Aditx Therapeutics(ADTX) - 2021 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited financial statements for Q1 2021 show a significant increase in net loss and operating expenses, with a stronger cash position from recent financing activities Balance Sheets As of March 31, 2021, total assets grew to $18.0 million from $13.1 million and total liabilities rose to $6.6 million from $2.1 million, primarily due to increased cash, fixed assets, and a new convertible note payable Balance Sheet Summary (as of March 31, 2021 vs. December 31, 2020) | Metric | March 31, 2021 ($) | December 31, 2020 ($) | | :--- | :--- | :--- | | Total Current Assets | $14,808,964 | $11,033,153 | | Total Assets | $18,016,567 | $13,096,504 | | Total Current Liabilities | $3,404,771 | $1,226,958 | | Total Liabilities | $6,646,738 | $2,085,022 | | Total Stockholders' Equity | $11,369,829 | $11,011,482 | - The increase in liabilities is primarily due to the issuance of a convertible note payable, with short-term and long-term portions totaling approximately $3.19 million (net of discount)[9] Statements of Operations For the three months ended March 31, 2021, the company reported a net loss of $6.4 million, a substantial increase from $1.2 million in 2020, driven by higher general and administrative and research and development expenses Statement of Operations Summary (Three Months Ended March 31) | Metric | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | General and administrative expenses | $5,098,517 | $856,427 | | Research and development expenses | $935,952 | $200,371 | | Total Operating Expenses | $6,093,032 | $1,056,798 | | Net Loss | ($6,379,667) | ($1,189,363) | | Net loss per share | ($0.46) | ($0.30) | - Stock-based compensation included in G&A expenses increased significantly to $1,464,902 in Q1 2021 from $529,437 in Q1 2020[11] Statements of Stockholders' Equity (Deficit) Stockholders' equity modestly increased to $11.4 million from $11.0 million at year-end 2020, driven by $3.7 million from warrant exercises and stock-based compensation, partially offset by a $6.4 million net loss - The company received $3,718,956 from the exercise of 1,163,556 warrants during the quarter[13] - Additional paid-in capital increased from $32.1 million to $38.8 million, driven by warrant exercises, stock-based compensation, and warrants issued with a convertible note[13][15] - The accumulated deficit grew from $(20.9) million to $(27.3) million due to the net loss for the period[15] Statements of Cash Flows Cash increased by $3.5 million to $14.0 million during the quarter, as $4.1 million used in operations was offset by $8.1 million from financing activities, including a $5.0 million convertible note and $3.7 million from warrant exercises Cash Flow Summary (Three Months Ended March 31) | Metric | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($4,053,729) | ($250,917) | | Net cash used in investing activities | ($486,450) | $0 | | Net cash provided by financing activities | $8,084,389 | $293,404 | | Net increase in cash | $3,544,210 | $42,487 | | Cash at end of period | $14,045,036 | $46,577 | Notes to Financial Statements Key notes detail the company's pre-revenue status, reliance on recent financing to alleviate going concern doubts, specifics of a $6 million convertible note, and a subsequent lease for new laboratory and office space - The company is a pre-revenue biotech firm focused on immune reprogramming (pre-clinical) and monitoring technologies[25] - Management believes that funds raised from the IPO, a September 2020 offering, and a January 2021 convertible note are sufficient to fund operations for at least the next 12 months, alleviating substantial doubt about its ability to continue as a going concern[31] - In January 2021, the company issued a $6 million Senior Convertible Promissory Note with a 24-month term, convertible at $4.00 per share, along with warrants to purchase 800,000 shares[66] - Subsequent to the quarter end, on May 4, 2021, the company entered into a 63-month lease for approximately 25,000 square feet of laboratory and office space in Richmond, Virginia[90] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on its ADi™ and AditxtScore™ platforms, attributing the increased Q1 2021 operating loss to expanded business and public company costs, while confirming recent financing provides sufficient capital for the next 12 months - The company's core focus is on two technology platforms: ADi™ for immune reprogramming to address organ transplant rejection and autoimmune diseases, and AditxtScore™ for personalized immune system monitoring[93][97][100] - The increase in operating expenses in Q1 2021 versus Q1 2020 was due to the company beginning to execute its business plan and incurring costs of being a public company[116] - As of March 31, 2021, the company had working capital of $11.4 million and an accumulated deficit of $27.3 million[117] - The company has funded operations through an IPO (July 2020, ~$9.5 million net), a follow-on offering (Sept 2020, ~$9.6 million gross), and a convertible note (Jan 2021, $6 million gross), and believes it has sufficient cash for the foreseeable future[118][120] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is not required to provide this information as it qualifies as a "smaller reporting company" - As a "smaller reporting company," Aditx Therapeutics, Inc. is exempt from the requirement to provide quantitative and qualitative disclosures about market risk[130] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period[131] - No material changes occurred in the company's internal control over financial reporting during the quarter ended March 31, 2021[132] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings outside the ordinary course of business - The company may become involved in various lawsuits from time to time but is not currently party to any that are expected to harm the business[133] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K and other SEC filings - The company states there have been no material changes to the Risk Factors previously disclosed in its Annual Report on Form 10-K[134] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued 18,000 shares of common stock to a consultant in Q1 2021 under a Section 4(a)(2) exemption and confirmed no material change in the planned use of its July 2020 IPO proceeds - In Q1 2021, the company issued 18,000 shares of common stock in unregistered sales to a consultant for services, pursuant to Section 4(a)(2) of the Securities Act[134][135] - The company confirmed no material change in the planned use of the $9.5 million net proceeds from its July 2020 IPO[136] Item 3. Defaults Upon Senior Securities None Item 4. Mine Safety Disclosures Not applicable Item 5. Other Information None Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from principal officers and XBRL data files - The report includes a list of exhibits, such as the CEO and CFO certifications (31.1, 31.2, 32.1) and XBRL instance documents, which are filed herewith[138]