Note 4 – SAFE Agreements

During the year ended December 31, 2018, the Company entered into SAFE agreements (Simple Agreement for Future Equity) with investors through a Regulation Crowdfunding campaign in exchange for cash investments totaling $628,558. Upon an initial public offering of the Company’s common shares or a change of control, the amount invested under the SAFE agreements automatically converted into the Company’s common shares. The number of shares the SAFE agreement investors received was based on a 16% discount to the pricing in the triggering equity financing. The SAFE agreements did not limit the number of shares that the issuer could be required to issue upon conversion. The SAFE agreements had no interest rate or maturity date and the SAFE investors had no voting right prior to conversion.

In accordance with the SAFE agreements, 50% of the funds raised, net of all fees associated with the use of a campaign platform was held in an escrow account and are included in Restricted Cash. The escrow funds were released to the Company upon successfully acquiring the patent rights from HPI and upon the Company’s spending on Phase II clinical trials of an amount equal to at least half of the escrow funds prior to December 28, 2019. If the escrow funds were not released to the Company before December 28, 2019, the funds were to be distributed to the SAFE agreement investors. Such distribution would not have reduced the number of common shares that the investors would receive upon conversion.

As of September 30, 2019, the SAFE agreements had not yet converted as a qualifying financing had not yet occurred. The SAFE agreements are recorded as a liability until conversion occurs. On November 13, 2019, upon the closing of the IPO, the amount invested under the SAFE agreements automatically converted into 191,151 common shares, and the funds held in escrow have been released to the Company.