Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2024

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring adjustments, unless otherwise indicated) necessary to present fairly the financial position and results of operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2023 (including the notes thereto) set forth in the Company’s Annual Report on Form 10- K/A for that period.

Use of Estimates

The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates.

Cash, Cash Equivalents, and Short-Term Investments

The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value. At June 30, 2024 and December 31, 2023, the Company had cash and cash equivalents of $5,451 and $35,285, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. The Company is exposed to credit risk, subject to federal deposit insurance, in the event of a default by the financial institutions holding its cash and cash equivalents to the extent of amounts recorded on the condensed consolidated balance sheets. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000.

Segment and Geographic Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment and does not segment the business for internal reporting or decision making.

Fair Value of Financial Instruments

In accordance with the reporting requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 825, “Financial Instruments”, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.

Cash, cash equivalents and accounts payable are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of notes payable approximate fair value since they bear market rates of interest and other terms. None of these instruments are held for trading purposes.

Derivative Financial Instruments

FASB ASC 815, Fair Value Measurements requires bifurcation of certain embedded derivative instruments in certain debt or equity instruments, and measurement at their fair value for accounting purposes. A holder redemption feature embedded in the Company’s note payable requires bifurcation from its host instrument and is accounted for as a freestanding derivative.

ASC Topic 820, “Fair Value Measurement”, requires that certain financial instruments be recognized at their fair values at our balance sheet dates. However, other financial instruments, such as debt obligations, are not required to be recognized at their fair values, but GAAP provides an option to elect fair value accounting for these instruments. GAAP requires the disclosure of the fair values of all financial instruments, regardless of whether they are recognized at their fair values or carrying amounts in our balance sheets. For financial instruments recognized at fair value, GAAP requires the disclosure of their fair values by type of instrument, along with other information, including changes in the fair values of certain financial instruments recognized in income or other comprehensive income. For financial instruments not recognized at fair value, the disclosure of their fair values is provided below under “Financial Instruments.”

Nonfinancial assets, such as property, plant and equipment, and nonfinancial liabilities are recognized at their carrying amounts in the Company’s balance sheets. GAAP does not permit nonfinancial assets and liabilities to be remeasured at their fair values. However, GAAP requires the remeasurement of such assets and liabilities to their fair values upon the occurrence of certain events, such as the impairment of property, plant and equipment. In addition, if such an event occurs, GAAP requires the disclosure of the fair value of the asset or liability along with other information, including the gain or loss recognized in income in the period the remeasurement occurred.

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following is a summary of activity of Level 3 liabilities for the quarters ended March 31, 2024 and June 30, 2024:

Balance - December 31, 2023	$	93,634
Additions		-
Settlements		-
Change in fair value		15,560
Balance – March 31, 2024		109,194
Additions		-
Settlements		-
Change in fair value		51,321
Balance – June 30, 2024		160,515

Beginning on November 17, 2023, the Company issued a note payable agreement which contains conversion provisions meeting the definition of a derivative liability which therefore require bifurcation. Further, pursuant to the Company’s contract ordering policy, equity linked instruments subsequent to November 17, 2023, resulted in derivative liabilities.

At December 31, 2023, the Company estimated the fair value of the conversion feature derivative embedded in the note payable and based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock of $0.0730; risk-free interest rate of 5.00%; expected volatility of the Company’s common stock of 199% based on the volatility of comparable publicly traded entities; exercise price of $0.0366; and term of eight months.

At March 31, 2024, the Company estimated the fair value of the conversion feature derivative embedded in the note payable and based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock of $0.0579; risk-free interest rate of 5.00%; expected volatility of the Company’s common stock of 199% based on the volatility of comparable publicly traded entities; exercise price of $0.0314; and term of five months.

At June 30, 2024, the Company estimated the fair value of the conversion feature derivative embedded in the note payable and based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock of $0.0417; risk-free interest rate of 5.00%; expected volatility of the Company’s common stock of 199% based on the volatility of comparable publicly traded entities; exercise price of $0.0; and term of five months.

Research and Development Costs

Research and development costs are charged to expense as incurred and are typically comprised of expenses associated with advancing the commercialization of our technologies. The Company incurred $22,652 of research and development costs during the six months ended June 30, 2024, which includes interest and late fees related to the Company’s license agreement with TaiwanJ Pharmaceuticals. The Company incurred $356,132 of research and development costs during the six months ended June 30, 2023, which includes legal fees related to the maintenance and prosecution of licensed and owned intellectual property as well as the fair value of common stock issued to extend the payment terms of the Company’s license agreement with TaiwanJ Pharmaceuticals.

Income Taxes

The Company follows ASC Topic 740, Income Taxes, 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 statements 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 asset 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 standard 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 ASC Topic 740, 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 tax 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 likelihood of being realized upon ultimate settlement. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

At the date of adoption, and as of June 30, 2024 and 2023, the Company does not have a liability for unrecognized tax uncertainties. The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of June 30, 2024, and 2023, the Company does not have any interest or penalties related to uncertain tax positions.

Stock-Based Compensation and Issuance of Common Stock for Non-Cash Consideration

The Company measures and recognizes compensation expense for share-based awards based on estimated fair values equaling either the market value of the shares issued, or the value of consideration received, whichever is more readily determinable. Generally, the non-cash consideration pertains to services rendered by consultants and others and has been valued at the fair value of the Company’s common stock at the date of the agreement.

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC Topic 718, “Compensation-Stock Compensation.” The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete.

The Company did not issue any stock-based compensation awards during the six months ended June 30, 2024 and 2023.

Net Income (Loss) per Share

For the six month period ended June 30, 2024, basic and diluted net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.

Diluted net income (loss) per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, using the treasury-stock method. For purposes of the diluted net income (loss) per share calculation, shares to be issued pursuant to convertible debt and warrants are considered to be common stock equivalents but are excluded from the calculation of diluted net income (loss) per share in 2024 and 2023 because their effect would be anti-dilutive. A total of 31,995 warrants and 3,044,497 shares, resulting from the conversion of principal and interest on convertible notes, have been excluded from this calculation for the six month period ended June 30, 2024.

For the six month period ended June 30, 2024, diluted income per share was calculated by dividing the net income by the weighted-average number of common shares outstanding for the period determined using the treasury-stock method. A reconciliation of the weighted average shares outstanding used in basic and diluted earnings per share for the periods ended June 30, 2024 and 2023 are as follows:

	June 30, 2024			June 30, 2023
	Three Months ended
	June 30, 2024			June 30, 2023
Basic EPS
Income (loss) available to common shareholders (Numerator)	$	(427,960	)	$	(504,234	)
Weighted average common shares (Denominator)		83,698,396			83,285,054
Basic EPS	$	(0.01	)	$	(0.01	)

Diluted EPS
Income (loss) available to common shareholders (Numerator)	$	(427,960	)	$	(504,234	)
Weighted average common shares (Denominator)		83,698,396			83,285,054
Diluted EPS	$	(0.01	)	$	(0.01	)

	June 30, 2024			June 30, 2023
	Six Months ended
	June 30, 2024			June 30, 2023
Basic EPS
Income (loss) available to common shareholders (Numerator)	$	(780,595	)	$	(920,350	)
Weighted average common shares (Denominator)		83,725,128			83,381,739
Basic EPS	$	(0.01	)	$	(0.01	)

Diluted EPS
Income (loss) available to common shareholders (Numerator)	$	(780,595	)	$	(920,350	)
Weighted average common shares (Denominator)		83,725,128			83,381,739
Diluted EPS	$	(0.01	)	$	(0.01	)

Recent Accounting Standards

The Company has reviewed the accounting pronouncements issued by the Financial Accounting Standards Board during the six months ended June 30, 2024. Applicable pronouncements will be adopted by the Company in accordance with the accounting guidance and definition. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

Management does not believe there are other significant accounting pronouncements which have had or will have a material impact on the Company’s consolidated financial statements.

Biostax Corp. 10-Q