10-Q/A: Coeptis Therapeutics Restates Q3 2023 Financials Due to Accounting Errors

Coeptis Therapeutics Holdings, Inc. has filed an amended 10-Q to restate its financial statements for the third quarter of 2023 due to errors in accounting for a convertible note and a research agreement.

Summary

• Coeptis Therapeutics Holdings, Inc. has restated its financial results for the three and nine months ended September 30, 2023.
• The restatement was necessary due to errors in accounting for a $350,000 convertible promissory note issued for legal services and a $716,714 corporate research agreement with the University of Pittsburgh.
• The errors impacted the consolidated balance sheet, specifically notes payable, accrued expenses, and accumulated deficit, as well as research and development expenses on the income statement.
• The company's accumulated deficit increased by $618,768 due to the restatement.
• The restatement increased research and development expenses by $89,589 for the three months ended September 30, 2023 and $268,768 for the nine months ended September 30, 2023.
• The company had a net loss of $6,350,496 for the three months ended September 30, 2023 and $17,510,950 for the nine months ended September 30, 2023.
• As of November 8, 2023, the company had 34,108,036 shares of common stock outstanding.

Sentiment

Score: 4

Explanation: The document reveals significant financial challenges, including a restatement of financials, substantial losses, and a going concern risk. While there are some positive developments in terms of technology and licensing, the overall sentiment is negative due to the financial instability and need for further capital.

Positives

• The company has identified and corrected accounting errors, demonstrating a commitment to accurate financial reporting.
• The company has a diverse portfolio of assets including the CD38-GEAR-NK and CD38-Diagnostic technologies.
• The company has secured an exclusive license for a cell therapy platform from Deverra Therapeutics.

Negatives

• The company's financial statements required restatement due to accounting errors.
• The company has a significant accumulated deficit of $83,600,673 as of September 30, 2023.
• The company has incurred substantial net losses of $6,350,496 for the three months and $17,510,950 for the nine months ended September 30, 2023.
• The company has a history of losses and has not yet achieved profitability.
• The company has a going concern risk due to its accumulated deficit and need for additional funding.

Risks

• The company's ability to continue as a going concern is dependent on obtaining additional financing or establishing a profitable business.
• The company has a history of losses and may not achieve profitability.
• The company's research and development efforts may not be successful.
• The company's products may not achieve market acceptance.
• The company may face challenges in commercializing its products.
• The company is subject to risks associated with the pharmaceutical industry, including regulatory hurdles and competition.

Future Outlook

The company expects to continue its product development efforts and explore partnership opportunities. Management does not expect the company to generate any significant revenue for at least the next two years.

Management Comments

• Management determined the previously issued condensed consolidated financial statements do not give effect to the issuance of the note payable nor the corporate research agreement.
• Management believes that additional financing as necessary will result in improved operations and cash flow.
• David Mehalick, our President and Chief Executive Officer, and Daniel A. Yerace, our Vice President of Operations, both agreed to waive their rights to a 2023 guaranteed bonus payment under their respective employment agreements to further maintain our ability to fund operations.

Industry Context

The company is operating in the competitive pharmaceutical and biotechnology industry, focusing on innovative therapies in areas such as auto-immune disease and oncology. The company is pursuing strategic partnerships and licensing agreements to advance its product portfolio.

Comparison to Industry Standards

• The restatement of financials is not uncommon in the pharmaceutical industry, especially for companies with complex transactions and early-stage development programs, however, it does raise concerns about internal controls.
• The company's focus on cell therapies and gene editing aligns with current trends in the biotechnology sector, with companies like Kite Pharma (acquired by Gilead), Juno Therapeutics (acquired by Celgene), and bluebird bio also developing similar technologies.
• The company's licensing agreement with Deverra Therapeutics is similar to other biotech companies that acquire or license technologies to expand their pipelines, such as CRISPR Therapeutics and Editas Medicine.
• The company's financial losses are typical for early-stage biotech companies that are investing heavily in research and development, and are not yet generating significant revenue. Companies like Moderna and BioNTech also experienced significant losses in their early years before commercializing their products.

Management Changes

Related Party Transactions

• In September 2023, the Company entered into a transaction with AG Bio Life Capital I LP (AG), a Delaware limited partnership, where an employee of the Company is the general partner. The Company agreed to issue 600,000 shares of common stock of the Company (AG Shares) to AG, in exchange for $600,000, $100,000 payable in cash and the balance payable under a promissory note (AG Note).

Stakeholder Impact

• Shareholders may be concerned about the restatement of financials and the company's ongoing losses.
• Employees may be affected by the company's financial instability and need for additional funding.
• Customers and partners may be impacted by the company's ability to commercialize its products.
• Creditors may be concerned about the company's ability to repay its debts.

Next Steps

• The company will continue to develop its product portfolio.
• The company will explore partnership opportunities.
• The company will seek additional financing to support its operations.
• The company will continue to work on its internal controls.

Key Dates

Keywords

restatement, financial statements, accounting errors, convertible note, research agreement, accumulated deficit, research and development, pharmaceutical, biotechnology, warrants, CD38, CAR-T, NK cells, licensing, Deverra Therapeutics