Replies to post #147828 on Enzolytics Inc (ENZC)
All outstanding debt of the Company flowed to its subsidiary, now known as Robustomed, Inc. This means there are no outstanding convertible debt pieces of ENZC common equity, and that has been the case since November 30, 2020. This has been disclosed in all filings made on OTC (both annual and quarterly) since that date.
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The standard eliminates the liability and equity separation model for convertible instruments with a cash conversion feature. As a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Additionally, the embedded conversion feature will no longer be amortized into income as interest expense over the instrument’s life. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.
On November 30, 2020, the Company assumed the responsibilities of the Crowdfunding convertible notes issued by BioClonetics to various investors as part of its business combination agreement. On November 30, 2020, the outstanding balance of the Crowdfunding convertible notes was $654,606 consisting various investor notes (“Investor Notes” or “Investor Note”). As a result, the Company recorded an expense of $654,606 to general and administrative expenses in its consolidated statements of operations for the year ended December 31, 2020 , and corresponding amount to Crowdfunding convertible notes on its consolidated balance sheet for the Company’s servicing responsibilities for these notes. The Crowdfunding convertible notes are stock-settled debt under ASC 480.
Since the underlying obligation to the investors is a BioClonetic obligation as it relates to a sale of the company and capital raises at the Company believes that neither of these scenario’s will never happen, the Company offered the following three options to the investors to settle the Crowdfunding convertible notes:
Option 1: The investor may elect to hold its note until a conversion event occurs such as a future Series A financing round or when the Company is acquired.
Option 2: The investor may elect to have the Company repay the notes along with the 2% interest.
Option 3: The investor may elect to exchange its notes for each $5.00 note investment into 1 shares of Series D Preferred Stock.
The holders of Series B Preferred Stock shall have conversion rights as follows: Each share of Series B Preferred Stock shall be convertible at the option of the holder thereof and without the payment of additional consideration by the holder thereof, at any time, into shares of Common Stock in accordance with the stock designations filed with the office of the Delaware Secretary of State.
In December 2020, the Company entered into subscription agreements to issue Series C Convertible Preferred Stock to the same two investors who were investors in the Securities Exchange Agreements on November 16, 2020. Under the terms of the subscription agreements, the investors purchased 1,763,324 shares of Series C Convertible Preferred Stock and warrants to purchase 1,763,324 shares of the Series C Convertible Preferred Stock at a price of $0.50 per share resulting in a carrying value of $881,662.
Each share of the Series C Convertible Preferred Stock is convertible at price of $0.005 into shares of common stock anytime at the option of the investors. The warrants have an exercise price of $0.00750 per share and a term of three years and are exercisable anytime.
On June 1, 2021 the Company issued 1,250,000 shares of Series E preferred stock pursuant to a $500,000 subscription agreement.
On June 16, 2021 the Company issued 1,250,000 shares of Series E preferred stock pursuant to a $500,000 subscription agreement.
On October 20, 2020, the Company entered into a three-year employment agreements with four of its executive officers. Each executive officer is entitled to a base salary of $120,000 per year and 5,000,000 stock options. The stock options have a term of three years and vest ratably over a two-year period commencing on October 20, 2020.
On November 16, 2020, the Company entered into Securities Exchange Agreements with two investors. Under the terms of the Securities Exchange Agreements, the Company issued 941,078 shares of its Series Convertible Preferred Stock and 188,215,600 warrants to purchase 188,215,600 shares of its common stock in exchange for payment of various notes and accrued interest totaling $470,539 to these investors. Each share of the Series C Convertible Preferred Stock is convertible at price of $0.005 anytime at the option of the investors. The warrants have an exercise price of $0.00750 per share and expire on November 16, 2023. The Company valued the Series Convertible Preferred Stock at a price $0.50 per share which was based on subsequent subscription agreements entered in December 2020 (discussed below).
In December 2020, the Company entered into subscription agreements to issue Series C Convertible Preferred Stock to the same two investors who were investors in the Securities Exchange Agreements on November 16, 2020. Under the terms of the subscription agreements, the investors purchased 1,763,324 shares of Series C Convertible Preferred Stock and warrants to purchase 1,763,324 shares of the Series C Convertible Preferred Stock at a price of $0.50 per share resulting in a carrying value of $881,662.
With each increase in Float the total Restricted shares decreased in the same amount. As of December 31, 2021 there were 451,289,565 restricted shares remaining of the 2,797,935,953 originally issued prior to October 15, 2020. Approximately 71 million of these restricted shares are part of a lawsuit filed by the Company. The remaining 380,289,565 have met the SEC requirement for removal of the restrictive legends but have either not elected to or been unable to obtain an opinion letter acceptable to the transfer agent or are held by Officers and directors of the Company.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred an operating losses since inception and as of December 31, 2020, the Company has incurred accumulated deficit of $29,533,234. The Company has funded its operations through the issuances of notes payable to investors and sales of Series C Convertible Preferred Stock. The Company evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year beyond the filing of this Annual Report. In 2021, the Company has raised $2,000,000 in sales of Series E Convertible Preferred Stock and additional $950,000 in sales of subscribed Series C Convertible Preferred Stock. On May 12, 2021, the Company entered into a distribution agreement with a company to distribute the Company's anti-HIV-1 therapeutic ITV-1 in the countries of India, Pakistan, UAE, Indonesia, Philippines, Nigeria, Benin and Togo, Kenya, Tanzania, Rwanda, Libya, Uganda, North Sudan, Egypt, Morocco, and Tunisia. The Company received $1,000,000 in cash from the distribution agreement. As a result, the Company believes there are sufficient funds to continue operations and research and development programs for at least 12 months from the date of this report.
Management of the Company believes that the Company will be successful in its capital formation and operating activities, there can be no assurance that it will be able to raise additional equity capital or be able to generate sufficient revenues to sustain its operations. The Company also intends to conduct additional capital formation activities through the issuance of its common stock to establish sufficient working capital and to expand its operations. The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP), which contemplate continuation of the Company as a going concern. The Company has incurred an operating loss since inception and the cash resources of the Company are insufficient to meet its planned business objectives. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
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