The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 AND 2019 (Unaudited)
Note 1: Business Activity
Evolutionary Genomics, Inc. (the Company, We, or Our) has developed a technology platform, the Adapted Traits Platform (ATP), to identify commercially valuable genes that control important traits in animals and plants. We are using the ATP to identify genes to improve crop plant traits such as yield, sugar content, biomass, drought tolerance, and pest/disease resistance. Our platform identifies key genes that have changed successfully to impart new or improved traits.
The Company performs its research on behalf of governmental organizations, non-profit foundations, and commercial entities and receives revenue from grants and commercial research contracts. These grants/contracts contain fixed-fee arrangements and may also have licensing provisions upon effective commercialization of research results. Successful commercialization may take many years to produce license royalty payments. Ownership of intellectual property developed in research projects varies from the Company retaining no rights to intellectual property, to joint ownership, to the Company retaining all rights.
During 2014, the Company purchased 75.16% of the outstanding stock of Fona, Inc., (Fona) a public shell company. Since Fona was a public shell company which did not constitute a business and the purchase was done in contemplation of a reverse merger, the Company accounted for the payment as a distribution to Fona shareholders. The Company also entered into an Agreement and Plan of Merger (the Merger), which was consummated on October 19, 2015. As a result of the Merger, Evolutionary Genomics, Inc. became a wholly owned subsidiary of Fona. For accounting purposes, the merger was treated as a reverse acquisition with Evolutionary Genomics, Inc. as the acquirer and Fona as the acquired party. Subsequent to the Merger, Fona was renamed Evolutionary Genomics, Inc. and our subsidiary was renamed from Evolutionary Genomics, Inc. to EG Crop Science, Inc.
Note 2: Summary of Significant Accounting Policies
Principals of Consolidation: These condensed and consolidated financial statements include the accounts of Evolutionary Genomics, Inc. and its wholly owned subsidiary. All material intercompany transactions and balances have been eliminated.
Use of Estimates: The preparation of condensed and consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed and consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
Cash: The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less when purchased to be cash.
Investments: The Companys short-term investments are comprised of equity securities and are carried at their fair value based on the quoted market prices of the securities at March 31, 2020 and December 31, 2019. Net realized and unrealized gains and losses on investments are included in net earnings. For purposes of determining realized gains and losses, the cost of securities sold is based on specific identification.
Property and Equipment: Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided for by the straight-line method over three- to seven-year estimated useful lives of software, furniture and fixtures and equipment. Maintenance and repairs are expensed as incurred; major renewals and betterments that extend the useful lives of property and equipment are capitalized. When property and equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized.
6
EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 AND 2019 (Unaudited)
Long-Lived Assets: The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. An impairment is considered to exist if the total estimated undiscounted cash flows are less than the carrying amount of the asset. An impairment loss is measured and recorded to the extent that the carrying amount of the asset exceeds its estimated fair value. No asset impairment was recorded during the three months ended March 31, 2020 and 2019.
Intangible Assets: Intangible assets include acquired research in progress and patents on the Companys core technology for gene identification. Patents are amortized over their expected useful life of 20 years using the straight-line method. Acquired research in progress is an indefinite-lived intangible asset until the development is complete at which time the useful life of the asset will be assigned. Costs incurred to renew intangible assets are expensed in the period incurred, while costs incurred to extend the lives of patents are capitalized and amortized over the remaining useful life of the asset. Intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any intangible assets may be impaired, an evaluation of recoverability is performed. An impairment is considered to exist if the total estimated undiscounted cash flows are less than the carrying amount of the asset. No impairment was recorded during the three months ended March 31, 2020 and 2019. Realization of this asset is dependent upon the successful completion of the Companys research and development efforts.
Revenue Recognition: In May 2014, the FASB issued new guidance related to revenue recognition, which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new guidance requires a company to recognize revenue as control of goods or services transfers to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. It defines a five-step approach for recognizing revenue, which may require a company to use more judgment and make more estimates than under the current guidance. The Company adopted this standard on January 1, 2018 using the modified-retrospective method and it did not have a material impact on the condensed and consolidated financial statements.
Grant revenue, which is not within the scope of Topic 606, consists of funding under cost reimbursement programs primarily from federal and non-profit foundation sources for qualified research and development activities performed by us, and as such, are not based on estimates that are susceptible to change. Such amounts are invoiced and recorded as revenue as grant-funded activities are performed.
Income Taxes: Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Management regularly assesses the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent management believes that it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established. When a valuation allowance is established, increased or decreased, an income tax charge or benefit is included in the condensed and consolidated financial statements and net deferred tax assets are adjusted accordingly. As of March 31, 2020 and December 31, 2019, a full valuation allowance has been established on the net deferred tax asset.
Under the Income Tax topic of the ASC, in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon resolution of the benefit. The Company has no accruals for uncertain tax benefits.
Stock-Based Compensation: The Company accounts for stock option awards in accordance with ASC 718. The estimated grant-date fair value of stock-based awards is expensed over the requisite service period, which is typically equivalent to the vesting term of the award.
The Companys accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services received follows the provisions of ASC Topic 718. Accordingly, 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 vendors performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.
7
EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 AND 2019 (Unaudited)
Research and Development: Research and development costs are expensed as incurred. In instances where we enter into agreements with third parties for research and development activities, we may prepay for services at the initiation of the contract. We record the prepayment as a prepaid asset and amortize the asset into research and development expense over the period of time the contracted research and development services are performed.
Net Loss Per Common Share: Basic net (loss) income per common share excludes any dilutive effects of equity instruments. We compute basic net (loss) income per common share using the weighted average number of common shares outstanding during the period. We compute diluted net (loss) income per common share using the weighted average number of common shares and common stock equivalents outstanding during the period. For the three months ended March 31, 2020, common stock equivalents including 679,923 shares of convertible preferred stock, options for 1,081,667 shares of common stock and warrants for 110,856 shares of common stock were excluded because their effect was anti-dilutive. For the three months ended March 31, 2019, common stock equivalents including 577,063 shares of convertible preferred stock, options for 566,667 shares of common stock and warrants for 110,884 shares of common stock were excluded because their effect was anti-dilutive.
Subsequent Events: The Company has evaluated all subsequent events through the date of this filing. On April 17, 2020, the Company received $71,268 in funding from the SBA under their Paycheck Protection Program and we expect that most, if not all of this funding will be forgiven.
Note 3: New Accounting Standards
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The updated guidance also expands the disclosure requirements to enable users of financial statements to understand the entitys assumptions, models and methods for estimating expected credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within that reporting period and did not have an impact on the Companys condensed and consolidated financial statements.
Note 4: Fair Value Measurements
The Company complies with the provisions of ASC 820, in measuring fair value and in disclosing fair value measurements at the measurement date. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements required under other accounting pronouncements. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements also reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model.
ASC 820 provides three levels of the fair value hierarchy as described below:
Level 1 Inputs Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs Observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities.
Level 3 Inputs Unobservable inputs that are supported by little or no market activity.
When determining the fair value measurements for assets or liabilities required or permitted to be recorded at and/or marked to fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.
8
EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 AND 2019 (Unaudited)
The following table presents the Companys financial assets that were accounted for at fair value on a recurring basis as of March 31, 2020 and December 31, 2019, by level within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Quoted Prices in Active Markets for Identical Items
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Balance at December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
$
|
41,694
|
|
|
$
|
41,694
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
$
|
41,694
|
|
|
$
|
41,694
|
|
|
$
|
|
|
|
$
|
|
|
Balance at March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
$
|
29,694
|
|
|
$
|
29,694
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
$
|
29,694
|
|
|
$
|
29,694
|
|
|
$
|
|
|
|
$
|
|
|
For the Companys Level 1 measures, which represent common stock in publicly traded companies, fair value is based on the last closing trade occurring on, or closest to, the respective period end date. The carrying value of financial instruments, including cash, receivables, accounts payable and accrued expenses, approximates their fair value at March 31, 2020 and December 31, 2019 due to the relatively short-term nature of these instruments.
Note 5: Property and Equipment
Property and equipment is comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Equipment
|
|
$
|
432,499
|
|
|
$
|
432,499
|
|
Software
|
|
|
63,179
|
|
|
|
63,179
|
|
Furniture and fixtures
|
|
|
7,987
|
|
|
|
7,987
|
|
|
|
|
503,665
|
|
|
|
503,665
|
|
Accumulated depreciation
|
|
|
(424,312
|
)
|
|
|
(414,783
|
)
|
Property and equipment, net
|
|
$
|
79,353
|
|
|
$
|
88,882
|
|
Depreciation expense for the three months ended March 31, 2020 and 2019 was $9,529 and $9,529, respectively.
9
EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 AND 2019 (Unaudited)
Note 6: Intangible Assets
Intangible assets are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Acquired research in progress - indefinite lived
|
|
$
|
4,016,596
|
|
|
$
|
4,016,596
|
|
Patents
|
|
|
52,045
|
|
|
|
52,045
|
|
Accumulated amortization
|
|
|
(33,700
|
)
|
|
|
(33,049
|
)
|
Intangible assets, net
|
|
$
|
4,034,941
|
|
|
$
|
4,035,592
|
|
The Company expects to recognize $2,602 of amortization expense related to its patents during each of the next five years and the remaining $5,335 thereafter. Amortization expense for the patents during the three months ended March 31, 2020 and 2019 was $651 and $650, respectively.
In its merger completed on October 19, 2015, the Company acquired research in progress. The value of the acquired research in progress was based upon several factors including, evaluation of other intangible assets, the purchase price, estimated future cash flows, and the amounts expended on the research to date. Acquired research in progress is an indefinite lived intangible asset until the development phase is complete, at which time a useful life of the asset will be determined. The research in progress was the identification and validation of genes to provide pest and disease resistance to plants performed by EG I. The research had been in process since November 2010 and the Company expects to complete the research and place this asset in service in the second half of 2020. Additional costs to complete the research are expected to be approximately $102,000, which will be expensed as incurred. The timing and cost of additional research may vary from these estimates as the success of the research is subject to many factors outside of the Companys control.
We previously expected to complete the soybean research in the second quarter of 2020. Subsequent to March 31, 2020, our academic labs have informed us that they are not starting any new projects due to the Covid-19 pandemic and we now believe that the project will be delayed into the second half of 2020. If this research is not completed within a reasonable timeframe or within estimated costs, future licensing revenue, the valuation of our research in progress and the financial condition of the Company could be significantly impacted.
Note 7: Stockholders Equity and Warrants
The Amended and Restated Certificate of Incorporation of the Company dated October 19, 2015 authorized the issuance of 800,000,000 shares of all classes of stock including 780,000,000 shares of Common Stock having a par value of $0.001 per share and 20,000,000 shares of Preferred Stock having a par value of $0.001 per share, 600,000 of which were designated as Series A-1 Convertible Preferred Stock (Series A-1) and 200,000 of which were designated as Series A-2 Convertible Preferred Stock (Series A-2). The Board of Directors, without a vote of the shareholders, is authorized to issue additional shares of Preferred Stock in series and to establish the characteristics thereof.
Liquidation: Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the Series A-1 and Series A-2 shall be entitled to receive out of the assets of the Company for each share of Series A-1 and Series A-2 an amount equal to its stated value, $5.25 per share as of March 31, 2020 and December 31, 2019, plus any accrued but unpaid dividends before any distribution or payment shall be made to the holders of any other class or series of stock of the Company that ranks junior to the Series A-1 and Series A-2. The holders shall be entitled to convert their shares of Series A-1 and Series A-2 into Common Stock at any time prior to the consummation of a Liquidation. This is considered a contingent redemption feature.
Conversion: The holders of Series A-1 and Series A-2 may convert their shares into shares of Common Stock, at the option of the holder, on a one-share-for-one-share basis and shall be subject to certain adjustments at any time.
10
EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 AND 2019 (Unaudited)
Optional Redemption; Sinking Fund Account: The Company may elect to redeem some or all of the then outstanding shares of Series A-1, (i) for cash in an amount equal to the liquidation preference per share, $5.25 per share as of December 31, 2019, subject to adjustment and (ii) by issuing one share, subject to adjustment, of Common Stock for each share of Series A-1 and Series A-2 outstanding being redeemed. 50% of all licensing fees received by the Company will be deposited into a separate sinking fund for use in an optional redemption. As of March 31, 2020, no licensing revenue has been received under these provisions and no sinking fund account has been established.
Dividends: The Company shall pay to the holders of the Series A-1 and Series A-2 dividends at the rate of 8% per annum and the Company has accrued these dividends since issuance of the Series A-1 and Series A-2. The dividend amount shall accrue and shall be payable in shares of Common Stock upon the conversion of the Series A-1 and Series A-2, or upon the redemption of the Series A-1 and Series A-2. No dividends shall be paid on any Common Stock of the Company or any capital stock of the Company that ranks junior to the Series A-1 and Series A-2 until dividends of Series A-1 and Series A-2 been paid. As of March 31, 2020, there were $1,022,052 in accrued stock dividends.
Voting: The holders of the Series A-1 and Series A-2 are entitled to vote on all matters submitted to the stockholders for a vote on an as-if-converted to Common Stock basis, with all stockholders voting as a single class.
Warrants: As of March 31, 2020 and December 31, 2019, the Company had outstanding warrants to purchase 110,856 and 110,884 shares, respectively of the Companys Common Stock. The following table summarizes the status of the Companys aggregate warrants outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Warrants
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining
Term(Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019
|
|
|
|
110,884
|
|
|
$
|
6.60
|
|
|
|
1.87
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
|
110,884
|
|
|
$
|
6.60
|
|
|
|
0.87
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
(28
|
)
|
|
|
6.60
|
|
|
|
|
|
Balance, March 31, 2020
|
|
|
|
110,856
|
|
|
$
|
6.60
|
|
|
|
0.62
|
|
Note 8: Stock-Based Compensation
The Company grants stock-based instruments under the 2015 Stock Incentive Plan (Plan) for which 1,400,000 shares of the Companys Common Stock has been reserved. The Plan allows for the issuance of incentive stock options and non-qualified stock options with a maximum contractual term of 10 years. Shares and options that are cancelled are available for reissuance under the Plan. For the three months ended March 31, 2020 and 2019, the Company recorded compensation costs for stock options of $54,930 and $17,278, respectively. Stock options are generally issued with an exercise price at or above the estimated per-share value of the Companys Common Stock. The Company granted no options during the three months ended March 31, 2020 and 2019.
Management has valued the options at their date of grant utilizing the Black-Scholes option pricing model. As of the issuance of the outstanding options, there was not a public market for the Companys shares. Accordingly, the Company utilized the value obtained in equity transactions with unrelated parties to estimate the fair value of the Companys Common Stock on the date of grant. Volatility of the underlying common shares was determined based on the historical volatility for similar companies that are actively traded in the public markets for a term consistent with the expected life of the options. The risk-free interest rate used in the calculations is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options on the date of the grant. Due to the lack of sufficient historical activity, the expected life of the options was estimated using the formula set forth in Securities and Exchange Commission SAB 107.
11
EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 AND 2019 (Unaudited)
The following table summarizes the status of the Companys aggregate stock options granted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining
Term(Years)
|
|
|
Total Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019
|
|
|
|
566,667
|
|
|
$
|
2.33
|
|
|
|
5.95
|
|
|
|
|
|
Granted
|
|
|
|
640,000
|
|
|
|
1.54
|
|
|
|
9.83
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
(125,000
|
)
|
|
|
3.00
|
|
|
|
7.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
|
1,081,667
|
|
|
$
|
1.74
|
|
|
|
7.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2020
|
|
|
|
1,081,667
|
|
|
$
|
1.74
|
|
|
|
7.85
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020
|
|
|
|
1,081,667
|
|
|
$
|
1.74
|
|
|
|
7.60
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2020
|
|
|
|
508,333
|
|
|
$
|
1.96
|
|
|
|
5.83
|
|
|
$
|
177,334
|
|
During the three months ended March 31, 2020 and 2019, options for 0 and 83,334 shares vested, respectively. As of March 31, 2020, there was $570,238 of unrecognized compensation cost related to share-based compensation arrangements that will be recognized over the next three years.
Note 9: Commitments and Contingencies
Officer Indemnification: Under the Companys organizational documents, the Companys officers, employees, and directors are indemnified against certain liabilities arising out of the performance of their duties. The Companys maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Company expects any risk of loss to be remote. The Company also has an insurance policy for its directors and officers to insure them against liabilities arising from their performance in their positions with the Company.
Lease Commitments: The Company leases its operating facility and pays its rent in monthly installments. The lease was renewed in June 2016 for a period of twelve months and monthly rentals for the period of July 1, 2016 through December 31, 2019 are $2,378 per month which continues on a month-to-month basis. There is no minimum lease commitment as of March 31, 2020. Renewals after June 30, 2017 are by mutual agreement. The Companys rent expense for the three months ended March 31, 2020 and 2019 was $7,134 and $7,134, respectively.
Royalty: Effective March 1, 2012, the Company entered into an Agreement for Contract Services with SmithBucklin Corporation (the Contractor) on behalf of the United Soybean Board. The contract includes the payment of certain royalties, as defined in the Agreement.
The Company is obligated to pay royalties to the United Soybean Board of 10% of the sale of products derived from the soybean genes that were the subject of the research performed by the Contractor or from royalties received by the Company from the sale of products by a third party not to exceed 150% of the total amount paid to the Contractor under this Agreement. The Company has recognized to date grant revenue from the contract of $262,400 as of March 31, 2020, thus limiting any future royalties as of March 31, 2020 to a total of $393,600. The Company has not accrued or paid any royalties under the terms of the Agreement as of and during the three months ended March 31, 2020 and 2019 because it has not received any revenue from the sale of products to date.
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EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 AND 2019 (Unaudited)
Note 10: Related Parties and Transactions
Steve B. Warnecke: Mr. Warnecke is the Companys Chief Executive Officer and Chairman of the Board and owns, directly or indirectly, 1,932,088 shares or 29.9% of the Common Stock outstanding as of March 31, 2020.
Note 11: Concentrations
Considerations of Credit Risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains its cash balances at high-credit, quality financial institutions. The balances, at times, may exceed federally insured limits. The Company routinely monitors the credit quality of its customers.
Note 12: Liquidity and Going Concern
Sources of funding to meet prospective cash requirements include the Companys existing cash balances and investments. As of March 31, 2020 we had $10,653 in our bank accounts and $29,694 of trading securities. On April 17, 2020, the Company received $71,268 in funding from the SBA under their Paycheck Protection Program and we expect that most, if not all of this funding will be forgiven. This will not be enough to pay for our expenses for the year ending December 31, 2020 without any additional revenue from grants or licensing revenue or additional capital infusions. We are marketing our banana genes in 2020 which may lead to revenue but may not be able to market our soybean genes until the research is finished. We have flexibility to reduce operating costs and also to delay research projects. We will require additional capital to complete our projects. These factors create substantial doubt as to our ability to continue as a going concern. The accompanying condensed and consolidated financial statements do not include any adjustments that may result if the Company is unable to continue as a going concern.
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ITEM 2.