NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021 and 2020
NOTE 1: ORGANIZATION
Axim
Biotechnologies, Ind., (the “Company”) was originally incorporated in Nevada on November 18, 2010, as Axim International
Inc. On July 24, 2014, the Company changed its name to AXIM Biotechnologies, Inc. to better reflect its business operations. The Company’s
principal executive office is located at 6181 Cornerstone Court E Suite 114, San Diego, CA 92121. On August 7, 2014, the Company formed
a wholly owned Nevada subsidiary named Axim Holdings, Inc. This subsidiary will be used to help facilitate the anticipated activities
planned by the Company. On May 11, 2015 the Company acquired a 100% interest in Can Chew License Company a Nevada incorporated licensing
Company, through the exchange of 5,826,706 shares of its common stock.
On
March 17, 2020, the Company acquired Sapphire Biotech, Inc., (“Sapphire’) which is research
and Development Company that has a mission to improve global cancer care through the development of proprietary therapeutics for inhibiting
cancer growth and metastasis. Sapphire is also developing a line of novel diagnostics for early cancer detection, response to treatment,
and recurrence monitoring. Additionally, with the onset of the COVID-19 pandemic, the Company decided to begin creating COVID-19
rapid diagnostic tools, including multiple first-in-class COVID-19 neutralizing antibody tests and other innovations.
Sapphire’s
operations are located in the Greater San Diego Area.
Company
Developments – Divesture of Cannabis Related Assets
On
May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc., a Nevada corporation (the “Company”), entered
into an Agreement (the “Separation Agreement”) by and among the Company, CanChew License Company (“CanCo”), CanChew
Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip
A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad
Foundation, US (collectively, the “Sanammad Parties”), pursuant to which, among other matters as described herein, Drs. Anastassov
and Van Damme and Mr. Changoer resigned as members of the Company’s Board of Directors.
Pursuant
to the Separation Agreement, the Company transferred and assigned to an entity designated by Dr. Anastassov all of the Company’s
cannabis-related intellectual property other than the inventions and discoveries described in that certain cannabis-related patent application
filed by the Company’s wholly-owned subsidiary, Sapphire Biotech, Inc. (water-soluble cannabinoid molecules). The Company also
transferred 100% of its interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set
forth above, any and all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in
its entirety.
In
addition, in consideration for the payment by the Company of $65,000, the Company purchased 100% of the issued and outstanding shares
of Series B Preferred Stock held by the Sanammad Parties. Such shares shall be retired to treasury of the Company. The Sanammad Parties
also agreed to forfeit and assign back to treasury, for no consideration, a total of 18,570,356 shares of the Company’s common
stock.
NOTE 2: ACQUISITION OF SAPPHIRE BIOTECH, INC.
On
March 17, 2020, the Company entered into a Share Exchange Agreement (“Agreement”) with Sapphire Biotech, Inc., a Delaware
corporation (“Sapphire”) and all the Sapphire stockholders (collectively, the “Sapphire Stockholders”). Following
the closing of the transaction, Sapphire will become a wholly owned subsidiary of AXIM.
Under
the terms of the Agreement, the Company: (i) acquired 100% of Sapphire’s outstanding capital (consisting of 100,000,000 shares
of common stock and zero (0) shares of Preferred Stock); and (ii) assume all of the outstanding debt of Sapphire. The outstanding debt
includes two (2) convertible notes in the principal amounts of $310,000 and $190,000. Pursuant to the terms of the Share Exchange Agreement,
the Company acquired 100% of the issued and outstanding shares of Sapphire by means of a share exchange with the Sapphire Stockholders
in exchange for 54,000,000 newly issued shares of the common stock of AXIM (the “Share Exchange”). As a result of the Share
Exchange, Sapphire became a 100% owned subsidiary of AXIM, which on a going forward basis will result in consolidated financial reporting
by AXIM to include the results of Sapphire. The closing of the Share Exchange occurred concurrently with entry into the Share Exchange
Agreement (the “Closing”).
In
March 2020, the Company acquired SAPPHIRE BIOTECH, Inc., a biotechnology company focusing on improving cancer care through the
development of proprietary therapeutics for inhibiting cancer growth and metastasis. The Company issued 54,000,000 shares of common
stock with a total fair value of $7,506,000 and assumed net liabilities of $412,233 (resulting in a total acquisition cost of
$7,918,233), in exchange for all outstanding shares of SAPPHIRE BIOTECH, Inc. The Company accounted for the acquisition using the
acquisition method of accounting for business combinations. On the acquisition date, the Company performed a preliminary allocation
of the purchase price to include the tangible assets acquired and the liabilities assumed with the remainder of the purchase price
allocated to patents pending approval, in-process research and development (IPR&D) and goodwill. The Company incurred $6,000 of
acquisition-related costs, which will be recorded as expense after the evaluation work been completed. In addition, the Company
recorded an estimated deferred tax liability on the assets acquired, except for goodwill for which deferred taxes are not
applicable.
The
Company completed the valuation of the intangible assets acquired in the SAPPHIRE BIOTECH, Inc. transaction by September 2020. Pursuant
to the valuation, the Company determined that the patents continue to be expanded and chose to subsume the patents within the IPR&D
balance. In management’s judgment, the amount assigned to IPR&D represents the amount the Company would reasonably expect to
pay an unrelated party for each project included in the technology. Based on the final valuation, the remaining excess purchase price
has been allocated to goodwill.
The
aggregate purchase price of $7,918,233 consisted of common stock valued at $7,506,000 and the net liabilities assumed of $412,233. The
value of the $7,506,000 of common shares issued was determined based on the closing price of the Company’s common shares at the
acquisition date.
The
following table summarizes the consideration paid for SAPPHIRE BIOTECH and the estimated amounts of the assets acquired and liabilities
assumed recognized at the acquisition date.
|
Schedule of consideration paid
|
|
|
|
|
|
Consideration:
|
|
|
|
Cash and cash equivalents
|
|
$
|
79,814
|
|
|
Property and equipment, net
|
|
|
20,533
|
|
|
In process Research & Development (IPRD)
|
|
|
7,800,000
|
|
|
Goodwill
|
|
|
2,458,233
|
|
|
Security deposit
|
|
|
12,785
|
|
|
Total asset acquired
|
|
$
|
10,371,365
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
5,767
|
|
|
Deferred taxes liability
|
|
|
2,340,000
|
|
|
Notes Payable including convertible and discount
on conversion
|
|
|
519,598
|
|
|
Total liabilities assumed
|
|
$
|
2,865,365
|
|
|
Net assets acquired
|
|
$
|
7,506,000
|
|
The
fair value of acquired IPR&D was determined using the income approach, based on the likelihood of success of products reaching
final development and commercialization. The fair value of acquired IPR&D was capitalized as of the Closing Date and is
subsequently accounted for as an indefinite-lived intangible asset until completion or abandonment of the associated research and
development efforts. Accordingly, during the development period after the Closing Date, this asset will be amortized over
a period of 36 months.
The acquired in process Research and development
as it relates to rapid COVID testing has reached the commercialization stage and is awaiting FDA EUA.
The
$2,458,233 of goodwill is not expected to be deductible for tax purposes.
The
effective settlement of receivable/payable between the Company and Sapphire deemed to be not material, which was recorded as gain on
intercompany transaction in P&L.
NOTE 3: BASIS OF PRESENTATION:
The
unaudited condensed consolidated financial statements of AXIM Biotechnologies, Inc. (formerly
Axim International, Inc.) as of June 30, 2021, and for the three months period ended June 30, 2021 and 2020 have been prepared
in accordance with United States generally accepted accounting principles (“US GAAP”).
The
following (a) balance sheets as of June 30, 2021 (unaudited) and December 31, 2020, which have been derived from audited financial statements,
and (b) the unaudited interim statements of operations and cash flows of AXIM Biotechnologies, Inc. (the “Company”) have
been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial
information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended
June 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2021. These unaudited financial
statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2020
included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on
April 26, 2021.
Principles
of Consolidation
The
consolidated financial statements include the accounts of Axim Biotechnologies, Inc. and its wholly owned subsidiaries Axim Holdings,
Inc., Marina Street LLC, Axim Biotechnologies (the Netherland Company) and Sapphire Biotech, Inc. The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been
eliminated upon consolidation.
NOTE 4:GOING CONCERN
The
Company’s condensed consolidated financial statements have been presented assuming that the Company will continue as a going concern.
The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated
deficit as of June 30, 2021. The Company has historically financed its operations primarily through the sale of common stock, promissory
notes and convertible notes. To date, none of the Company’s products related to continuing operations are still in the product
development phase. Management expects operating losses to continue and increase for the foreseeable future, as the Company progresses
into clinical development activities for its lead product candidates. The Company’s prospects are subject to risks, expenses and
uncertainties frequently encountered by companies in the biotechnology industry. As shown in the condensed consolidated financial statements,
the Company has deficit in working capital of $952,445
and has an accumulated deficit of $46,541,382
and has cash used in operating activities of
continuing operations $1,156,360 and discontinued operations of $4,633.
The Company intends to raise substantial additional capital through private placements of debt and equity securities, but there can be
no assurance that these funds will be available on terms acceptable to the Company or will be sufficient to enable the Company to fully
complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have
to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient
additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. That will
raise a doubt about the ability of the Company to continue as a going concern. The unaudited condensed consolidated
financial statements do not include any adjustments related to the recoverability of assets and classification of liabilities
that might be necessary should the Company be unable to continue in operation.
NOTE 5: SIGNIFICANT ACCOUNTING POLICIES
Use
of estimates
The
preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted
in the United States of America 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 as well as the reported amounts
of revenue and expenses during reporting periods. Actual results could differ from these estimates. Significant estimates are assumptions
about collection of accounts receivable, intangible assets, useful life of intangible assets, determination of the discount rate for
operating leases and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest
rate and expected dividend rate.
Risks
and uncertainties
The
Company operates in a dynamic and highly competitive industry and is subject to risks and uncertainties common to early-stage companies
in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection
of proprietary technology, dependence on key personnel, contract manufacturer and contract research organizations, compliance with government
regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require
significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval,
prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive
compliance and reporting. The Company believes that changes in any of the following areas could have a material adverse effect on the
Company’s future financial position, results of operations, or cash flows; ability to obtain future financing; advances and trends
in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s
products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual
property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to
support its growth.
Products
developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory
agencies prior to commercial sales. There can be no assurance that the Company’s research and development will be successfully
completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that the products will
receive the necessary approvals, or that any approved products will be commercially viable. If the Company was denied approval, approval
was delayed or the Company was unable to maintain approval, it could have a materially adverse impact on the Company. Even if the Company’s
product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The
Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology
companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.
Beginning
in late 2019, the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus,
which causes coronavirus disease 2019, or COVID-19, has evolved into a global pandemic. The extent of the impact of the coronavirus outbreak
on the Company’s business will depend on certain developments, including the duration and spread of the outbreak and the extent
and severity of the impact on the Company’s clinical trial activities, research activities and suppliers, all of which are uncertain
and cannot be predicted. At this point, the extent to which the coronavirus outbreak may materially impact the Company’s financial
condition, liquidity or results of operations is uncertain. The Company has expended and will continue to expend substantial funds to
complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional
funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that
receive regulatory approval. The Company may require additional funds to commercialize its products. The Company is unable to entirely
fund these efforts with its current financial resources. If adequate funds are unavailable on a timely basis from operations or
additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development
programs which would materially and adversely affect its business, financial condition and operations.
There
have been no material changes in the accounting policies from those disclosed in the financial statements and the related notes included
in the Form 10-K.
Cash
equivalents
The
Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
As of June 30, 2021 and December 31, 2020, the Company had no cash equivalents. Cash and cash equivalents are maintained at financial
institutions and, at times, balances may exceed federally insured limits. The Company had no uninsured balances at June 30, 2021 and
December 31, 2020. The Company has never experienced any losses related to these balances.
Accounts
Receivable
It
is the Company’s policy to review accounts receivable at least on monthly basis for conductibility and follow up with customers
accordingly. Covid19 has slowed collection as our customers are in a mandated pause. The Company have geographic concentration of
customers for the three months ending June 30, 2021 and 2020.
Concentrations
On
June 30, 2021 and December 31, 2020, one customer accounted for 100% of accounts receivable. For the six months period ended June
30, 2021, one customer accounted for 100% of total revenue. For the six months period ended June 30, 2020, one customer accounted
for 4% of total revenue. Accounts receivable and revenue were all generated from continuing operations for the six months ending
June 30, 2021.
Inventory
Inventory
consists of raw materials owned by the Company and are stated at the lower of cost or market. As of June 30, 2021 and December 31, 2020,
the Company had $20,509 and $-0-; —respectively.
Property
and equipment
Property
and equipment are carried at cost less accumulated depreciation. Depreciation is computed using straight-line method over the
estimated useful life. New assets and expenditures that extend the useful life of property or equipment are capitalized and
depreciated. Expenditures for ordinary repairs and maintenance are charged to operations as incurred. The Company’s property
and equipment relating to continuing operations consisted of the following on June 30, 2021 and December 31, 2020, respectively, and
none related to discontinued operations.
|
Schedule of property and equipment relating to continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2021
|
|
2020
|
|
Equipment of continuing operations
|
|
$
|
154,809
|
|
|
$
|
134,788
|
|
|
Less: accumulated depreciation
|
|
$
|
43,877
|
|
|
$
|
30,694
|
|
|
Property, Plant and Equipment, Net
|
|
$
|
110,932
|
|
|
$
|
104,094
|
|
For
the six months ended June 30, 2021 and 2020, the Company recognized depreciation expense of $13,184
and $5,124,
respectively.
In-Process
Research and Development (IPR&D)
The
fair value of IPR&D acquired through a business combination is capitalized as an indefinite-lived intangible asset until the completion
or abandonment of the related research and development activities. When the related research and development is completed, the asset
will be assigned a useful life and amortized.
The
fair value of an IPR&D intangible asset is determined using an income approach. This approach starts with a forecast of the net cash
flows expected to be generated by the asset over its estimated useful life. The net cash flows reflect the asset’s stage of completion,
the probability of technical success, the projected costs to complete, expected market competition, and an assessment of the asset’s
life-cycle. The net cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors
associated with the cash flow streams.
The
development of IPR&D reached completion in April 2021.
Goodwill
Goodwill
represents the excess of the purchase price of acquired businesses over the estimated fair value of the identifiable net assets acquired.
Goodwill is not amortized but is tested for impairment at least annually at the reporting unit level or more frequently if events or
changes in circumstances indicate that the asset might be impaired.
Goodwill
is tested for impairment annually or more frequently if events or changes in circumstances between annual tests indicate that the asset
may be impaired. Impairment loss is recognized based on a comparison of the fair value of the asset to its carrying value, without consideration
of any recoverability.
Intangible Assets
As
required by generally accepted accounting principles, trademarks and patents are amortized if they have a definite life, the amortization
is estimated in straight line through three years starting in April 2021. The Company’s intangible assets relating to continuing
operations and discontinued operations consisted of the following on June 30, 2021 and December 31, 2020, respectively.
|
Schedule of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2021
|
|
2020
|
|
Goodwill
|
|
$
|
2,458,233
|
|
|
$
|
2,458,233
|
|
|
Research in progress
|
|
$
|
7,800,000
|
|
|
$
|
7,800,000
|
|
|
Finite-Lived Intangible Assets, Gross
|
|
$
|
10,258,233
|
|
|
$
|
10,258,233
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: accumulated amortization
|
|
$
|
641,096
|
|
|
$
|
—
|
|
|
Intangible Assets, Net (Including Goodwill)
|
|
$
|
9,617,137
|
|
|
$
|
—
|
|
Estimated
aggregate amortization expense for each of the three succeeding years ending December 31 is as follows:
|
Estimated
aggregate amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Amortization
expense
|
|
$
|
1,951,779
|
|
|
$
|
2,600,000
|
|
|
$
|
2,600,000
|
|
|
$
|
648,221
|
|
Revenue
Recognition
The
Company follows the guidance contained in Topic 606 (FASB ASC 606). The core principle of Topic 606 (FASB ASC 606) is that an entity
should recognize revenue to depict the transfer of goods of services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. The revenue recognition guidance contained in Topic 606, to
follow the five-step revenue recognition model along with other guidance impacted by this standard: (1) identify the contract with the
customer; (2) identify the performance obligations in the contract; (3) determine the transportation price; (4) allocate the transportation
price; (5) recognize revenue when or as the entity satisfies a performance obligation. All revenue was from operations that were divested.
Revenues
are recognized when title for goods is transferred; non-refundable fees and proceeds from irrevocable agreements recognized when inflows
or other enhancements of assets of the Company are received.
Revenues
from continuing operations recognized for three and six months ended June 30, 2021 and 2020 amounted to $14,875,
$47,524,
$0
and $-0-,
respectively. Revenues from discontinued operations recognized for three and six months ended June 30, 2021 and 2020 amounted to $-0-,
$-0-,
and $7,990,
$15,130,respectively.
Grant
Income
In
2021 the Company has received government grants to drive its research and development efforts. Through these government grants, the government
has provided funding for the Company to perform research and development activities which will assist in developing its products. The
Company believes the government entities funding these grants are interested in the Company advancing its underlying technologies through
research activities and not providing incentives for hiring employees or building facilities that would suggest that the grant monies
are not for specific research activities.
In
determining how to classify the monies received under government grants, the Company acknowledges that there is no specific guidance
under US GAAP and that the FASB and AICPA have often drawn upon the guidance in IAS 20 for classification. In considering the alternatives
provided by IAS 20 for the presentation of these grants in the Company’s financial statements, the Company believes that recognizing
the government grant proceeds as a component of other revenue is a better reflection of the economics of the arrangements as the Company
earns the funding through the performance of research and development which is not one of the Company’s primary business activities
or central to its operations. The Company believes that presenting research and development funding from government grants, as other
revenue provides consistency in our financial reporting. The Company also believes that this presentation clearly presents to users
of its financial statements in one line the Company’s sources of funding from these grants. The Company notes that there are no
contingencies associated with the receipt of or ability to retain the funds under the grant, other than undertaking and performing the
related research and development activities.
The
Company recognizes funds received from contractual research and development services and from government grants as other
revenue. These contracts and grants are not considered an ongoing major and central operation of the Company’s business.
Our Income from Grants from Government for the three and six months ended June 30, 2021 and 2020 was $129,995, $219,995 and $-0-,
$-0- respectively.
Cost
of Sales
Cost
of sales includes the purchase cost of products sold and all costs associated with getting the products to the customers including buying
and transportation costs. Cost of sales all related to discontinued operations.
Shipping
Costs
Shipping
and handling costs billed to customers are recorded in sales. Shipping costs incurred by the company are recorded in general and administrative
expenses. Shipping costs all related to discontinued operations.
Fair
Value Measurements
The
Company applies the guidance that is codified under ASC 820-10 related to assets and liabilities recognized or disclosed in the financial
statements at fair value on a recurring basis. ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements.
Convertible
Instruments
The
Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards
for “Accounting for Derivative Instruments and Hedging Activities.”
Professional
standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments
and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which (a) the economic
characteristics and risks of the embedded derivative instruments are not clearly and closely related to the economic characteristics
and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract
is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported
in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered
a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional
as defined under professional standards as “The Meaning of “Conventional Convertible Debt Instrument.”
The
Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from
their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion
Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records,
when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon
the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective
conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their
earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded
in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note
transaction and the effective conversion price embedded in the note.
ASC
815-40 provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement,
then the contract shall be classified as an asset or a liability.
Income
Taxes
The
Company follows Section 740-10, Income tax (“ASC 740-10”) Fair Value Measurements and Disclosures of the FASB Accounting
Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are
based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management
concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period
that includes the enactment date.
The
Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized.
In making such a determination, the Company considers all available positive and negative evidence, including reversals of any existing
taxable temporary differences, projected future taxable income, tax planning strategies, and the results of recent operations. If the
Company determines that it would be able to realize a deferred tax asset in the future in excess of any recorded amount, the Company
would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25
addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely
than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has
a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on
de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
The Company had no liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
Concentrations
of Credit Risk
Financial
instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and
cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such amounts
may be in excess of the FDIC insurance limit.
Net
Loss per Common Share
Net
loss per common share is computed pursuant to section 260-10-45 Earnings Per Share (“ASC 260-10”) of the FASB Accounting
Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common
stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares
of common stock outstanding and the member potentially outstanding during each period. In periods when a net loss is experienced, only
basic net loss per share is calculated because to do otherwise would be anti-dilutive.
There
were 30,335,782
common share equivalents at June 30, 2021 and
32,556,727
common shares at December 31, 2020. For the six
months ended June 30, 2021 and 2020 these potential shares were excluded from the shares used to calculate diluted earnings per share
as their inclusion would reduce net loss per share.
Stock
Based Compensation
All
stock-based payments to employees and to nonemployee directors for their services as directors, including any grants of restricted stock
and stock options, are measured at fair value on the grant date and recognized in the statements of operations as compensation or other
expense over the relevant service period. Stock-based payments to nonemployees are recognized as an expense over the period of performance.
Such payments are measured at fair value at the earlier of the date a performance commitment is reached, or the date performance is completed.
In addition, for awards that vest immediately and are non-forfeitable the measurement date is the date the award is issued. The
Company accounts for stock options issued to non-employees based on the estimated fair value of the awards using the Black-Scholes option
pricing model in accordance with ASC 505-50, Equity-Based Payment to Non-employees. Stock-based compensation expense
related to stock options granted to non-employees is recognized as the stock options vest. The Company believes that the fair value of
the stock options is more reliably measurable than the fair value of the services received. Stock options granted to non-employees are
recorded at their fair value on the measurement date and are subject to periodic adjustments as such options vest and at the end of each
reporting period, and the resulting change in value, if any, is recognized in the Company’s statements of operations and comprehensive
loss during the period the related services are rendered.
Cost
of Sales
Cost
of sales includes the purchase cost of products sold and all costs associated with getting the products to the customers including buying
and transportation costs.
Research
and Development
The
Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research
and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred.
Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed
when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs
related to both present and future products are expensed in the period incurred. For the three and six months ended June 31, 2021 and
2020 the Company incurred research and development expenses of $48,066,
$149,019
and $121,437,
$126,292
from continuing operations, respectively. For
the three months ended June 30, 2021 and 2020 the Company incurred research and development expenses of $-0-, $-0- and $-0-, $-0- from
discontinued operations, respectively. The Company has entered into various agreements with CROs. The Company’s research and development
accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events,
and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities
on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates,
the Company will adjust the accrual accordingly. Payments made to CROs under these arrangements in advance of the performance of the
related services are recorded as prepaid expenses and other current assets until the services are rendered.
Recently
Issued Accounting Standards
Accounting
Standards Implemented Since December 31, 2020
ASC
Update 2021-04
Earnings
Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718),
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications
or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force)
The
amendments in this Update affect all entities that issue freestanding written call options that are classified in equity. Specifically,
the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity
classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications
or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance
in Topic 260, Earnings Per Share. The amendments in this Update do not apply to modifications or exchanges of financial instruments that
are within the scope of another Topic. That is, accounting for those instruments continues to be subject to the requirements in other
Topics. The amendments in this Update do not affect a holder’s accounting for freestanding call options.
ASC
Update No. 2020-10
In
October 2020, the FASB issued ASC Update No. 2020-10, Codification Improvements. Update No. 2020-10 amends a wide variety of Topics in
the Codification in order to improve the consistency of the Codification and the application thereof, while leaving Generally Accepted
Accounting Principles unchanged.
ASC Update No. 2020-06
In August 2020, the FASB issued ASC Update No.
2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own
Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in Update
No. 2020-06 simplify the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities
and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts
in an entity’s own equity.
In
November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 818): Clarifying the Interaction Between Topic 808 and
Topic 606, which clarifies when transactions between participants in a collaborative arrangement are within the scope of the FASB’s
revenue standard, Topic 606. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within
those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. The adoption
of this ASU did not have a material impact on our consolidated financial position, results of operations, cash flows, or presentation
thereof. See Note15 for more information related to the Company’s lease obligations.
In
October 2018, the FASB issued ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, that
changes the guidance for determining whether a decision-making fee paid to a decision makers and service providers are variable interests.
The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with
early adoption permitted. We adopted this standard on its effective date of January 1, 2020. The adoption of this ASU did not have
a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.
In
August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the
requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements
for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years
beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We adopted
this standard on its effective date of January 1, 2020. The adoption of this ASU did not have a material impact on our consolidated
financial position, results of operations, cash flows, or presentation thereof.
Other
recent accounting pronouncements issued by the FASB and the SEC did not or are not believed by management to have a material impact on
the Company’s present or future consolidated financial statements.
NOTE 6: PREPAID EXPENSES
Prepaid
expenses consist of the following as of June 30, 2021 and December 31, 2020:
|
Schedule of Prepaid Expenses
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2021
|
|
2020
|
|
Prepaid insurance
|
|
$
|
120,034
|
|
|
$
|
45,983
|
|
|
Prepaid services
|
|
|
57,224
|
|
|
|
209,940
|
|
|
|
|
$
|
177,258
|
|
|
$
|
255,923
|
|
For
the three and six months ended June 31, 2021 and 2020, the Company recognized amortization of prepaid expense of $105,353,
$34,108
and $216,158,
$68,079,
respectively.
NOTE 7: PROMISSORY NOTE
On
August 8, 2014 the Company entered into a Promissory Note Agreement with CanChew Biotechnologies, LLC (CCB), a related party (the owners
of CCB also own a majority of the outstanding shares of the Company), under which it borrowed $1,000,000
to fund working capital. The original loan was
a demand note bearing interest at the rate of 7%
per annum, which amount, along with principal, was payable upon demand. The demand note was amended effective January 1, 2015 to reduce
the annual interest rate to 3%. All other terms and conditions shall remain in full force and effect. The Company is in discussions to
have the demand note modified or exchanged for a longer term, fixed maturity note.
On
May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc., a Nevada corporation (the “Company”), entered
into an Agreement (the “Separation Agreement”). Pursuant to the Separation Agreement, the Company transferred 100% of its
interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set forth above, any and
all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in its entirety.
For
the three and six months ended June 30, 2021 and 2020, the Company recognized interest expense of $59,576,
$119,908
and $55,957,
$106,075,
respectively on this note all was related to discontinued operations.
On
December 31, 2019, Sapphire Biotech, Inc. had entered into a Debt Exchange Agreement whereas the Company assumed three (3) loans totaling
$128,375
of Debt owned by Sapphire Diagnostics, LLC which
had an interest rate of 6%
per annum. In the same Debt Exchange Agreement, the Company assumed four (4) additional loans made to Sapphire in 2019, which had an
interest rate of 6% per annum. All seven (7) loans totaling $310,000,
plus the aggregate interest accrued thereon of $14,218
making the face value of the new note $324,218.
As of June 30, 2021 and December 31, 2020, the principal and accrued interest balances were $353,452
and $343,725,
respectively.
The
Company owes $5,000
to the chairman of the board of the Company for
a working capital advance of $5,000 made in May of 2014, all was related to discontinued operations.
Under
an agreement Mr. Changoer received on March 20, 2018 the Company issued 50,000
restrictive shares of its common stock and recorded
$235,000
of compensation expenses in the accompanying
consolidated financial statements to account for the issuance of the incentive shares. As of June 30, 2021 and December 31, 2020, the
total outstanding balance was $20,000
and $60,000
respectively for consulting fees to Mr. Changoer
included in accounts payable.
On
September 25, 2018, the Company amended Independent Director Compensation agreement. Under the agreement in lieu of the share compensation
due to independent director of the Company for his annual service ending May 23, Dr. Philip A. Van Damme shall receive cash compensation
of $20,000.
Started from August 1, 2019 the company has been paying monthly clinical trial fee of $5,000.
As of June 30, 2021 and December 31, 2020, the total outstanding balance was $10,000
and $25,000,
respectively included in accounts payable.
Effective
January 1, 2019 the company entered into a thirty-months consulting agreement with the chairman of the board which pays a monthly consulting
fee of $20,000.
The company has also been paying a monthly bonus fee of 15,000; this additional fee is on a month-to-month basis at the discretion of
management. As of June 30, 2021 and December 31, 2020, the total outstanding balance was $40,000
and $225,000
respectively for consulting fees included in
accounts payable.
On
May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc., a Nevada corporation (the “Company”), entered
into an Agreement (the “Separation Agreement”) by and among the Company, CanChew License Company (“CanCo”), CanChew
Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip
A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad
Foundation, US (collectively, the “Sanammad Parties”), pursuant to which, among other matters as described herein, Drs. Anastassov
and Van Damme and Mr. Changoer resigned as members of the Company’s Board of Directors.
Pursuant
to the Separation Agreement, the Company transferred and assigned to an entity designated by Dr. Anastassov all of the Company’s
cannabis-related intellectual property other than the inventions and discoveries described in that certain cannabis-related patent application
filed by the Company’s wholly-owned subsidiary, Sapphire Biotech, Inc. (water-soluble cannabinoid molecules). The Company also
transferred 100% of its interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set
forth above, any and all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in
its entirety.
In
addition, in consideration for the payment by the Company of $65,000, the Company purchased 100% of the issued and outstanding 500,000
shares of Series B Preferred Stock held by the
Sanammad Parties. Such shares shall be retired to treasury of the Company. The Sanammad Parties also agreed to forfeit and assign back
to treasury, for no consideration, a total of 18,570,356 shares of the Company’s common stock.
In
addition, each of Drs. Anastassov and Van Damme and Mr. Changoer have agreed to subject the shares of the Company’s common stock
held by each of them to lock-up and leak-out restrictions, as follows: they shall not sell shares for a period of 12 months following
the Effective Date and, thereafter, subject to a daily volume limitation of 5%, on an aggregate basis among them.
Further,
the Company terminated the Consulting Agreement of Dr. Anastassov and the Employment Agreements for each of Dr. Van Damme and Mr. Changoer.
In connection with the termination of Dr. Anastassov’s Consulting Agreement, the Company agreed to pay severance in the amount
of $35,000 for March 2020 and $20,000 per month thereafter through July 2021 (the termination date contemplated by the Consulting Agreement).
Commencing for the April 2020, the Company may, in its sole discretion, pay the $20,000 severance obligation by the issuance of shares
of the Company’s common stock registered pursuant to the Registration Statement on Form S-8 filed with the Commission on May 29,
2015 (“S-8 Shares”). If the gross cash proceeds from the sale of any S-8 Shares issued in lieu of cash severance is less
than $20,000, as determined 20 days after issuance of such S-8 Shares, then the Company has agreed to issue additional shares that would
serve to “true-up” the value of the shares to the $20,000 monthly severance obligation; provided, however, that if 30 days
after the date the severance payment is due the gross proceeds from the sale of S-8 Shares is less than $20,000, the Company must pay
the shortfall in cash. In addition, for each month that Dr. Anastassov is entitled to receive severance, he shall receive S-8 Shares
in an amount equal to the lesser of (a) 150,000 S-8 Shares, or (b) S-8 Shares valued at $15,000 based upon the closing price of the Company’s
common stock as of the due date of the severance payment obligation. In connection with the termination of the Employment Agreements
of Dr. Van Damme and Mr. Changoer, Mr. Changoer’s severance payments shall be $20,000 per month for 12 months, commencing April
2020 (paid in arrears) and Dr. Van Damme’s severance payments shall be $5,000 per month for 12 months, similarly commencing April
2020 and paid in arrears. The Company has the right to pay each of Dr. Van Damme’s and Mr. Changoer’s monthly severance payments
in S-8 shares in lieu of cash subject to the same terms and restrictions (including true-up terms) as set forth above for Dr. Anastassov.
As of June 30, 2021, the accrued severance payment was $40,000 to Dr. Anastassov, $20,000 to Mr. Changoer and $10,000 to Dr. Van Damme
included in accounts payable.
The
Company retains the right to prepay the severance obligations to Drs. Anastassov and Van Damme and Mr. Changoer, without penalty.
No
claims were alleged by the Company against any party, and no claims were alleged against the Company. However, in connection with the
transactions described above, the parties entered into a general mutual release of all claims.
NOTE 8: RELATED PARTY TRANSACTIONS
Related
Party
The
company has an employment agreement with Catlina Valencia at a rate of $15,000
per month commencing March 17, 2020. The agreement
can be terminated with 30 days’ notice by either party.
The
company has a consulting agreement with Glycodots LLC whereby it will provide the services of Dr. Sergei A. Svarovsky at a rate of $15,000
per month commencing March 17, 2020. The agreement
can be terminated with 30 days’ notice by either party.
Purchase
of Promissory Note and Forbearance Agreement
Effective
May 4, 2020, the Company acquired from TL-66, a California limited liability company (“Seller”), a promissory note issued
to Seller by Dr. Anastassov (“Maker”) dated December 1, 2017, with a face value of $350,000
and a remaining balance due of approximately
$100,000
(the “Note”). The purchase price
for the Note was $100,000 payable by the Company issuing Seller One Million (1,000,000) restricted shares of the Company’s Common
Stock. Effective May 6, 2020, the Company and Maker entered into a Forbearance Agreement whereby the Company agreed to forbear from making
any collection efforts on the Note for a period of 24 months so long as Maker has not breached the Separation Agreement. Following 24
months, if there has been no breach of the Separation Agreement by Maker, repayment of the Note, including all principal and unpaid interest,
will be waived in full. As of May, 4, 2020 the carrying value of the note receivable was $102,567,
the value of the common stock to be issued was $135,000,
resulting in a loss of $32,433
accounted as loss on debt extinguishment related
to discontinued operations. The balance of the Note Receivable as of June 30, 2021 and December 31, 2020 is $102,567
for both periods, plus interest accrued
thereon of $1,188
and $675,
respectively.
NOTE 9:DUE TO FIRST INSURANCE FUNDING
On
June 25, 2020, the Company renewed its D&O insurance policy with total premiums, taxes and fees for $93,357. A cash down payment
of $18,671 was paid on July 6, 2020. Under the terms of the insurance financing, payments of $8,456, which include interest at the rate
of 4.6% per annum, are due each month for nine months commencing on July 25, 2020.
On
June 25, 2021, the Company renewed its D&O insurance policy with total premiums, taxes and fees for $98,888. A cash down payment
of $24,273 was paid on July 7, 2021. Under the terms of the insurance financing, payments of $1,797, which include interest at the rate
of 4.420% per annum, are due each month for nine months commencing on July 25, 2021.
The
total outstanding due to First Insurance Funding as of June 30, 2021 and December 31, 2020 is $98,888
and $25,369,
respectively.
NOTE 10: CONVERTIBLE NOTES PAYABLE
The
following table summarizes convertible note payable of related party as of June 30, 2021 and December 31, 2020:
|
Schedule of Convertible Notes Payable, Shareholder
|
|
|
|
|
|
|
|
|
June 30,
|
December 31,
|
|
|
2021
|
2020
|
|
Convertible note payable, due on November
1, 2026, interest at 3.5%
p.a.
|
$
|
4,000,000
|
|
$
|
4,000,000
|
|
|
Accrued interest
|
|
229,037
|
|
|
158,648
|
|
|
Convertible note payable, net
|
$
|
4,229,037
|
|
$
|
4,158,648
|
|
In
2018 the Company extinguished debt with Investor. Investor had proposed a financing transaction pursuant to which the Company will satisfy
and retire the Original Note and Original Note current balance in simultaneous exchange for and upon delivery by the Company of a (1)
new Convertible Promissory Note in the principal amount of $4,000,000
(the “Exchange Note”), and (2) 400,000
shares of the Company’s restricted common
stock (the “Origination Shares”).
Simultaneously,
a third-party Investor and the Company entered in Debt Exchange Agreement with Medical Marijuana Inc. As part of this agreement Investor
will exchange and deliver the AXIM note to Medical Marijuana in exchange for a Convertible Promissory note. Axim consented to the transfer
and assignment of the Axim Note in exchange for the issuance by the Medical Marijuana of the Exchange Note. The interest on this note
is payable bi-annually every May 1 and November 1. On May 1, 2019 the Company paid accrued interest of $60,278.
In
2020 the Company was authorized to apply the accounts receivable of $75,074
due from Kannaway towards its accrued interest.
On
May 1, 2020, the Company agreed to modify its existing convertible note with a principal balance of $4 million, 3.5% interest rate convertible
note with the current holder of that note. There were two changes to the existing agreement – (a) the conversion price was
reduced from the $1.50 conversion price in the original Note to $0.25 cents in the modified Note and (b) the term of the note was extended
from the original maturity date of November 1, 2021, to November 1, 2026. The Company’s stock closed trading on the day of the
modification at $0.13 per share. The amendment of this convertible Note was also evaluated under ASC Topic 470-50-40, “Debt
Modifications and Extinguishments.” Based on the guidance, the instruments were determined to be substantially different due to
the change in the conversion price being substantial, and debt extinguishment accounting was applied. The fair value of the modified
convertible note was not different than the carrying value of the original note as such no extinguishment loss was recorded, The Note
prior to the amendment of approximately $4 million, and the fair value of the Note and embedded derivatives after the amendment
of approximately $4 million. There were no unamortized debt issuance costs and the debt discount associated with the original 2018
Note.
For the three and six month ended June 30, 2021 and 2020, interest
expenses was $35,389, $35,389, $70,389 and $70,389, respectively.
As
of June 30, 2021 and December 31, 2020, the balance of secured convertible note was $4,229,037
and $4,158,648
which included $229,037
and $158,648
accrued interest, respectively.
The
following table summarizes convertible note payable as of June 30, 2021 and December 31, 2020:
|
Schedule of Convertible Note Payable of Related
Party
|
|
|
|
|
|
|
|
|
June 30,
|
December 31,
|
|
|
2021
|
2020
|
|
Convertible note payable, due on October 1, 2029, interest
at 3.5% p.a.
|
$
|
484,478
|
|
$
|
484,478
|
|
|
Convertible note payable, due on October 1, 2029, interest at 3.5% p.a.
|
|
500,000
|
|
|
1,000,000
|
|
|
Convertible note payable, due on December 31, 2034, interest at 3% p.a.
|
|
190,000
|
|
|
190,000
|
|
|
Convertible note payable, due on July 21, 2032, interest at 3.5% p.a.
|
|
609,835
|
|
|
609,835
|
|
|
Accrued interest (The accrued interest and principal
are both included in the captions titled “convertible note payable” in the balance sheet)
|
|
192,521
|
|
|
236,148
|
|
|
Total
|
|
1,976,834
|
|
|
2,520,461
|
|
|
Less: unamortized debt discount/finance premium costs
|
|
(640,552
|
)
|
|
(843,673
|
)
|
|
Convertible note payable, net
|
$
|
1,336,282
|
|
$
|
1,676,788
|
|
On
September 16, 2016, we entered into a convertible note purchase agreement (the “Convertible Note Purchase Agreement” or “Agreement”)
with a third-party investor. Under the terms of the Convertible Note Purchase Agreement the investor may acquire up to $5,000,000 of
convertible notes from the Company. With various closings, under terms acceptable to the Company and the investor as of the time of each
closing. Pursuant to the Agreement, on September 16, 2016 the investor provided the Company with $850,000 secured convertible note financing
pursuant to four (4) Secured Convertible Promissory Notes (the “Notes”). Each of the Notes matures on October 1, 2029, and
pay 3.5% compounded interest paid bi-annually. The Note are secured by the assets of the Company, may not be pre-paid without the consent
of the holder, and are convertible at the option of the holder into shares of the Company common stock at a conversion price equal to
$0.2201 per share.
As
of June 30, 2021 and December 31, 2020, the balance of secured convertible notes was $564,945
and $556,420,
which included $80,467
and $71,942
accrued interest, respectively.
On
October 20, 2016 a third-party investor provided the Company with $1,000,000 secured convertible note financing pursuant to three (3)
Secured Convertible Promissory Notes (the “Notes”). Each of the Notes mature on October 1, 2029 and pay 3.5% compounded interest
paid bi-annually. The Notes are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are
convertible at the option of the holder into shares of the Company’s common stock at a fixed conversion price equal of $0.2201
per share. The investor paid cash of $500,000 for one of the Notes and issued to the Company two (2) secured promissory notes of $250,000
each for two (2) Convertible Notes of $250,000 each. The two secured promissory notes issued by the investor (totaling $500,000) as payment
for two (2) secured Notes totaling $500,000 mature on February 1, 2017 ($250,000) and March 1, 2017 ($250,000), bear interest at the
rate of 1% per annum, are full recourse and additionally secured by 10,486,303 shares of Medical Marijuana, Inc. (Pink Sheets symbol:
MJNA) and were valued at $858,828 based upon the closing price of MJNA on October 20, 2016. A debt discount was recorded related to beneficial
conversion feature inn connection with this convertible note of $499,318, related to the beneficial conversion feature of the note to
be amortized over the life of the note or until the note is converted or repaid. As of June 30, 2021 and December 31, 2020, this note
has not been converted and the balance of secured convertible notes was $583,270
and $1,148,944,
which included $83,270
and $148,944
accrued interest, respectively.
On
June 7, 2021 the Company converted $500,000 of the Convertible Note with TL-66-LLC along with the accrued interest of $82,707 into
2,647,464 shares of the Company’s common stock at $0.2201 per share which resulted in a loss on extinguishment of debt of
$1,535,264.
On
December 31, 2019, Sapphire Biotech, Inc. entered into a Convertible Note Purchase Agreement whereas the Company issued a convertible
note with a face value of $190,000 with a compounding interest rate of 3% per annum, the interest shall be payable annually beginning
on December 31, 2020 until the maturity date of December 31, 2034, at which time all principal and interest accrued thereon shall be
due and payable. The Convertible Note is secured by substantially all the Company’s tangible and intangible assets. In addition,
the Convertible Note includes various non-financial covenants including the Company may not enter into any agreement, arrangement or
understanding of any kind that would result in a transaction, or series of transactions, that would result in the sale of 50% or more
of the Company’s capital stock without the prior approval of the holder.
Upon
issuance, the Convertible Note was convertible into shares of the Company’s common stock at $1.90 per share. At December 31, 2019,
the Company determined that the Convertible Note contained a beneficial conversion feature for which a full discount was recorded on
the Convertible Note. The fair market value of the Company’s common stock was based upon the estimated per share acquisition price
per the pending acquisition of the Company. The discount of $190,000 will be amortized using the effective interest method and will be
fully amortized by December 31, 2034.
On
March 17, 2020 the Company entered into a Share Exchange Agreement (“Agreement”) with Sapphire Biotech, Inc., a Delaware
corporation (“Sapphire”) and all of the Sapphire stockholders (collectively, the “Sapphire Stockholders”). Following
the closing of the transaction, Sapphire will become a wholly owned subsidiary of AXIM. Under the terms of the Agreement, the Company
intends to assume the convertible notes in the principal amounts of $190,000.
After the acquisition, the Convertible Note was able to convert 6,000,000
shares of Axim’s common stock. Upon assumption
of the note, the Company recorded a beneficial conversion feature of $190,000.
As of June 30, 2021 and December 31, 2020, the balance of secured convertible note was $198,566
and $195,716,
which included $8,566
and $5,716
accrued interest, respectively.
On
July 21, 2020 the Company entered into convertible note purchase agreement with Cross & Company, the Company owed to Cross &
Company $609,835 of aggregated payments and desired to satisfy the amount due in full by issuing to Cross & Company a convertible
promissory note. The convertible note matures on July 21, 2032 and incurred 3.5% compounded interest paid annually. The Note are secured
by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder
into shares of the Company common stock at a conversion price equal to $0.37. Notwithstanding the foregoing, holder shall not be permitted
to convert the note, or portion thereof, if such conversion would result in beneficial ownership by holder and its affiliates of more
than 4.9% of the debtor’s outstanding common stock as of the date of conversion. The Company determined that that the conversion
of the amounts due into a long-term convertible note resulted in a debt extinguishment due to the change in the fair values exceeding
10%. Accordingly, the loss of $823,497 was included in the statement of operations as loss on debt extinguishment. As of June 30, 2021
and December 31, 2020, the balance of secured convertible note was $630,053
and $619,381,
which included $20,218
and $9,546
accrued interest respectively.
During
the three and six months ended June 30, 2021 and 2020, the Company amortized the debt discount on all the notes of $181,295,
$203,122
and $22,071,
$41,432,
respectively, to other expenses. As of June 30, 2021 and December 31, 2020, unamortized debt discount was $640,552
and $843,673,
respectively.
NOTE 11: STOCK INCENTIVE PLAN
On
May 29, 2015 the Company adopted its 2015 Stock Incentive Plan. Under the Plan the Company may issue up to 10,000,000 S-8 shares to officers,
employees, directors or consultants for services rendered to the Company or its affiliates or to incentivize such parties to continue
to render services. S-8 shares are registered immediately upon the filing of the Plan and are unrestricted shares that are free-trading
upon issuance. As of June 30,2021 December 31, 2020 there were 13,033,335
and 9,806,000
shares available for issuance under the Plan.
The Company recorded compensation expense of $91,526,
$191,266
and $-0-,
$-0 -during the three and six months ended June 31,
2021 and 2020.
On
May 13, 2020, Alim Seit-Nebi the Chief Technology Officer and Co-Founder of Sapphire Biotechnology was granted the options to purchase
1 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options will vest six
months from the date of grant, one third of the options will vest one year from the date of grant, and the remaining one third of the
options will vest two years from the date of grant.
On
May 13, 2020, Dr. Douglas Lake the Chief Clinical Officer and Co-Founder of Sapphire Biotechnology was granted the options to purchase
2 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options will vest six
months from the date of grant, one third of the options will vest one year from the date of grant, and the remaining one third of the
options will vest two years from the date of grant.
On
May 13, 2020, Timothy R, Scott the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common
stock under the plan at the exercise price of $0.126 per share. One third of the options vested immediately, one third of the options
will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.
On
May 13, 2020, Robert Cunningham the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common
stock under the plan at the exercise price of $0.126 per share. One third of the options vested immediately, one third of the options
will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.
On
May 13, 2020, Maurico Bellora the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common
stock under the plan at the purchase price of $0.126 per share. One third of the options vested immediately, one third of the options
will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.
On
September 10, 2020, Noel C. Gillespie the Senior Patent Attorney of Axim Biotechnology was granted the options to purchase 0.5 million
shares of Axim common stock under the plan at the purchase price of $0.61 per share. One third of the options vested immediately, one
third of the options will vest one year from the date of grant, and the remaining one third of the options will vest two years from the
date of grant.
For
the three and six months ended June 30, 2021 and 2020 the Company recorded compensation expense of $91,526,
$191,266 and $-0-,
$-0- respectively.
NOTE 12: STOCKHOLDERS’ DEFICIT
Preferred
Stock
The
Company has authorized 5,000,000
shares of preferred stock, with a par value of
$0.0001
per share. Of the 5,000,000 authorized preferred
shares, 4,000,000
are undesignated “blank check” preferred
stock. The Company may issue such preferred shares and designate the rights, privileges and preferences of such shares at the time of
designation and issuance. As of June 30, 2021, and December 31, 2020 there are -0-
and -0-
shares of undesignated preferred shares issued and outstanding, respectively.
There
are zero shares issued and outstanding of Series A and Series B Preferred stock as of June 30, 2021.
Series
C Convertible Preferred Stock
On
August 17, 2016 the Company designated up to 500,000
shares of a new Series C Convertible Preferred
Stock (Series C Preferred Stock). The holders of the Series C Preferred are entitled to elect four members to the Company’s board
of directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. Each share of
Series C Convertible Preferred is convertible into one share of the Company’s common stock. The Series C Convertible Preferred
designation contains a number of protective and restrictive covenants that restrict the Company from taking a number of actions without
the prior approval of the holders of the Series C Preferred or the unanimous vote of all four Series C Directors. If at any time there
are four Series C Directors, one such director must be independent as that term is defined in the Series C designation. Any challenge
to the independence of a Series C Director is a right conferred only upon the holders of the Series B Convertible Preferred Stock and
may only be made by the holders of the Series B Convertible Preferred Stock.
On
August 18, 2016 the Company issued all 500,000
shares of its newly designated Series C Preferred
Stock to MJNA Investment Holdings, LLC in exchange for cash of $65,000.
As the holders of the Series C Preferred Stock, MJNA Investment Holdings, LLC has designated Dr. Timothy R. Scott, John W. Huemoeller
II, Robert Cunningham and Blake Schroeder as their four Series C Directors.
On
February 20, 2019, MJNA Investment Holdings LLC (“Seller”) sold its 500,000 shares of AXIM Biotechnologies, Inc.’s,
a Nevada corporation (the “Company”) Series C Preferred Stock to Juniper & Ivy Corporation, a Nevada corporation (“Purchaser”)
for a purchase price of $500,000
(the “Purchase Price”) pursuant to
a Preferred Stock Purchase Agreement (the “Purchase Agreement”). Payment of the Purchase Price was made as follows (i) a
$65,000 payment made by check payable to Seller, which Purchaser borrowed from an unrelated third-party and which has no recourse against
the Series C Preferred Stock or assets of Purchaser (the “Loan”), and (ii) the issuance by Purchaser to Seller of a promissory
note, face value, $435,000,
which has no recourse against the Series C Preferred Stock or assets of Purchaser (the “Note”). The Company’s Chief
Executive Officer John W. Huemoeller II is the President of Purchaser. Mr. Huemoeller provided a personal guaranty for the Loan and the
Note.
The
holders of the Series C Preferred Stock are entitled to elect four members to the Company’s Board of Directors and are entitled
to cast 100 votes per share on all other matters presented to the shareholders for a vote. As a result of this transaction, a change
in control has occurred.
Effective
April 2, 2019, Blake N. Schroeder resigned as a member of the Company’s Board of Directors. Mr. Schroeder’s resignation was
not because of any disagreements with the Company on matters relating to its operations, policies and practices.
On
April 3, 2019 pursuant to the Company’s Amended and Restated Bylaws, the holder of the Company’s Series C Preferred Stock
appointed Mauricio Javier Gatto-Bellora to fill the director seat vacated by the resignation of Mr. Schroeder.
On
July 21, 2020 pursuant to the Company’s Amended and Restated Bylaws, the holder of the Company’s Series C Preferred Stock
appointed Peter O’Rourke to fill one of the vacant positions on board created by the resignations of Dr. George Anastassov, Lekhram
Changoer, and Dr. Philip Van Damme.
Common
Stock and Common Stock Warrants
Common
Stock
The
Company has authorized 300,000,000
shares of common stock, with a par value of $0.0001
per share. As of June 30, 2021, and December 31, 2020, the Company had 133,024,435
and 125,327,579
shares of common stock issued and outstanding,
respectively.
2021
Transactions:
Common
Stock
On
May 14, 2021, The Company entered into the Equity Purchase Agreement with Cross, pursuant to which we have the right to “put,”
or sell, up to $10,000,000 worth of shares of our common stock to Cross. As provided in the Equity Purchase Agreement, we may require
Cross to purchase shares of our common stock from time to time by delivering a put notice to Cross specifying the total number of shares
to be purchased (such number of shares multiplied by the purchase price described below, the “Investment Amount”); provided
there must be a minimum of ten trading days between delivery of each put notice. We may determine the Investment Amount, provided that
such amount may not be more than 500% of the average daily trading volume in dollar amount for our common stock during the five trading
days preceding the date on which we deliver the applicable put notice, unless waived by Cross in its sole discretion. Additionally, such
amount may not be lower than $10,000 or higher than $1,000,000. Cross will have no obligation to purchase shares under the Equity Line
to the extent that such purchase would cause Cross to own more than 4.99% of our issued and outstanding shares of common stock.
In
June 2021 the company issued 500,000
restricted shares of its common stock valued
at $332,500
pursuant to S-1 Agreement to third party for
certain services, recorded as subscription receivable.
During
April, May and June 2021 the company issued 2,647,464
restricted shares of its common stock valued
at $582,707
pursuant to conversion of convertible note (Note
10) with a loss of extinguishment of debt $1,535,264.
During
April, May and June 2021 the Company issued 1,234,113
shares for cash of gross proceed of $402,500
pursuant to various Warrant Stock purchase agreements.
The cash was received in the second quarter ending 2021. Out of these 519,828 shares of common stock valued at $152,500 was adjusted
with common stock to be issued of prior period. The company also issued warrants to purchase 175,000 shares of common stock at an exercise
price of $0.75 and 714,285 shares of common stock at an exercise price of $0.80. Warrants are exercisable within a 3 year period from
issuance.
During
April, May and June 2021 the company issued 1,114,351
restricted shares of its common stock valued
at $792,389
to third parties for certain services, recorded
as consulting fees.
During
March 2021 the Company issued 1,712,500
shares for cash of gross $434,000
pursuant to various Stock purchase agreements.
The cash was received in the first quarter ending 2021.The company also issued warrants to purchase 900,000
shares of common stock at an exercise price of
$0.75.
Warrants are exercisable within a 3
year period from issuance.
Company
paid finders fees of $20,000 in cash during this period for capital raise and will also issue shares equaling $16,000 in market value,
which was issued during the three months ended June 30, 2021.
On
March 18, 2021 the company issued 488,428
restricted shares of its common stock valued
at $291,974
to third parties for certain services, recorded
as consulting fees. Out of these 108,965 shares of common stock valued at $66,974 was adjusted with common stock to be issued of prior
year.
2020
Transactions:
During
the period between January 1, 2020 and December 31, 2020 the Company issued total 17,292,751 shares valued $3,309,130 pursuant to the
Company’s Registration Statement on Form S-3. The Company received $3,309,130 in cash.
On
January 13, 2020 the Company issued 250,000
restricted shares of its common stock to third
party valued at $50,000,
which were carried on the books as stock to be issued.
On
January 23, 2020 and February 26, 2020 the Company issued 600,000,
and 62,839
restricted shares of its common stock to third
party valued at $262,500,
and $25,000
pursuant to the stock purchase agreement for
certain services, recorded as advertising and promotion expense and License, permits & Patents, respectively.
On
March 17, 2020 the company acquired 100% of the issued and outstanding shares of Sapphire by means of a share exchange with the Sapphire
Stockholders in exchange for 54,000,000
restricted shares of its common stock at valued
$7,506,000.
On
April 21, 2020 the Company issued 1,176,470
restricted shares of its common stock to third
party valued at $100,000
pursuant to the stock purchase agreement. The
cash was received in 2020.
On
May 6, 2020, the Company entered into an agreement with Sanammad Foundation, the Sanammad Parties agreed to forfeit and assign back to
treasury, for no consideration, a total of 18,570,356
shares of the Company’s common stock, for
which the fair value was $2,562,709,
however for accounting purpose this transaction recording at par value adjustment to additional paid in capital. This transaction is
related to the divesture of the previous operations to Sanammad.
On
May 22, 2020 the Company issued 190,810
and 286,215 S-8 shares valued at $60,000 and
$90,000
pursuant to the Company’s Registration
Statement on Form S-8 for severance fees.
On
June 10, 2020 and June 24, 2020 the Company issued 2,173,913
and 625,000
restricted shares of its common stock to third
party valued at $500,000
and $100,000
pursuant to the stock purchase agreement. The
cash was received in 2020, respectively.
On
July 1, 2020 the Company issued 185,185
and 370,370
restricted shares of its common stock to third
party valued at $25,000
and $50,000
pursuant to the stock purchase agreement. The
cash was received in 2020, respectively.
On
July 2, 2020 and July 9, 2020 the Company issued 714,285
and 1,785,714
restricted shares of its common stock to third
party valued at $100,000
and $250,000
pursuant to the stock purchase agreement. The
cash was received in 2020, respectively.
On
July 10, 2020 the Company issued 5,141,377
restricted shares of its common stock in exchange
for the conversion of $51,414
of a convertible note payable, which included
$6,414 in interest.
On
July 10, 2020 the Company issued 142,857
and 357,153
restricted shares of its common stock to third
party valued at $20,000
and $50,000
pursuant to the stock purchase agreement. The
cash was received in 2020, respectively.
On
July 10, 2020 the Company issued 250,000
and 107,143
restricted shares of its common stock to third
party valued at $35,000
and $15,000
pursuant to the stock purchase agreement. The
cash was received in 2020, respectively.
On
July 14, 2020 the Company issued 200,000
restricted shares of its common stock to third
party valued at $23,630
pursuant to the stock purchase agreement. The
cash was received in 2020, respectively.
On
July 21, 2020 the Company entered into convertible note purchase agreement with Cross & Company, the Company owed to Cross &
Company $609,835
of aggregated True-Up payments due to subscription
price adjustment and desired to satisfy the amount due in full by issuing to Cross & Company a convertible promissory note (see note
10).
On
July 22, 2020 the Company issued 65,359
and 130,719
restricted shares of its common stock to third
party valued at $20,000
and $40,000
pursuant to the stock purchase agreement. The
cash was received in 2020, respectively.
On
July 22, 2020 the Company issued 163,398
and 326,797
restricted shares of its common stock to third
party valued at $50,000
and $100,000
pursuant to the stock purchase agreement. The
cash was received in 2020, respectively.
On
July 22, 2020 the Company issued 816,993
and 65,359
restricted shares of its common stock to third
party valued at $250,000
and $20,000
pursuant to the stock purchase agreement. The
cash was received in 2020, respectively.
On
July 24, 2020 359,524
shares for the purchase of prepaid marketing
expenses valued at $302,000
On
August 4, 2020 the Company issued 141,243
restricted shares of its common stock to third
party valued at $50,000
pursuant to the stock purchase agreement. The
cash was received in 2020.
On
August 6, 2020 the Company issued 148,166
and 166,686
S-8 shares valued at $120,000
and $135,000
pursuant to the Company’s Registration
Statement on Form S-8 for severance fees.
On
August 12, 2020 the Company issued 414,419
restricted shares of its common stock to third
party valued at $76,690
pursuant to the stock purchase agreement for
certain services, recorded as commission fees.
On
December 7, 2020 the Company issued 130,609
S-8 shares of its common stock to third party
value at $75,000
pursuant to the Company’s Registration
Statement on Form S-8 for severance fees.
NOTE 13: STOCK OPTIONS
Options
to purchase common stock are granted at the discretion of the Board of Directors, a committee thereof or, subject to defined limitations,
an executive officer of the Company to whom such authority has been delegated. Options granted to date generally have a contractual life
of ten years.
The
stock option activity for six months ended June 30, 2021 and the year ended December 31, 2020 is as follows:
|
Schedule of Stock option activity
|
|
|
|
|
|
|
|
|
|
|
|
Options
Outstanding
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding at December 31, 2019
|
|
|
2,000,000
|
|
|
$
|
0.75
|
|
|
Granted
|
|
|
8,300,000
|
|
|
|
0.27
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
Expired or canceled
|
|
|
—
|
|
|
|
—
|
|
|
Outstanding at December 31, 2020
|
|
|
10,300,000
|
|
|
|
0.36
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
Expired or canceled
|
|
|
(2,000,000
|
)
|
|
|
0.75
|
|
|
Outstanding at June 30, 2021
|
|
|
8,300,000
|
|
|
$
|
0.36
|
|
The
following table summarizes the changes in options outstanding, option exercisability and the related prices for the shares of the Company’s
common stock issued to employees and consultants under a stock option plan at June 30, 2021 and December 31,2020: 2,000,000 options issued to John Huemoeller were canceled to allow for issuances to other employees.
As
of June 31, 2021
|
Schedule of options under Stock Option Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
Average
Exercise
Price
($)
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual
Life
(Years)
|
|
|
|
Weighted
Average
Exercise
Price
($)
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise
Price
($)
|
|
|
$
|
0.36
|
|
|
8,300,000
|
|
|
9.5
|
|
|
$
|
0.36
|
|
|
6,966,665
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2020
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
Average
Exercise
Price
($)
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual
Life
(Years)
|
|
|
|
Weighted
Average
Exercise
Price
($)
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise
Price
($)
|
|
|
$
|
0.36
|
|
|
10,300,000
|
|
|
9.8
|
|
|
$
|
0.36
|
|
|
7,466,662
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company determined the value of share-based compensation for options vested using the Black-Scholes fair value option-pricing model with
the following weighted average assumptions:
|
Schedule of assumptions to determine value of
share-based compensation for options
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2021
|
|
2020
|
|
Expected life (years)
|
|
|
10
|
|
|
|
10
|
|
|
Risk-free interest rate (%)
|
|
|
1.74
|
|
|
|
0.61
|
|
|
Expected volatility (%)
|
|
|
190
|
|
|
|
230
|
|
|
Dividend yield (%)
|
|
|
—
|
|
|
|
—
|
|
|
Weighted average fair value of shares at grant date
|
|
$
|
1.74
|
|
|
$
|
0.61
|
|
For the three months ended June 30, 2021 and 2020 stock-based compensation
expense related to vested options was $91,526 and $0, respectively.
For
the six months ended June 30, 2021 and 2020 stock-based compensation expense related to vested options was $191,266
and $0,
respectively.
NOTE 14: DISCONTINUED OPERATIONS
During
May 2020 the Company decided to discontinue most of its operating activities pursuant to the Separation Agreement entered into by and
among the Company, CanChew License Company (“CanCo”), CanChew Biotechnologies, LLC (“CanChew”), Medical Marijuana,
Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip A. Van Damme (“Dr. Van Damme”), Lekhram Changoer
(“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad Foundation, US (collectively, the “Sanammad Parties”).
(see Note 1)
Pursuant
to the terms of the Purchase Agreement dated as of May 6, 2020, Sanammad Parties agreed to acquire from the Company substantially all
of its assets and its wholly-owned subsidiaries and to assume certain liabilities and its wholly-owned subsidiaries. Sanammad Parties
agreed to pay a purchase price of $2,609,100 reflected in amount due Canchew were deemed paid in full. The sale, which was completed
on May 6, 2020, did not include the Company’s cash and certain other excluded assets and liabilities.
The
assets sold and liabilities transferred in the transaction were the sole revenue generating assets of the Company. The results of operations
associated with the assets sold have been reclassified into discontinued operations for periods prior to the completion of the transaction.
The
following is a summary of assets and liabilities sold, stock retired and gain recognized, in connection with the sale of assets to Sanammad
parties:
|
Schedule of Discontinued Operations - Summary
of assets and liabilities sold
|
|
|
|
|
|
Other current assets
|
|
$
|
5,000
|
|
|
Total current assets
|
|
$
|
510,017
|
|
|
Intangible assets, net of amortization
|
|
$
|
47,375
|
|
|
Total asset
|
|
$
|
562,392
|
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
880,000
|
|
|
Accounts payable and accrued expenses
|
|
$
|
210,640
|
|
|
Due to Canchew
|
|
$
|
1,526,603
|
|
|
Stock retired
|
|
$
|
1,857
|
|
|
Total liabilities and equity
|
|
$
|
2,619,100
|
|
|
|
|
|
|
|
|
The gain on sale of assets was reported during the period was determined
as follows:
|
|
|
|
|
|
Loss on sale of assets
|
|
$
|
562,392
|
|
|
Gain on sale of liabilities
|
|
$
|
2,619,100
|
|
|
|
|
|
|
|
|
Net gain from sale of assets and liabilities
|
|
$
|
2,056,708
|
|
The
resulting gain from the sale will be fully offset by existing net operating loss carryforwards available to the Company.
For
the six months ended June 30, 2021 and 2020 the Company recognized interest expense of $-0-
and $-0-,
respectively.
Additionally,
the operating results and cash flows related to assets sold on May 06, 2020 are included in discontinued operations in the consolidated
statements of operations and consolidated statements of cash flows for the twelve months ended December 31, 2020 and 2019.
As
of June 30, 2021 and 2020, the Company has nil asset and liabilities of the discontinued operations in the unaudited condensed consolidated
balance sheet in accordance with the provision of ASC 205-20.
Loss
from Discontinued Operations
The
sale of the majority of the assets and liabilities related to the Sanammad parties represents a strategic shift in the Company’s
business. For this reason, the results of operations related to the assets and liabilities held for sale for all periods are classified
as discontinued operations.
The
following is a summary of the results of operations related to the assets and liabilities held for sale (discontinued operations) for
the six months ended June 30, 2021 and 2020:
|
Summary of Results of Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
2021
|
|
June
30,
2020
|
|
Net sales
|
|
$
|
—
|
|
|
$
|
5,097
|
|
|
Total expenses
|
|
$
|
(4,633
|
)
|
|
$
|
(2,321,852
|
)
|
|
Gain from sale of asset and liability
|
|
$
|
—
|
|
|
$
|
2,046,708
|
|
|
Other loss (income)
|
|
$
|
—
|
|
|
$
|
(87,383
|
)
|
|
Loss from discontinued operations
|
|
$
|
(4,633
|
)
|
|
$
|
(357,430
|
)
|
The
following is a summary of net cash provided by or used in operating activities, investing activities and financing activities for the
assets and liabilities held for sale (discontinued operations) for the six months ended June 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
2021
|
|
June
30,
2020
|
|
Income (loss) from discontinued operations
|
|
$
|
(4,633
|
)
|
|
$
|
(357,430
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment of non-cash activities
|
|
|
—
|
|
|
|
(1,809,325
|
)
|
|
Decrease in accounts receivable
|
|
|
—
|
|
|
|
315,684
|
|
|
Increase in inventory
|
|
|
—
|
|
|
|
(22,203
|
)
|
|
Increase in accounts payable and accrued expenses
|
|
|
—
|
|
|
|
1,075,335
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(4,633
|
)
|
|
$
|
(797,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Net cash provided by (used in) financing activities
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE 15: COMMITMENT AND CONTINGENCIES
On
January 2, 2019 the Company entered into the term of Executive’s employment agreement, at a base salary of $10,000 per month with
John W. Huemoeller II to serve as its Chief Executive Officer. The Company and Executive acknowledge and agree that Executive’s
employment hereunder shall at all times be “at will,” which means that either Executive may resign at any time for any reason
or for no reason, and that the Company may terminate Executive’s employment at any time for any reason or for no reason, in either
case, subject to the applicable provisions of this Agreement. In further consideration for Executive’s services and subject to
the approval of the Board, Executive will be granted an option to purchase 2,000,000 shares of the Company’s common stock (the
“Option Shares”). The option will be subject to the terms and conditions applicable to stock options granted under the Company’s
2015 Stock Incentive Plan, as amended from time to time (the “Plan”), and as described in the Plan and the stock option agreement,
which Executive will be required to sign. 50% of the Option Shares shall vest on the date of grant and the remaining 50% of the Option
Shares shall vest on the 12- month anniversary of the grant date, subject to Executive’s continued employment by the Company. The
exercise price per share will be equal to the fair market value per share on the date of grant, as determined by the last closing price
of the Company’s common stock the day prior to grant. Beginning in October 2019, the board decided to increase CEO base salary
to $35,000 per month.
On
April 24, 2017 the company entered into an employment agreement with Robert Malasek, its Chief Financial Officer and Secretary. The agreement
does not have a set term and may be terminated at any time by the Company or Mr. Malasek with proper notice. The shares were issued in
the 1st quarter 2018. Beginning in October 2019, the board ratified to increase CFO base salary to $3,000 per month.
On
August 21, 2018, AXIM Biotechnologies, Inc. (the “Company”) entered into an agreement with
Revive Therapeutics Ltd. (“Revive”) to begin selling the Company’s flagship nutraceutical product throughout the rapidly
expanding Canadian cannabis market. The agreement defines a relationship where Revive will seek regulatory approval for AXIM’s
proprietary, controlled-release functional chewing gum which contains hemp oil and cannabidiol (CBD). Under the terms of the agreement,
Revive will have a minimum purchase amount annually, which increases each year for the term of the agreement.
On
September 10, 2018, AXIM Biotechnologies, Inc. (the “Company”) entered into a Letter of Intent (“LOI”) with Impression
Healthcare Limited (“Impression”), Australia’s largest home dental impression company, for exclusive distribution of
all AXIM® Biotech products throughout Australia and New Zealand.
Pursuant
to the LOI, both parties will endeavor to enter into a definitive agreement whereby the parties will co-develop new products, initially
for pre-clinical and phase 1 trials (among other clinical trials), including an oral rinse liquid targeted for the treatment of oral
mucositis, strep throat, oral infections and gum disease. Pending initial discussions and an internal review of AXIM® Biotech and
its product offerings, Impression will collaborate with AXIM® Biotech for the licensing and distribution of its current and future
medicinal cannabis products for distribution in Australia and New Zealand. On December 20, 2018 the Company signed Exclusivity Agreement
on terms that include Exclusivity period of 90 days after the date on which this agreement is executed with Impression in exchange for
10,300,000 ordinary fully paid shares in Impression at the price of A$0.02 per share and exchange rate of $0.74 AUD/USD valued $150,000
which the Company recognized as a revenue in 4th quarter of 2018. During the year ended December 31, 2019, the Company received
another 2,000,000 shares and sold 7,375,000 shares. On April 14, 2020 the Company entered into deed of settlement and release with Impression
Healthcare Limited and transferred 4,925,000 held shares back to Impression Healthcare Limited by way of sale and purchase, with the
total amount payable by Impression Healthcare Limited to Axim for completion of the sale and purchase and transfer being the aggregate
amount of $1.
On
May 31, 2019, AXIM Biotechnologies, Inc. (“AXIM”) entered into a cannabinoid product supply agreement with Impression Healthcare
Limited (“Impression”), Australia’s largest home dental impression company, for the supply of the AXIM’s toothpaste
and mouthwash containing cannabidiol (CBD) for its clinical trial for the treatment of periodontitis. The supply agreement is in preparation
for a clinical trial to test the effectiveness of CBD in treating periodontitis. The clinical trial will be performed at Swinburne University
of Technology in Melbourne, Australia. In accordance with the agreement, AXIM will supply the first batch of its patented toothpaste
and mouthwash products containing CBD, along with associated placebo units for Impression to perform a randomized control clinical trial.
On April 14, 2020 the Company terminated its supply agreement with Impression Healthcare Limited by mutual consent of both parties.
On
July 2, 2019, AXIM Biotechnologies, Inc. (“AXIM”) entered into a multi-term, non-exclusive license and distribution agreement
(“Agreement”) with Colorado based gum developer, KISS Industries, LLC (“KISS Industries”). Under the terms of
the Agreement, AXIM grants KISS Industries a non-exclusive license to formulate and sell products that fall within AXIM’s cannabinoid
chewing gum patent in exchange for royalties to be paid to AXIM based upon KISS Industries sales in the United States and Mexico. The
Agreement also grants AXIM the right to: (i) acquire 10 percent of KISS Industries under certain conditions; and (ii) match any outside
future offer to acquire KISS Industries as a whole. Further, AXIM’s CEO John W. Huemoeller II will also join the Board of Directors
of KISS Industries.
In
exchange for this license Kiss Industries will pay Axim 6% of gross sales as a royalty on all licensed products sold by Kiss. In the
territory covered by this license which is the USA and Mexico. (Minimum annual royalty $50,000). Kiss will manufacture for Axim various
licensed products at a price equal to 140% of Kiss’s cost. As of June 30, 2021 and December 31, 2020 Kiss Industries did not sell
any Axim’s products.
Industry
Sponsored Research Agreement— Sapphire entered into the Industry Sponsored Research Agreement (“SRA”) effective February
7, 2020 to test and confirm the inhibitory activity of SBI-183 (exclusively licensed on January 13, 2020) and SBI-183 analogs, including
those synthesized by the Company. The testing will include cell-based in vitro assays, NMR binding studies and testing to determine if
SBI-183 enhances the activity of cytotoxic drugs in vitro. Animal studies will also be conducted under the SRA. Specifically, SBI-183
analogs will be evaluated in a mouse model of triple negative breast cancer using human tumor xenografts. The work will be performed
over a period of one year with the total cost of the SRA totaling $150,468 paid prior to acquisition. In consideration of the License
executed between Skysong Innovations and the Company, the SRA provides for a reduced overhead of 5% instead of the usual 67.7%. This
overhead fee differential of $89,851 will be deferred for five (5) years with interest of 5% compounded annually. For the six months
ended June 30, 2021, the Company recorded research and development expenses of $191,266.
On
August 5, 2020 Sapphire was awarded a $395,880 phase I Small Business Innovation Research (SBIR) grant by the National Cancer Institute
(NCI). The grant will support continued development of novel small molecules that inhibit the enzymatic activity of Quiescin Sulfhydryl
Oxidase I (QSOX1) based on a lead compound. QSOX1 is a tumor-derived enzyme that is important for cancer growth, invasion and metastasis.
Sapphire is conducting this research with technology it has exclusively licensed from Skysong Innovations, LLC, the intellectual property
management company for Arizona State University. Sapphire will subcontract tumor biology work for evaluating analog inhibitors for QSOX1
to Dr. Doug Lake’s laboratory at Arizona State University and Mayo Clinic Arizona. Grant income received for the six months ended
June 30, 2021 and 2020 was $159,995 and $-0-; respectively.
On
August 25, 2020 we signed an exclusive licensing, manufacturing and distribution agreement with Empowered Diagnostics LLC to execute
the high-volume production of our rapid point-of-care diagnostic test. AXIM and Empowered have completed the technology transfer and
Empowered Diagnostics has built out their production facility to be able to manufacture millions of our neutralizing antibody tests for
Covid-19 per month. In exchange for this license Empowered will pay Axim a royalty on net sales on all licensed products sold by Empowered
covered by this license which global with the exception of Mexico.
Operating
Lease
Lease
Agreement—On March 3, 2020, Sapphire entered into a 3-year lease agreement (“Lease”) to relocate to a larger space
within the same business park. The new space totals 1,908 square feet with monthly base rent in the 1st year $4,713, 2nd year $4,854
and 3rd year $5,000 at implicit interest rate of 6%. Upon commencement of the Lease on April 25, 2020, the previous lease will expire.
Operating
Leases - Right of Use Assets and Purchase Commitments Right of Use Assets
We
have operating leases for office space that expire through 2023. Below is a summary of our right of use assets and liabilities as of
June 30, 2021.
|
Summary of Right of Use Assets and Liabilities
|
|
|
|
|
Right-of-use assets
|
|
$
|
104,185
|
|
|
|
|
|
|
Lease liability obligations, current
|
|
$
|
58,540
|
|
Lease liability obligations, noncurrent
|
|
|
45,646
|
|
Total lease liability obligations
|
|
$
|
104,186
|
|
|
|
|
|
|
Weighted-average remaining lease term
|
|
|
1.83
years
|
|
|
|
|
|
|
Weighted-average discount rate
|
|
|
6%
|
The
following table summarizes the lease expense for the three months ended June 30, 2021 and 2020:
|
Summary of Lease Expenses
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2021
|
|
2020
|
|
Operating lease expense
|
|
$
|
28,560
|
*
|
|
$
|
4,713
|
**
|
|
Short-term lease expense
|
|
|
7,379
|
|
|
|
10,458
|
|
|
Total lease expense
|
|
$
|
35,939
|
|
|
$
|
15,171
|
|
|
*
|
We
recorded $35,939 of operating lease expense this includes $7,379 of maintenance.
|
|
**
|
The
first lease payment was made and adjusted in preacquisition cost.
|
Approximate
future minimum lease payments for our right of use assets over the remaining lease periods as of June 30, 2021, are as follows:
|
Schedule of Future Minimum Rental Payments for
Operating Leases
|
|
|
|
|
|
Remainder
of 2021
|
|
|
$
|
29,124
|
|
2022
|
|
|
|
59,416
|
|
2023
|
|
|
|
20,000
|
|
Total minimum
payments
|
|
|
|
108,540
|
|
Less:
amount representing interest
|
|
|
|
(4,354)
|
|
Total
|
|
|
$
|
104,186
|
|
|
|
|
|
|
Litigation
As
of June 30, 2021, and this report issuing date, the Company is not a party to any pending material legal proceeding. To the knowledge
of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. To the knowledge
of management, no director, executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent
of the Company’s Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.
NOTE 16: SUBSEQUENT EVENTS
August
03, 2021,the Company announced that they have signed a Binding Term Sheet to acquire the technology for the testing of Dry Eye Disease
(DED), including two FDA authorizations and approvals for the commercial sale of two ophthalmic diagnostic lab tests.
AXIM
and Advanced Tear Diagnostics, LLC, have signed a Binding Term Sheet and intend to enter into the Definitive Agreement for the transaction
to close no later than October 1, 2021. However, the Binding Term Sheet will remain in full force and effect until such time as the Definitive
Agreement is executed by the parties. AXIM intends to immediately implement the strategy for commercial launch of the first product projected
for the beginning of 2022.
August
10, 2021, the company issued 122,000 restricted shares of its common stock to a third party valued at $50,000 pursuant to a stock
purchase agreement. The cash was received in 2021.
The
company issued 115,554 restricted s8 shares of its common stock valued at $100,000 to a third party for prepaid consulting services.
In addition the vendor will be compensated at a rate of $7,500 per month. The agreement has a one year term.
