CARDAX, INC. Explanatory Note
Unless otherwise noted, references in this Quarterly Report on Form 10-Q to
"
Unless otherwise noted, references in this Quarterly Report on Form 10-Q to our "product" or "products" includes our dietary supplements, pharmaceutical candidates, and any of our other current or future products, product candidates, and technologies, to the extent applicable.
Corporate Overview and History
We are a biopharmaceutical company primarily focused on the development of pharmaceuticals for chronic diseases driven by inflammation. We also have a commercial business unit that markets dietary supplements for inflammatory health. CDX-101, our astaxanthin pharmaceutical candidate, is being developed for cardiovascular inflammation and dyslipidemia, with a target initial indication of severe hypertriglyceridemia. CDX-301, our zeaxanthin pharmaceutical candidate, is being developed for macular degeneration. Our pharmaceutical candidates are currently in pre-clinical development, including the planning of IND enabling studies. ZanthoSyn® is a physician recommended astaxanthin dietary supplement for inflammatory health. We sell ZanthoSyn® primarily through wholesale and e-commerce channels. The safety and efficacy of our products have not been directly evaluated in clinical trials or confirmed by the FDA.
At present we are not able to estimate if or when we will be able to generate sustained revenues. Our financial statements have been prepared assuming that we will continue as a going concern; however, given our recurring losses from operations, our independent registered public accounting firm has determined there is substantial doubt about our ability to continue as a going concern.
Impact of COVID-19
The COVID-19 pandemic is a worldwide health crisis that is adversely affecting the economies and financial markets of many countries and may have short-term and long-term adverse effects on our business, financial condition, and results of operations that cannot be predicted as the global pandemic continues to evolve. Our sales, receivables, and access to financing, have been adversely affected during the pandemic.
41 Results of Operations
Results of Operations for the Three -Months Ended
The following table reflects our operating results for the three -months endedMarch 31, 2021 and 2020: Three-months ended Three-months ended Operating Summary March 31, 2021 March 31, 2020 Revenues, net $ 104,574 $ 142,813 Cost of Goods Sold (38,378 ) (62,995 ) Gross Profit 66,196 79,818 Operating Expenses (837,508 ) (985,849 ) Net Operating Loss (771,312 ) (906,031 ) Other Expenses, net (610,806 ) (96,837 ) Net Loss $ (1,382,118 ) $ (1,002,868 )
Operating Summary for the Three-Months Ended
Our revenues presently derive from the sale of ZanthoSyn® primarily through
wholesale and, to a lesser extent, e-commerce channels. We launched our
e-commerce channel in 2016 and began selling to GNC stores in 2017. ZanthoSyn®
is available at GNC corporate stores nationwide. As a result, revenues were
Operating expenses were
Other expenses, net, were
42
Liquidity and Capital Resources
Since our inception, we have sustained operating losses and have used cash
raised by issuing securities. We expect to continue to operate with a net loss
until we are able to develop and commercialize our pharmaceutical product
candidates. During the three-months ended
Our existing liquidity is not sufficient to fund our operations, including payroll, anticipated capital expenditures, working capital, and other financing requirements for the foreseeable future. We require additional financing in order to continue to fund our operations and to pay existing and future liabilities and other obligations, and may require more financing than anticipated, especially if we experience downturns or cyclical fluctuations in our business that are more severe or longer than anticipated, or if we experience significant increases in the cost of manufacturing, research and development, or sales and marketing activities, or increases in our expense levels resulting from being a publicly-traded company.
Our working capital and capital requirements at any given time depend upon numerous factors, including, but not limited to:
? revenues from the sale of any products or licenses;
? costs of production, marketing and sales capabilities, or other operating
expenses; and
? costs of research, development, and commercialization of our products and
technologies.
Our largest customer, GNC, filed for Chapter 11 reorganization under the
We have undertaken certain actions regarding the advancement of our pharmaceutical development program, the conduct of a dietary supplement clinical trial, and the continued sales and marketing of our commercial dietary supplement. We plan to fund such activities, including compensation to service providers, with a combination of cash and equity payments. The amount of payments in cash and equity will be determined by us from time to time.
We will incur ongoing recurring expenses associated with professional fees for
accounting, legal, and other expenses for annual reports, quarterly reports,
proxy statements, and other filings under the Exchange Act. We estimate that
these costs will likely be in excess of
43
We need additional capital to fund our operations and pay our current and future obligations, including without limitation our outstanding promissory notes; however, our ability to access the capital markets or otherwise raise such capital is unknown during the COVID-19 pandemic and there can be no assurance that we will be able to obtain sufficient amounts of capital as and when needed.
We filed a registration statement on Form S-1 on
In
We recently launched a private placement of our preferred stock for an aggregate
amount of up to
During the three-months ended
As of the date hereof, we have outstanding promissory notes that are (i) due in
the 2021 calendar year in the aggregate principal amount of
Our stockholders may be diluted upon the exercise or conversion of our outstanding warrants, options, preferred stock, and convertible notes, including as previously disclosed, certain of our outstanding notes that have rights to convert into shares of our common stock upon certain dates or events at prices that may cause substantial dilution.
Any inability to obtain additional financing will materially and adversely affect us, including requiring us to significantly curtail or cease business operations altogether. We cannot give any assurance that we will in the future be able to achieve a level of profitability from the sale of existing or future products or otherwise to sustain our operations. These conditions raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
44
The following is a summary of our cash flows provided by (used in) operating, investing, and provided by financing activities during the periods indicated:
© Edgar Online, source
