UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 1−SA
☒ SEMIANNUAL
REPORT PURSUANT TO REGULATION A
or
☐ SPECIAL
FINANCIAL REPORT PURSUANT TO REGULATION A
For the fiscal semiannual period ended June
30, 2022
20/20 GeneSystems, Inc.
(Exact name of issuer as specified in its charter)
Delaware |
|
57-2272107 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S.
Employer
Identification No.) |
15810 Gaither Road,
Suite 235, Gaithersburg, MD 20877
(Full mailing address of
principal executive offices)
(240) 453-6339
(Issuer’s telephone
number, including area code)
| Item 1. | Management’s
Discussion and Analysis of Financial Condition and Results of Operations |
Use of Terms
Except as otherwise indicated by the context
and for the purposes of this report only, references in this report to “we,” “us,” “our” or the “Company”
refer to 20/20 GeneSystems, Inc., a Delaware corporation.
Special Note Regarding Forward Looking Statements
Certain information contained in this report
includes forward-looking statements. The statements herein which are not historical reflect our current expectations and projections
about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently
available to us and our interpretation of what is believed to be significant factors affecting the businesses, including many assumptions
regarding future events.
Forward-looking statements are generally identifiable
by use of the words “may,” “should,” “expect,” “anticipate,” “estimate,”
“believe,” “intend,” or “project” or the negative of these words or other variations on these words
or comparable terminology. Actual results, performance, liquidity, financial condition, prospects and opportunities could differ materially
from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors.
Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including,
without limitation, the risks outlined under “Item 1. Business-Risk Factors” included in our Annual Report on Form 1-K, and
matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this report will in fact occur.
Potential investors should not place undue reliance
on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update
or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
Overview
We are a digital diagnostics company with the
core mission of developing and commercializing clinical laboratory tests and associated software that is powered by machine learning
and real-world data to improve diagnostic accuracy and clinical usefulness.
For early cancer detection, we use machine learning
and real-world data analytics approaches to substantially improve the accuracy of tumor biomarkers that are currently tested in millions
of individuals around the world. Our cancer product, known as OneTest, is a multi-cancer early detection test for screening more than
five types of cancer from one blood sample.
In response to the novel coronavirus pandemic
that began in early 2020, we expanded our business and offered several COVID-19 testing solutions, both rapid kits and laboratory-based
tests. In the third quarter of 2020, in response to substantial and urgent demand for expanded viral testing in Maryland, we also began
to provide COVID-19 viral testing using polymerase chain reaction (PCR) analytical equipment in our clinical laboratory.
In 2021, we moved to a larger laboratory and
office location and established a Clinical Laboratory Innovation Accelerator, or CLIAx, which permits diagnostics start-up companies
from around the world to launch their laboratory developed tests in a CLIA licensed laboratory using shared equipment and laboratory
personnel. There is currently one company actively enrolled in CLIAx with negotiations underway with several other companies. Our CLIAx,
which we believe to be the first such shared CLIA laboratory facility in the U.S., reduces the costs and expense for start-up companies
to launch their novel tests in the American market while providing us with sales and marketing rights to additional products.
Our legacy business includes a pioneering field
test kit for screening suspicious powders for bioterror agents that is used regularly by hundreds of first responder organizations worldwide,
known as BioCheck. Our BioCheck kits for screening suspicious powders remains profitable, but with limited growth potential, at least
in the U.S. absent a serial anthrax incident, or similar incident, like the one that occurred in the U.S. in 2001.
Recent Developments
On August 10, 2022, we entered a Technology
License & Access Agreement with BioInfra Life Science, Inc., a Korean corporation, to be the exclusive distributor in the U.S.
of their unique and proprietary algorithms which will be used in conjunction with our current laboratory tests. Upon signing, we
paid an up-front fee of $150,000, which accounts for up-front royalty payments, and a second payment of $150,000 will be paid after
completion of a successful blinded U.S. validation study. The royalty fees to be paid will range from $12 to $25 per test depending
upon what is being tested. The royalty fees earned will offset the up-front royalty payment before any additional fees are owed. The
products include measurement of chronic (non-cancer) disease markers, tumor antigens and clinical chemistry analytes. The more that
is tested the more the price per test will increase and in direct relationship so will the associated royalty fee.
On August 15, 2022, we launched an offering of
up to $4,999,995 of convertible promissory notes pursuant to Section 4(a)(6) of the Securities Act of 1933, as amended, or the Securities
Act, and Regulation Crowdfunding promulgated thereunder. Investors will receive a note earning between 6% and 9% in simple interest depending
upon certain criteria being met at time of investment. The notes will convert at the earlier of a qualified equity financing of $100,000
or the maturity date of February 28, 2025. The highest conversion price per security is set at a valuation cap of $58,400,000 or if less,
at 10% discount on the price received at the qualified equity financing. The notes will contain customary events of default for loans
of this type. On January 9, 2022, we entered into a Company Engagement and Posting Agreement with StartEngine Secure, LLC, or StartEngine,
to provide the funding portal enabling the equity offering. Under this agreement, we will pay StartEngine a cash commission equal to
5.5% of the gross proceeds raised in the offering and will issue to StartEngine convertible promissory notes in a principal amount equal
to 3% of the gross proceeds raised in the offering. As of the date of this report, we have issued convertible promissory notes in the
aggregate principal amount of approximately $93,000 and have raised approximately $84,000 in net proceeds after deducting approximately
$9,000 in commissions and expenses.
Principal Factors Affecting our Financial
Performance
Our operating results are primarily affected
by the following factors:
| ● | our
ability to access additional capital and the size and timing of subsequent financings; |
| ● | the
costs of acquiring additional data, technology, and/or intellectual property to successfully
reach our goals and to remain competitive; |
| ● | personnel
and facilities costs in any region in which we seek to introduce and market our products; |
| ● | the
costs of sales, marketing, and customer acquisition; |
| ● | average
price per test paid by consumers; |
| ● | the
number of tests ordered per quarter; |
| ● | costs
of third-party laboratories to run our tests; |
| ● | willingness
of healthcare providers (including telemedicine providers) to prescribe and encourage our
tests and the fees charged by them to do so; |
| ● | the
costs of compliance with any unforeseen regulatory obstacles or governmental mandates in
any states or countries in which we seek to operate; |
| ● | the
costs of any additional clinical studies which are deemed necessary for us to remain viable
and competitive in any region of the world; |
| ● | the
extent and duration of demand for COVID-19 viral and serology testing after the introduction
and acceptance of safe and effective vaccines; and |
| ● | our
ability to identify additional tests and revenue sources to make up for the anticipated drop
in COVID-19 testing after “herd immunity” is reached |
Results of Operations
The following table sets forth key components
of our results of operations during the six months ended June 30, 2022 and 2021.
| |
Six Months Ended June 30, | | |
Change | |
| |
2022 | | |
2021 | | |
$ | | |
% | |
Revenues | |
$ | 9,091,632 | | |
$ | 1,810,791 | | |
$ | 7,280,841 | | |
| 402.1 | % |
Cost of revenues | |
| 4,233,485 | | |
| 865,174 | | |
| 3,368,311 | | |
| 389.3 | % |
Gross profit | |
| 4,858,147 | | |
| 945,617 | | |
| 3,912,530 | | |
| 413.8 | % |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Sales, general and administrative | |
| 1,424,712 | | |
| 1,608,164 | | |
| (183,452 | ) | |
| (11.4 | )% |
Research and development | |
| 50,010 | | |
| 122,732 | | |
| (72,722 | ) | |
| (59.3 | )% |
Total operating expenses | |
| 1,474,722 | | |
| 1,730,896 | | |
| (256,174 | ) | |
| (14.8 | )% |
Income (loss) from operations | |
| 3,383,425 | | |
| (785,279 | ) | |
| 4,168,704 | | |
| 530.9 | % |
Total other income (expense) | |
| 4,253 | | |
| (11,316 | ) | |
| 15,569 | | |
| 137.6 | % |
Net income (loss) | |
$ | 3,387,678 | | |
$ | (796,595 | ) | |
$ | 4,184,273 | | |
| 525.3 | % |
Revenues. We generated revenues
from sales of COVID-19 tests, OneTest and BioCheck for six months ended June 30, 2022 and 2021. In the six months ended June 30, 2022,
we also generated revenues from our CLIAx services. Our total revenues were $9,091,632 for the six months ended June 30, 2022, as compared
to $1,810,791 for the six months ended June 30, 2021, an increase of $7,280,841, or 402.1%.
Revenues from our COVID-19 tests are derived
from two classes of tests: (i) rapid point-of-care tests (antibody and antigen) that we distributed after validating and (ii) lab-based
PCR testing of nasal swabs sent to our CLIA lab from area nursing homes, numerous county school systems in the State of Maryland and
the Montgomery County Health Department. Revenues from our COVID-19 tests increased by $7,228,165, or 464.1%, to $8,785,760 for the six
months ended June 30, 2022 from $1,557,595 for the six months ended June 30, 2021. Such increase was due to a 619.1% increase in PCR
tests resulting from a significant increase in the volume of tests, offset by an 83.7% decrease in rapid tests. As of the date of this
report, we have been informed by the State of Maryland that they will no longer be funding school testing; however, each school system
can independently request testing from three approved laboratories in the state of Maryland of which we are one of these approved lab
locations. Our sales team is working to sign the previously supported school systems with testing when needed. We have also seen a decrease
in testing offered through the Montgomery County Health Department.
Revenues from sales of OneTest increased by $33,746,
or 22.1%, to $186,392 for the six months ended June 30, 2022 from $152,646 for the six months ended June 30, 2021. Such increase was
due to volume increases, primarily related to orders with fire departments.
Revenues from sales of BioCheck decreased by
$26,188, or 26.0%, to $74,362 for the six months ended June 30, 2022 from $100,550 for the six months ended June 30, 2021. Such decrease
was due to significant COVID-19 testing precluding our marketing efforts for BioCheck.
Revenues from sales of CLIAx services, our newly
opened CLIA licensed laboratory using shared equipment and laboratory personnel, were $45,118 for the six months ended June 30, 2022.
Cost of revenues. Our cost of revenues
includes materials, labor and laboratory expenses. Our cost of revenues increased by $3,368,311, or 389.3%, to $4,233,485 for the six
months ended June 30, 2022 from $865,174 for the six months ended June 30, 2021. This increase was mainly due to costs of COVID-19 tests.
Additionally, there was an increase in base costs of maintaining a laboratory, amortization of license agreements attributable to the
analyzation of OneTest orders and the required diagnostic reagent kits in connection with the OneTest sales increases. As a percentage
of revenues, cost of revenues was 46.6% and 47.8% for the six months ended June 30, 2022 and 2021, respectively. The 1.2% decrease was
primarily due to the increased sales of COVID-19 tests, which have lower costs than our other tests.
Gross profit and gross margin.
Our gross profit increased by $3,912,530, or 413.8%, to $4,858,147 for the six months ended June 30, 2022 from $945,617 for the six months
ended June 30, 2021. Gross profit as a percentage of revenues (gross margin) was 53.4% and 52.2% for the six months ended June 30, 2022
and 2021, respectively.
Sales, general and administrative expenses.
Our sales, general and administrative expenses include sales, marketing, office leases, overhead, executive compensation, legal,
regulatory, government relations, and similar expenses. Our sales, general and administrative expenses decreased by $183,452, or 11.4%,
to $1,424,712 for the six months ended June 30, 2022 from $1,608,164 for the six months ended June 30, 2021. The decrease was primarily
due to a decrease in professional fees and sales and marketing expenses as the significant COVID-19 testing precluded marketing of OneTest
or BioCheck. As a percentage of revenues, sales, general and administrative expenses amounted to 15.7% for the six months ended June
30, 2022, compared to 88.8% for the six months ended June 30, 2021.
Research and development expenses.
Our research and development expenses include principally clinical
data acquisitions, laboratory validation and bridging studies, data analysis algorithms and non-capitalizable machine learning software
development. It also includes laboratory test validation and technical consultation. Our research and development expenses decreased by
$72,722, or 59.3% to $50,010 for the six months ended June 30, 2022 from $122,732 for the six months ended June 30, 2021. As a percentage
of revenues, research and development expenses decreased to 0.6% for the six months ended June 30, 2022 from 6.8% for the six months ended
June 30, 2021. The decrease was due to the decrease of staffing resources related to our cancer test products in 2022 compared to 2021.
Total other income (expense). Total
other income, net, was $4,253 for the six months ended June 30, 2022, as compared to total other expense, net, of $11,316 for the six
months ended June 30, 2021. Total other income, net, for the six months ended June 30, 2022 consisted of interest income of $7,218 and
other income of $2,371, offset by interest expense of $5,336, while total other expense, net, for the six months ended June 30, 2021
consisted of interest expense of $6,488 and other expense of $5,900, offset by interest income of $1,072.
Net income (loss). As a result
of the cumulative effect of the factors described above, our net income increased by $4,184,273, or 525.3%, to $3,387,678 for the six
months ended June 30, 2022 from a net loss of $796,595 for the six months ended June 30, 2021.
Liquidity and Capital Resources
Historically, our sources of cash have included
private placements of equity securities and cash generated from revenues. Our historical cash outflows have primarily been associated
with cash used for operating activities such as research and development activities and other working capital needs; the acquisition
of clinical data, patient samples (blood, tissue), intellectual property; and expenditures related to equipment and improvements used
for our laboratory facility. We intend to fund our operations through increased revenue from operations and the remaining capital raised
through our recent offerings.
Summary of Cash Flows
As of June 30, 2022, we had approximately
$7,819,608 in cash and cash equivalents. The following table presents a summary of our cash flows for the periods indicated:
| |
Six Months Ended June 30, | |
| |
2022 | | |
2021 | |
Net cash provided by (used in) operating activities | |
$ | 4,739,343 | | |
$ | (733,335 | ) |
Net cash used in investing activities | |
| (245,241 | ) | |
| (11,973 | ) |
Net cash provided by (used in) financing activities | |
| (28,963 | ) | |
| 1,187,143 | |
Net increase in cash and cash equivalents | |
| 4,465,139 | | |
| 441,835 | |
Cash and cash equivalents at beginning of period | |
| 3,354,469 | | |
| 3,468,192 | |
Cash and cash equivalent at end of period | |
$ | 7,819,608 | | |
$ | 3,910,027 | |
Net cash provided by operating activities was
$4,739,343 for the six months ended June 30, 2022, as compared to net cash used in operating activities of $733,335 for the six months
ended June 30, 2021. In 2022, the cash from operations will be used for future operating and investing activities. In 2021, the principal
use of cash in operating activities was to fund our net loss. Cash flows from operations can vary significantly due to various factors,
including changes in our operations, accounts receivable, prepaid expenses, accounts payable and accrued expenses.
Net cash used in investing activities was $245,241
for the six months ended June 30, 2022, as compared to $11,973 for the six months ended June 30, 2021. Net cash used in investing activities
for the six months ended June 30, 2022 consisted of purchases of capital equipment of $242,347, proceeds from sale of equipment of $5,750,
and capitalized patent costs of $8,644, while net cash used in investing activities for the six months ended June 30, 2021 consisted
entirely of purchases of capital equipment.
Net cash used in financing activities was $28,963
for the six months ended June 30, 2022, as compared to net cash provided by financing activities of $1,187,143 for the six months ended
June 30, 2021. Net cash used in financing activities for the six months ended June 30, 2022 consisted entirely of principal payments
of capital lease obligations, while net cash provided by financing activities for the six months ended June 30, 2021 consisted of the
net proceeds from the issuance of preferred stock of $1,093,577 and proceeds from refinancing of equipment through a capital lease of
$134,991, offset by repayments of $41,425 on the lease.
Regulation A Offering
On January 8, 2020, we launched an offering under
Regulation A of Section 3(6) of the Securities Act for Tier 2 offerings, pursuant to which we offered up to 3,340,909 shares of
series C preferred stock at an offering price of $4.40 per share for gross proceeds of up to $14,700,000 on a “best efforts”
basis. This offering was terminated on June 15, 2021.
During the six months ended June 30, 2021, we
raised approximately $1,399,226 in gross proceeds through the sale of 340,647 shares of our series C preferred stock for net proceeds
of $1,168,362, of which $78,191 was recorded as a subscription receivable as funds were not received as of the period end.
Capital Expenditures
We incurred capital expenditures of $242,347 in the six months ended
June 30, 2022 and we incurred capital expenditures of $50,897 in the six months ended June 30, 2021 in direct purchase of $11,973 and
equipment under capital lease of $38,924. We estimate that our total capital expenditures in fiscal year 2022 will reach approximately
$300,000. Such funds will be used primarily to build out our new facility and any additional laboratory equipment.
Off-Balance Sheet Arrangements
We did not have during the periods presented,
and we do not currently have, any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity
with United States generally accepted accounting principles, or U.S. GAAP, requires our management to make assumptions, estimates and
judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if
any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting
policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those
that are most important to the portrayal of our financial condition and results of operations and require management’s difficult,
subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain
and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial
statements and because of the possibility that future events affecting the estimate may differ significantly from management’s
current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in
the preparation of our financial statements:
Revenue Recognition. In accordance
with Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, we recognize revenue when the
customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange
for those goods and services. To determine revenue recognition for arrangements that we deem are within the scope of ASC Topic 606, we
perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in
the contract; (iii) calculate transfer price; (iv) allocate the transaction price to the performance obligation in the contract;
and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Performance obligations for three different
types of services are discussed below:
| ● | OneTest
‒ Revenues from the sale of OneTest is recognized when returned serum specimens are
analyzed in our CLIA laboratory and the results are reported. Due to the nature of OneTest,
revenue per test is recorded based on historical average receipts from patients. |
| ● | BioCheck
‒ Revenues for kits is recognized when purchase orders are processed and kits are shipped
to customers. |
| o | Point-of-Care
(POC) Test Kits ‒ Revenues for COVID-19 distributed test kits for use at the POC (i.e.,
rapid antigen and antibody tests) are recognized when purchase orders are processed, and
test kits are shipped to customers. |
| o | COVID-19
Lab Tests (PCR) ‒ Revenues from the sale of COVID-19 viral (PCR) tests is recognized
when returned nasal swabs are analyzed in our CLIA laboratory and the results are reported.
Due to the nature of PCR tests, revenue per test is recorded based on historical average
receipts from insurance payers, Medicare, Medicaid, nursing homes or County government. |
| ● | CLIAx
‒ Revenues from the CLIAx are currently from internal lab services provided by the
Company to CLIAx customers. Future revenues will come from marketing and selling the CLIAx
customer’s laboratory developed tests through the Company’s developed sales channels. |
Stock-Based Compensation. We account
for stock awards issued under ASC 718, Compensation – Stock Compensation. Under ASC 718, stock-based compensation cost is
measured at the grant date, based on the estimated fair value of the award. Stock-based compensation is recognized as expense over the
employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. The fair value of each
stock option or warrant award is estimated on the date of grant using the Black-Scholes option valuation model. Restricted shares are
measured based on the fair market value of the underlying stock on the grant date.
Recently Issued Accounting Pronouncements
Management does not believe any other recently
issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated
financial statements.
We have no information to disclose that was required
to be in a report on Form 1-U during the semiannual period covered by this Form 1-SA, but was not reported.
| Item 3. | Financial Statements |
INDEX TO FINANCIAL
STATEMENTS OF 20/20 GENESYSTEMS, INC.
20/20 GENESYSTEMS,
INC.
BALANCE SHEETS
JUNE 30, 2022 AND DECEMBER 31, 2021
(UNAUDITED)
| |
June 30, 2022 | | |
December 31, 2021 | |
Assets | |
| | |
| |
Current assets: | |
| | |
| |
Cash and cash equivalents | |
$ | 7,819,608 | | |
$ | 3,354,469 | |
Accounts receivable, net | |
| 2,784,543 | | |
| 4,215,465 | |
Inventory | |
| 148,546 | | |
| 246,658 | |
Prepaid expenses | |
| 147,163 | | |
| 125,664 | |
Total current assets | |
| 10,899,860 | | |
| 7,942,256 | |
License agreement, net | |
| 356,463 | | |
| 367,713 | |
Property and equipment, net | |
| 666,267 | | |
| 511,910 | |
Intangible assets, net | |
| 214,137 | | |
| 213,885 | |
Right of use assets | |
| 1,057,344 | | |
| 1,168,471 | |
Due from affiliated entities | |
| 2,699 | | |
| 2,699 | |
Other assets | |
| 54,099 | | |
| 65,347 | |
Total assets | |
$ | 13,250,869 | | |
$ | 10,272,281 | |
| |
| | | |
| | |
Liabilities and Stockholders’ Equity | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 518,475 | | |
$ | 834,269 | |
Accrued liabilities | |
| 911,524 | | |
| 1,121,607 | |
Deferred revenue | |
| 209,173 | | |
| 152,698 | |
Financing lease liabilities - current | |
| 56,714 | | |
| 56,714 | |
Lease liability - current | |
| 119,935 | | |
| 88,314 | |
Total current liabilities | |
| 1,815,821 | | |
| 2,253,602 | |
| |
| | | |
| | |
Long-term liabilities: | |
| | | |
| | |
Financing lease liabilities – long term | |
| 19,762 | | |
| 48,725 | |
Lease liability – long term | |
| 1,007,659 | | |
| 1,080,157 | |
Total long-term liabilities | |
| 1,027,421 | | |
| 1,128,882 | |
| |
| | | |
| | |
Total liabilities | |
| 2,843,242 | | |
| 3,382,484 | |
| |
| | | |
| | |
Commitments and contingencies (Note 8) | |
| - | | |
| - | |
| |
| | | |
| | |
Stockholders’ equity: | |
| | | |
| | |
Series C preferred stock, $0.01 par value; 3,340,909 authorized; 1,204,040 and 1,205,069 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively; liquated preference of $5,297,776 and $5,302,304 | |
| 12,040 | | |
| 12,051 | |
Series B preferred stock, $0.01 par value; 3,569,405 authorized; 1,471,487 shares issued and outstanding as of June 30, 2022 and December 31, 2021; liquated preference of $5,194,349 | |
| 14,715 | | |
| 14,715 | |
Series A-2 preferred stock, $0.01 par value; 800,000 authorized; 442,402 shares issued and outstanding as of June 30, 2022 and December 31, 2021; liquated preference of $1,442,231 | |
| 4,424 | | |
| 4,424 | |
Series A-1 preferred stock, $0.01 par value; 978,000 authorized; 651,465 shares issued and outstanding as of June 30, 2022 and December 31, 2021; liquated preference of $1,999,998 | |
| 6,515 | | |
| 6,515 | |
Series A preferred stock, $0.01 par value; 1,303,000 authorized; 846,368 shares issued and outstanding as of June 30, 2022 and December 31, 2021; liquated preference of $2,598,350 | |
| 8,464 | | |
| 8,464 | |
Common stock, $0.01 par value; 25,000,000 authorized; 4,763,601 and 4,762,572 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | |
| 47,636 | | |
| 47,626 | |
Additional paid-in capital | |
| 26,678,452 | | |
| 26,548,299 | |
Accumulated deficit | |
| (16,364,619 | ) | |
| (19,752,297 | ) |
Total stockholders’ equity | |
| 10,407,627 | | |
| 6,889,797 | |
Total liabilities and stockholders’ equity | |
$ | 13,250,869 | | |
$ | 10,272,281 | |
See accompanying notes to
the financial statements
20/20 GENESYSTEMS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND
2021
(UNAUDITED)
| |
2022 | | |
2021 | |
Revenues | |
$ | 9,091,632 | | |
$ | 1,810,791 | |
| |
| | | |
| | |
Cost of revenues | |
| 4,233,485 | | |
| 865,174 | |
| |
| | | |
| | |
Gross profit | |
| 4,858,147 | | |
| 945,617 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
Sales, general and administrative | |
| 1,424,712 | | |
| 1,608,164 | |
Research and development | |
| 50,010 | | |
| 122,732 | |
Total operating expenses | |
| 1,474,722 | | |
| 1,730,896 | |
| |
| | | |
| | |
Operating income (loss) | |
| 3,383,425 | | |
| (785,279 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Interest expense | |
| (5,336 | ) | |
| (6,488 | ) |
Interest income | |
| 7,218 | | |
| 1,072 | |
Other expense | |
| - | | |
| (5,900 | ) |
Other income | |
| 2,371 | | |
| - | |
Total other income (expense) | |
| 4,253 | | |
| (11,316 | ) |
Income (loss) before income taxes | |
| 3,387,678 | | |
| (796,595 | ) |
Provision for income taxes | |
| - | | |
| - | |
Net income (loss) | |
$ | 3,387,678 | | |
$ | (796,595 | ) |
Basic net income (loss) per common share | |
$ | 0.71 | | |
$ | (0.17 | ) |
Diluted net income (loss) per common share | |
$ | 0.36 | | |
$ | (0.17 | ) |
Weighted-average common shares outstanding, basic | |
| 4,763,180 | | |
| 4,727,495 | |
Weighted-average common shares outstanding, diluted | |
| 9,520,885 | | |
| 4,727,495 | |
See accompanying notes to
the financial statements
20/20
GENESYSTEMS, INC.
STATEMENTS
OF STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(UNAUDITED)
Six
Months Ended June 30, 2022
| |
Series
C Preferred Stock | | |
Series
B Preferred Stock | | |
Series
A-2 Preferred Stock | | |
Series
A-1 Preferred Stock | | |
Series
A Preferred Stock | | |
Common
Stock | | |
Additional
Paid-in | | |
Accumulated | | |
Total
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Equity | |
Balance,
December 31, 2021 | |
| 1,205,069 | | |
$ | 12,051 | | |
| 1,471,487 | | |
$ | 14,715 | | |
| 442,402 | | |
$ | 4,424 | | |
| 651,465 | | |
$ | 6,515 | | |
| 846,368 | | |
$ | 8,464 | | |
| 4,762,572 | | |
$ | 47,626 | | |
$ | 26,548,299 | | |
$ | (19,752,297 | | |
$ | 6,889,797 | |
Stock
based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 130,153 | | |
| - | | |
| 130,153 | |
Conversion
of preferred stock | |
| (1,029 | ) | |
| (11 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,029 | | |
| 10 | | |
| | | |
| - | | |
| (1 | ) |
Net
income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,387,678 | | |
| 3,387,678 | |
Balance,
June 30, 2022 | |
| 1,204,040 | | |
$ | 12,040 | | |
| 1,471,487 | | |
$ | 14,715 | | |
| 442,402 | | |
$ | 4,424 | | |
| 651,465 | | |
$ | 6,515 | | |
| 846,368 | | |
$ | 8,464 | | |
| 4,763,601 | | |
$ | 47,636 | | |
$ | 26,678,452 | | |
$ | (16,364,619 | | |
$ | 10,407,627 | |
Six
Months Ended June 30, 2021
| |
Series C Preferred
Stock | | |
Series B Preferred
Stock | | |
Series A-2 Preferred
Stock | | |
Series A-1 Preferred
Stock | | |
Series A Preferred
Stock | | |
Common Stock | | |
Additional Paid-in | | |
Subscription | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Receivable | | |
Deficit | | |
Equity | |
Balance, December 31, 2020 | |
| 858,327 | | |
$ | 8,584 | | |
| 1,471,487 | | |
$ | 14,715 | | |
| 442,402 | | |
$ | 4,424 | | |
| 651,465 | | |
$ | 6,515 | | |
| 846,368 | | |
$ | 8,464 | | |
| 4,728,833 | | |
$ | 47,288 | | |
$ | 25,123,303 | | |
$ | - | | |
$ | (21,824,074 | ) | |
$ | 3,389,219 | |
Stock based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 171,032 | | |
| - | | |
| - | | |
| 171,032 | |
Issuance of preferred stock, net
of offering costs | |
| 340,647 | | |
| 3,406 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,168,362 | | |
| (78,191 | ) | |
| - | | |
| 1,093,577 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (796,595 | ) | |
| (796,595 | ) |
Balance, June 30, 2021 | |
| 1,198,974 | | |
$ | 11,990 | | |
| 1,471,487 | | |
$ | 14,715 | | |
| 442,402 | | |
$ | 4,424 | | |
| 651,465 | | |
$ | 6,515 | | |
| 846,368 | | |
$ | 8,464 | | |
| 4,728,833 | | |
$ | 47,288 | | |
$ | 26,462,697 | | |
$ | (78,191 | ) | |
$ | (22,620,669 | ) | |
$ | 3,857,233 | |
See
accompanying notes to the financial statements
20/20
GENESYSTEMS, INC.
STATEMENTS
OF CASH FLOWS
FOR
THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(UNAUDITED)
| |
2022 | | |
2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
| |
Net income (loss) | |
$ | 3,387,678 | | |
$ | (796,595 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 93,003 | | |
| 38,971 | |
Stock based compensation | |
| 130,153 | | |
| 171,032 | |
Amortization of license fees | |
| 11,250 | | |
| 10,179 | |
Amortization of ROU | |
| 70,250 | | |
| - | |
Allowance for uncollectible receivables | |
| - | | |
| 8,100 | |
Loss of sale of asset disposition | |
| (2,371 | ) | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 1,430,922 | | |
| (226,832 | ) |
Inventory | |
| 98,112 | | |
| 25,359 | |
Prepaid expenses and other | |
| (10,251 | ) | |
| (105,340 | ) |
Accounts payable | |
| (315,796 | ) | |
| 57,918 | |
Accrued liabilities | |
| (210,082 | ) | |
| 873 | |
Deferred revenue | |
| 56,475 | | |
| 83,000 | |
Net cash provided by (used in) operating activities | |
| 4,739,343 | | |
| (733,335 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
License agreement | |
| (8,644 | ) | |
| - | |
Purchase of property and equipment | |
| (242,347 | ) | |
| (11,973 | ) |
Proceeds from sale of equipment | |
| 5,750 | | |
| - | |
Net cash used in investing activities | |
| (245,241 | ) | |
| (11,973 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from equipment financing lease | |
| - | | |
| 134,991 | |
Principal payments on financing lease obligations | |
| (28,963 | ) | |
| (41,425 | ) |
Proceeds from sale of preferred stock, net of offering costs | |
| - | | |
| 1,093,577 | |
Net cash provided by (used in) financing activities | |
| (28,963 | ) | |
| 1,187,143 | |
| |
| | | |
| | |
Increase in cash and cash equivalents | |
| 4,465,139 | | |
| 441,835 | |
Cash and cash equivalents, beginning of period | |
| 3,354,469 | | |
| 3,468,192 | |
Cash and cash equivalents, end of period | |
$ | 7,819,608 | | |
$ | 3,910,027 | |
| |
| | | |
| | |
Supplemental disclosures of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | 3,334 | | |
$ | 6,324 | |
Cash paid for income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Non-cash disclosures of cash flow information: | |
| | | |
| | |
Equipment acquired under a capital lease | |
$ | - | | |
$ | 38,923 | |
Non-cash conversion of preferred stock to common stock | |
$ | 11 | | |
$ | - | |
See
accompanying notes to the financial statements
20/20
GENESYSTEMS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022 AND 2021
NOTE
1 – BUSINESS AND NATURE OF OPERATIONS
20/20
GeneSystems, Inc. (the “Company”), founded in May 2000, is a digital diagnostics company with the core mission of developing
and commercializing clinical laboratory test and associated software that is powered by machine learning and real-world data to improve
diagnostic accuracy and clinical usefulness.
For
early cancer detection, the Company uses machine learning and real-world data analytics approaches to substantially improve the accuracy
of tumor biomarkers that are currently tested in millions of individuals around the world. The Company’s cancer product, known
as OneTest, is a multi-cancer test for screening at least five types of cancer from one blood sample.
In
response to the novel coronavirus pandemic that began in early 2020, the Company expanded its business and acquired and commercialized
several COVID-19 serology (antibody) and viral (RT-PCR) tests, both rapid kits and laboratory-based tests.
In
2021, the Company moved to a larger laboratory and office location and established a Clinical Laboratory Innovation Accelerator (“CLIAx”),
which permits diagnostics start-up companies from around the world to launch their laboratory developed tests in a CLIA licensed laboratory
using shared equipment and laboratory personnel.
The
Company’s legacy business includes a patented field test kit for screening suspicious powders for bioterror agents that is used
regularly by hundreds of first responder organizations worldwide, known as BioCheck.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with United States generally
accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with Rule 8-03 of Regulation
S-X per Regulation A requirements. Certain information and disclosures normally included in the annual financial statements prepared
in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all
adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. These interim
consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements of the Company
for the years ended December 31, 2021 and 2020. The results of operations for the six months ended June 30, 2022 and 2021 are not necessarily
indicative of the results that may be expected for the full year.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses
during the reporting periods. Actual results could materially differ from these estimates. It is reasonably possible that changes in
estimates will occur in the near term. The use of estimates include revenue recognition, impairment of long-lived assets, stock-based
compensation and expense accruals.
Cash
and Cash Equivalents
The
Company considers time deposits, certificates of deposit, and certain investments with an original maturity of three months or less to
be cash equivalents.
20/20
GENESYSTEMS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022 AND 2021
Accounts
Receivable
Accounts
receivable represent amounts due from commercial customers. On June 30, 2022 and December 31, 2021, customer accounts receivable totaled
$2,784,543 and $4,215,465, respectively. Unbilled receivables of $1,363,628 and $2,060,695 are included in the balance at June 30, 2022
and December 31, 2021, respectively. The payment of consideration related to these unbilled receivables is subject only to the passage
of time. Management reviews open accounts monthly and takes appropriate steps for collection. When needed, an allowance for doubtful
accounts is recorded to reflect management’s determination of the amount deemed uncollectable. An allowance for doubtful accounts
of $40,100 and $40,100 is included in accounts receivable at June 30, 2022 and December 31, 2021, respectively.
Inventories
Inventories
are stated at the lower of cost or market using the first-in, first out (FIFO) method. Inventories consisted entirely of finished goods
as of June 30, 2022 and December 31, 2021.
Basic
and Diluted Loss Per Share
The
Company follows Financial Accounting Standards Board (“FASB”) ASC 260, Earnings per Share, to account for earnings
per share. Basic earnings per share calculations are determined by dividing net loss by the weighted average number of shares of common
stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average
number of common shares and dilutive common share equivalents outstanding. Dilutive common share equivalents include the dilutive effect
of in-the-money share equivalents, which are calculated, based on the average share price for each period using the treasury stock method.
Under the treasury stock method, the exercise price of an award, if any, the amount of compensation cost, if any, for future service
that the Company has not yet recognized, and the estimated tax benefits that would be recorded in paid-in capital, if any, when an award
is settled are assumed to be used to repurchase shares in the current period. During periods when common stock equivalents, if any, are
anti-dilutive they are not considered in the computation.
The
following is a summary of outstanding securities which have been included in the calculation of diluted net income per share and reconciliation
of net income to net income available to common stockholders for the six months ended June 30, 2022 and 2021.
| |
2022 | | |
2021 | |
Weighted average common shares outstanding used in calculating basic earnings per share | |
| 4,763,180 | | |
| 4,727,495 | |
Warrants to purchase Common Stock | |
| 88,632 | | |
| - | |
Options to purchase Common Stock | |
| 53,311 | | |
| - | |
Series C Preferred Stock | |
| 1,204,040 | | |
| - | |
Series B Preferred Stock | |
| 1,471,487 | | |
| - | |
Series A-2 Preferred Stock | |
| 442,402 | | |
| - | |
Series A-1 Preferred Stock | |
| 651,465 | | |
| - | |
Series A Preferred Stock | |
| 846,368 | | |
| - | |
Weighted average common shares outstanding used in calculating diluted earnings per share | |
| 9,520,885 | | |
| 4,727,495 | |
The
Company excluded 15,096 options and 180,917 warrants from the computation of diluted net income per share for the six months ended June
30, 2022 as their exercise prices were in excess of the most recent valuation of the Company’s common stock during that period.
The warrants and options to purchase common stock were calculated under the treasury method resulting in a weighted average outstanding
warrants of 88,632 and stock options of 721,930 converting to 64,903 dilutive warrants and 53,311 dilutive options, respectively. The
Company excluded all preferred stock, warrants and options from the computation of diluted net loss per share for the six months ended
June 30, 2021 as the effects would have been anti-dilutive.
20/20
GENESYSTEMS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022 AND 2021
Revenue
Recognition
In
accordance with ASC Topic 606, Revenue from Contracts with Customers, the Company recognizes revenue when the customer obtains
control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those
goods and services. To determine revenue recognition for arrangements that the Company deems are within the scope of ASC Topic 606, the
Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations
in the contract; (iii) calculate transfer price; (iv) allocate the transaction price to the performance obligation in the contract;
and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
Disaggregated
Revenue ‒ The Company disaggregates revenue from contracts with customers by contract type, as it believes it best depicts
how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The
Company’s revenue by contract type is as follows:
| |
For the Six Months Ended
June 30, | |
| |
2022 | | |
2021 | |
Revenues | |
| | |
| |
BioCheck | |
$ | 74,362 | | |
$ | 100,550 | |
OneTest | |
| 186,392 | | |
| 152,646 | |
COVID-19 PCR Tests | |
| 8,729,633 | | |
| 1,213,905 | |
COVID-19 Antibody/Antigen Tests | |
| 56,127 | | |
| 343,690 | |
CLIAx | |
| 45,118 | | |
| - | |
Total revenues | |
$ | 9,091,632 | | |
$ | 1,810,791 | |
Performance
Obligations ‒ Performance obligations for three different types of services are discussed below:
| ● | OneTest
‒ Revenues from the sale of OneTest is recognized when returned serum specimens are
analyzed in the Company’s CLIA laboratory and the results are reported. Due to the
nature of OneTest, revenue per test is recorded based on historical average receipts from
patients. |
| ● | BioCheck
‒ Revenues for kits is recognized when purchase orders are processed and kits are shipped
to customers. |
| o | Point-of-Care
(POC) Test Kits ‒ Revenues for COVID-19 distributed test kits for use at the POC (i.e.,
rapid antigen and antibody tests) are recognized when purchase orders are processed, and
test kits are shipped to customers. |
| o | COVID-19
Lab Tests (PCR) ‒ Revenues from the sale of COVID-19 viral (PCR) tests is recognized
when returned nasal swabs are analyzed in the Company’s CLIA laboratory and the results
are reported. Due to the nature of PCR tests, revenue per test is recorded based on historical
average receipts from insurance payers, Medicare, Medicaid, nursing homes or County government. |
| ● | CLIAx
‒ Revenues from the CLIAx are currently from internal lab services provided by the
Company to CLIAx customers. Future revenues will come from marketing and selling the CLIAx
customer’s laboratory developed tests through the Company’s developed sales channels. |
20/20
GENESYSTEMS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022 AND 2021
Risk
and Uncertainty
The
Company’s significant growth in COVID-19 viral testing solutions is affected by the pattern of seasonality subject to
the unpredictable demand for viral testing in Maryland. As of the date of this report, the Company has been informed by the State of
Maryland that they will no longer be funding school testing; however, each school system can independently request testing from three
approved laboratories in the state of Maryland of which the Company is one of these approved lab locations. The Company’s sales
team is working to sign the previously supported school systems with testing when needed. The Company has also seen a decrease in testing
offered through the Montgomery County Health Department
Shipping
and Handling
Amounts
billed to a customer for shipping and handling are reported as revenues. Costs related to shipments to the Company are classified as
cost of sales and totaled $141,864 and $50,799 for the six months ended June 30, 2022 and 2021, respectively.
Research
and Development
The
Company incurs research and development costs during the process of researching and developing the Company’s laboratory tests,
algorithms, information technologies and other intellectual properties. The Company’s research and development costs consist primarily
of data acquisition and personnel costs of scientists and laboratory technicians. The Company expenses these costs as incurred until
the resulting product has been completed, tested, validated and made ready for commercial use.
Advertising
The
Company expenses advertising costs as incurred. Advertising expenses were $84,329 and $2,224 for the six months ended June 30, 2022 and
2021, respectively.
Stock-Based
Compensation
The
Company accounts for stock awards issued under ASC 718, Compensation – Stock Compensation. Under ASC 718, stock-based compensation
cost is measured at the grant date, based on the estimated fair value of the award. Stock-based compensation is recognized as expense
over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. The fair value
of each stock option or warrant award is estimated on the date of grant using the Black-Scholes option valuation model. Restricted shares
are measured based on the fair market value of the underlying stock on the grant date.
Income
Taxes
The
Company applies ASC 740, Income Taxes. Deferred income taxes are recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax
laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes
represents the tax expense for the period, if any and the change during the period in deferred tax assets and liabilities. At December
31, 2021, the Company has established a full allowance against all deferred tax assets. As of June 30, 2022, the Company has a valuation
allowance on the net deferred assets due to the continued likelihood that realization of any future benefit from deductible temporary
differences and net operating loss carryforwards cannot be sufficiently assumed.
ASC
740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. A tax benefit from
an uncertain position is recognized only if it is “more likely than not” that the position is sustainable upon examination
by the relevant taxing authority based on its technical merit. Interest and penalties, if any, are accrued as a component of operating
expenses when assessed.
20/20
GENESYSTEMS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022 AND 2021
Concentrations
The
Company maintains its cash at various financial institutions located in the United States of America which it believes to be credit worthy.
Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the Company maintains balances in excess
of the federally insured limits. The Company has not experienced any losses with respect to its cash balances.
As
of June 30, 2022, approximately 92% of total accounts receivable were due from two sources. As of December 31, 2021, approximately 91%
of total accounts receivable were due from two sources. During the six months ended June 30, 2022, approximately 97% of total revenues
were received from two sources. During the six months ended June 30, 2021, approximately 12% of total revenues were received from one
source. Management believes the loss of one or more of these customers would have a significant effect on the Company’s financial
condition.
NOTE
3 – PROPERTY AND EQUIPMENT
Property
and equipment consisted of the following:
| |
June 30,
2022 | | |
December 31,
2021 | |
Office equipment | |
$ | 155,969 | | |
$ | 162,100 | |
Furniture and fixtures | |
| 54,112 | | |
| 31,118 | |
Vehicles | |
| 40,555 | | |
| - | |
Laboratory equipment | |
| 896,636 | | |
| 864,734 | |
Leasehold improvements | |
| - | | |
| 5,700 | |
Total property and equipment | |
| 1,147,272 | | |
| 1,063,652 | |
Less accumulated depreciation | |
| (481,005 | ) | |
| (551,742 | ) |
| |
$ | 666,267 | | |
$ | 511,910 | |
Depreciation
expense was $84,611 and $30,579 for the six months ended June 30, 2022 and 2021, respectively.
NOTE
4 – INTANGIBLE ASSETS
Intangible
assets consisted of the following:
| |
June 30, 2022 | | |
December 31, 2021 | |
Issued patents (amortized) | |
$ | 241,998 | | |
$ | 31,840 | |
Unissued patents (unamortized) | |
| - | | |
| 201,514 | |
Software development costs | |
| 45,575 | | |
| 45,575 | |
Total patents | |
| 287,573 | | |
| 278,929 | |
Less accumulated amortization | |
| (73,436 | ) | |
| (65,044 | ) |
| |
$ | 214,137 | | |
$ | 213,885 | |
Amortization
expense for intangible assets was $8,392 respectively for the six months ended June 30, 2022 and 2021.
NOTE
5 – FINANCING LEASES
The
Company leases certain equipment under separate non-cancelable equipment loan and security agreements. The agreements mature in
December 2023. The agreements require various monthly payments of principal and interest through maturity and are secured by the
assets under lease. As of June 30, 2022 and December 31, 2021, $173,915 of financing lease equipment and $65,419 and $47,507, respectively,
of accumulated depreciation are included in property and equipment on the consolidated balance sheets. The weighted average interest
rate was 6.4% and 6.2% at June 30, 2022 and December 31, 2021, respectively.
20/20
GENESYSTEMS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022 AND 2021
Future
minimum lease payments under the leases as of June 30, 2022 are as follows:
2022 (remainder) | |
$ | 32,296 | |
2023 | |
| 64,592 | |
Total lease payments | |
| 96,888 | |
Less: amount representing interest | |
| (4,737 | ) |
Total lease payments | |
$ | 92,151 | |
As
of June 30, 2022, the weighted-average remaining lease term for all finance leases is 1.5 years.
NOTE
6 – OPERATING LEASES
On
March 18, 2021, the Company entered into a lease agreement with Shady Grove Development Park IX L.L.L.P. for a new office and laboratory
space totaling 5,511 square feet in Gaithersburg, Maryland. The term of the lease commenced on December 1, 2021 and shall expire 88 months
thereafter. The initial monthly rent is $14,315 with annual increases to $17,308 for the final year of the lease. The Company will also
pay its 7.75% pro rata portion of the property taxes, operating expenses and insurance costs and is also responsible to pay for the utilities
used on the premises. Total rent expense, including additional operating expenses related to this property, was $28,550 for the six months
ended June 30, 2022.
Supplemental
balance sheet information related to this lease is as follows:
| |
June 30,
2022 | |
Operating lease right-of-use lease asset | |
$ | 1,139,660 | |
Accumulated amortization | |
| 82,316 | |
Net balance | |
$ | 1,057,344 | |
| |
| | |
Lease liability, current portion | |
| 119,935 | |
Lease liability, long term | |
| 1,007,659 | |
Total operating lease liabilities | |
$ | 1,127,594 | |
| |
| | |
Weighted Average Remaining Lease Term – operating leases | |
| 81
months | |
| |
| | |
Weighted Average Discount Rate – operating leases | |
| 3.0 | % |
Future
minimum lease payments under this operating lease as of June 30, 2022, were as follows:
2022 (remainder) | |
$ | 64,056 | |
2023 | |
| 176,901 | |
2024 | |
| 181,772 | |
2025 | |
| 186,775 | |
2026 | |
| 191,910 | |
Thereafter | |
| 451,706 | |
Total lease payments | |
| 1,253,120 | |
Less imputed interest | |
| (125,526 | ) |
Maturities of lease liabilities | |
$ | 1,127,594 | |
In
August 2011, the Company entered into a lease commencing in December 2011 which expired in November 2016. Under the lease agreement,
the Company was to pay an annual rent of $134,975, plus additional operating expenses. Upon expiration, this lease had continued on a
month-to-month basis until March 2022. Total rent expense, including additional operating expenses related to this property, was $22,720
and $68,435 for the six months ended June 30, 2022 and 2021, respectively.
20/20
GENESYSTEMS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022 AND 2021
NOTE
7 – NOTE PAYABLE
On
May 19, 2020, the Company received a $144,107 paycheck protection program (“PPP”) loan from the U.S. Small Business Administration
(the “SBA”) under the provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The
PPP loan had a two-year term and bore interest at a rate of 1.0% per annum. The PPP provides that the PPP loans may be partially
or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company received notice
from Eagle Bank that its loan had been forgiven in its entirety by the SBA on September 9, 2021.
NOTE
8 – COMMITMENTS AND CONTINGENCIES
On
January 9, 2022, the Company entered into a Company Engagement and Posting Agreement with StartEngine Secure, LLC (“StartEngine”)
to provide the funding portal enabling the offering described in Note 10. Under this agreement, the Company will pay StartEngine a cash
commission equal to 5.5% of the gross proceeds raised in the offering and will issue to StartEngine convertible promissory notes in a
principal amount equal to 3% of the gross proceeds raised in the offering.
NOTE
9 – STOCKHOLDERS’ EQUITY
Preferred
Stock
The
Company has authorized the issuance of 10,000,000 shares of preferred stock with par value of $0.01, of which 1,303,000 have been designated
as series A preferred stock, 978,000 have been designated as series A-1 preferred stock, 800,000 shares have been designated as series
A-2 preferred stock, 3,569,405 shares have been designated as series B preferred stock and 3,340,909 shares have been designated as series
C preferred stock.
Series
A Preferred Stock
As
of June 30, 2022 and December 31, 2021, there were 846,368 shares of series A preferred stock issued and outstanding. No shares of series
A preferred stock were issued during six months ended June 30, 2022 and 2021.
Series
A-1 Preferred Stock
As
of June 30, 2022 and December 31, 2021, there were 651,465 shares of series A-1 preferred stock issued and outstanding. No shares of
series A-1 preferred stock were issued during six months ended June 30, 2022 and 2021.
Series
A-2 Preferred Stock
As
of June 30, 2022 and December 31, 2021, there were 442,402 shares of series A-2 preferred stock issued and outstanding. No shares of
series A-2 preferred stock were issued during six months ended June 30, 2022 and 2021.
Series
B Preferred Stock
As
of June 30, 2022 and December 31, 2021, there were 1,471,487 shares of series B preferred stock issued and outstanding. No shares of
series B preferred stock were issued during six months ended June 30, 2022 and 2021.
Series
C Preferred Stock
As
of June 30, 2022 and December 31, 2021, there were 1,204,040 and 1,205,069 shares of Series C Preferred Stock issued and outstanding,
respectively.
On
January 8, 2020, the Company launched an offering under Regulation A of Section 3(6) of the Securities Act of 1933, as amended (the “Securities
Act”) for Tier 2 offerings, pursuant to which the Company offered up to 3,340,909 shares of series C preferred stock at an
offering price of $4.40 per share for gross proceeds of up to $14,700,000 on a “best efforts” basis. This offering was terminated
on June 15, 2021.
During
the six months ended June 30, 2021, the Company issued shares of series C preferred stock for a purchase price, net of fees, of $1,168,362,
of which $78,191 was recorded as a subscription receivable as funds were not received as of the period end.
In
March 2022, an aggregate of 1,029 shares of series C preferred stock were converted into 1,029 shares of common stock.
20/20
GENESYSTEMS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022 AND 2021
Common
Stock
The
Company is authorized to issue 25,000,000 shares of common stock. As of June 30, 2022 and December 31, 2021, there were 4,763,601 and
4,762,572 shares of common stock and outstanding, respectively.
In
March 2022, the Company issued an aggregate of 1,029 shares of common stock upon the conversion of 1,029 shares of series C preferred
stock.
No
shares of common stock were issued during the six months ended June 30, 2021.
Stock
Options
On
February 1, 2022, the Company granted options for the purchase of an aggregate of 150,332 shares of common stock at an exercise price
of $1.0643 per share to certain directors. These options have a term of ten years and vested in full on the date of grant. On February
1, 2022, the Company also granted options for the purchase of an aggregate of 150,336 shares of common stock at an exercise price of
$1.0643 per share to the same directors. These options have a term of ten years and vest monthly over a one-year period. Management determines
the value of options granted using the calculated value method and the Black-Scholes option pricing model. The fair value of the stock
options issued in 2022 was determined using the Black Scholes option pricing model with the following assumptions: dividend yield: 0%;
volatility: 68.5%; risk free rate: 1.63%; estimated term five years for a value of $374,560.
On
January 28, 2021, the Company granted non-qualified stock options for the purchase of 306,512 shares of common stock at an exercise price
of $1.044 per share, all of which vested in full on the date of grant, to certain directors of the Company. Management determines the
value of options granted using the calculated value method and the Black-Scholes option pricing model. The fair value of the stock options
issued in 2021 was determined using the Black Scholes option pricing model with the following assumptions: dividend yield: 0%; volatility:
69.9%; risk free rate: 0.42%; estimated term five years for a value of $182,680 and recorded in general and administrative costs.
Total stock-based compensation for the six months ended June 30, 2022
and 2021 was $130,153 and $171,032, respectively, and is recorded in general and administrative costs.
Warrants
On April 19, 2022, the Company issued a five-year warrant for the purchase
of 91 shares of Common Stock at an exercise price of $4.40 (subject to standard adjustments) to a consultant for a value of $28 as partial
compensation for services rendered and recorded in general and administrative costs.
NOTE
10 – RELATED PARTY TRANSACTIONS
On
February 1, 2022, the Company granted stock options to certain directors of the Company. See Note 9.
The
Company utilizes the services of Barry Cohen, the brother of the Chief Executive Officer, who is trained as a computer engineer and has
over seven years’ experience with clinical lab operations, to oversee the Company’s laboratory information systems and patient/physician
portals. During the six months ended June 30, 2022 and 2021, the Company paid $58,078 and $47,067, respectively, to this related party.
20/20
GENESYSTEMS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022 AND 2021
NOTE
11 – SUBSEQUENT EVENTS
The
Company has evaluated subsequent events that occurred after June 30, 2022 through September 30, 2022, the issuance date of these financial
statements. Except as set forth below, there have been no other events or transactions during this time which would have a material effect
on these financial statements.
Technology
License & Access Agreement
On
August 10, 2022, the Company entered a Technology License & Access Agreement with BioInfra Life Science, Inc., a Korean
corporation, to be the exclusive distributor in the U.S. of their unique and proprietary algorithms which will be used in
conjunction with current laboratory tests. Upon signing, the Company paid an up-front fee of $150,000, which accounts for up-front
royalty payments, and a second payment of $150,000 will be paid after completion of a successful blinded U.S. validation study. The
royalty fees to be paid will range from $12 to $25 per test depending upon what is being tested. The royalty fees earned will offset
the up-front royalty payment before any additional fees are owed. The products include measurement of chronic (non-cancer) disease
markers, tumor antigens and clinical chemistry analytes. The more that is tested the more the price per test will increase and in
direct relationship so will the associated royalty fee.
Crowdfunding
Offering
On
August 15, 2022, the Company launched an offering of up to $4,999,995 of convertible promissory notes pursuant to Section 4(a)(6) of
the Securities Act and Regulation Crowdfunding promulgated thereunder. Investors will receive a note earning between 6% and 9% in simple
interest depending upon certain criteria being met at time of investment. The notes will convert at the earlier of a qualified equity
financing of $100,000 or the maturity date of February 28, 2025. The highest conversion price per security is set at a valuation cap
of $58,400,000 or if less, at 10% discount on the price received at the qualified equity financing. The notes will contain customary
events of default for loans of this type. As of the date of this report, the Company has issued convertible promissory notes in the aggregate
principal amount of approximately $93,000 and has raised approximately $84,000 in net proceeds after deducting approximately $9,000 in
commissions and expenses.
Exhibit
No. |
|
Description |
2.1 |
|
Second
Amended and Restated Certificate of Incorporation of 20/20 GeneSystems, Inc. (incorporated by reference to Exhibit 2.1 to the Semiannual
Report on Form 1-SA filed on November 15, 2018) |
2.2 |
|
Certificate
of Designation of Series C Preferred Stock (incorporated by reference to Exhibit 2.2 to the Annual Report on Form 1-K filed on July
6, 2020) |
2.3 |
|
Amended
and Restated Bylaws of 20/20 GeneSystems, Inc. (incorporated by reference to Exhibit 2.3 to the Annual Report on Form 1-K filed on
July 6, 2020) |
6.1 |
|
Lease
Agreement, dated March 18, 2021, between Shady Grove Development Park IX L.L.L.P. and 20/20 GeneSystems, Inc. (incorporated by reference
to Exhibit 6.11 to the Annual Report on Form 1-K filed on April 30, 2021) |
6.2 |
|
Employment
Agreement, dated May 5, 2019, between 20/20 GeneSystems, Inc. and Jonathan Cohen (incorporated by reference to Exhibit 6.8 to the
Offering Statement on Form 1-A filed on August 12, 2019) |
6.3 |
|
20/20
GeneSystems, Inc. 2022 Stock Incentive Plan (incorporated by reference to Exhibit 6.3 to the Annual Report on Form 1-K filed on May
26, 2022) |
6.4 |
|
Form
of Stock Option Agreement (incorporated by reference to Exhibit 6.4 to the Annual Report on Form 1-K filed on May 26, 2022) |
6.5 |
|
Form
of Restricted Stock Award Agreement (incorporated by reference to Exhibit 6.5 to the Annual Report on Form 1-K filed on May 26, 2022) |
SIGNATURES
Pursuant
to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date:
September 28, 2022 |
20/20
GENESYSTEMS, INC. |
|
|
|
/s/
Jonathan Cohen |
|
Name:
Jonathan Cohen |
|
Title:
Chief Executive Officer |
|
(Principal
Executive Officer and Principal Financial and Accounting Officer) |
21
20 20 GeneSystems (GM) (USOTC:TWTG)
Gráfico Histórico do Ativo
De Mai 2024 até Jun 2024
20 20 GeneSystems (GM) (USOTC:TWTG)
Gráfico Histórico do Ativo
De Jun 2023 até Jun 2024