NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
ORGANIZATION,
BACKGROUND, AND BASIS OF PRESENTATION
Guided
Therapeutics, Inc. (formerly SpectRx, Inc.), together with its
wholly owned subsidiary, InterScan, Inc. (formerly Guided
Therapeutics, Inc.), collectively referred to herein as the
“Company”, is a medical
technology company focused on developing innovative medical devices
that have the potential to improve healthcare. The Company’s
primary focus is the continued commercialization of its LuViva
non-invasive cervical cancer detection device and extension of its
cancer detection technology into other cancers, including
esophageal. The Company’s technology, including products in
research and development, primarily relates to biophotonics
technology for the non-invasive detection of
cancers.
Basis
of Presentation
All
information and footnote disclosures included in the consolidated
financial statements have been prepared in accordance with
accounting principles generally accepted in the United
States.
The
accompanying unaudited consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”) for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements.
Therefore, these financial statements should be read in conjunction
with our Annual Report on Form 10-K for the fiscal year ended
December 31, 2019 filed with the Securities and Exchange Commission
(“SEC”) pursuant to Section 13 or 15(d) under the
Securities Exchange Act of 1934. In the opinion of management, all
adjustments (consisting of normal recurring accruals and other
items) considered necessary for a fair presentation have been
included.
A 1:800
reverse stock split of all of the Company’s issued and
outstanding common stock was implemented on March 29, 2019. As a
result of the reverse stock split, every 800 shares of issued and
outstanding common stock were converted into 1 share of common
stock. All fractional shares created by the reverse stock split
were rounded to the nearest whole share. The number of authorized
shares of common stock did not change. The reverse stock split
decreased the Company’s issued and outstanding shares of
common stock from 2,652,309,322 shares to 3,319,469 shares as of
that date with rounding. See Note 4, Stockholders’ Deficit.
Unless otherwise specified, all per share amounts are reported on a
post-stock split basis, as of June 30, 2020 and December 31,
2019.
The
Company’s prospects must be considered in light of the
substantial risks, expenses and difficulties encountered by
entrants into the medical device industry. This industry is
characterized by an increasing number of participants, intense
competition and a high failure rate. The Company has experienced
net losses since its inception and, as of June 30, 2020, it had an
accumulated deficit of approximately $143.6 million. To date, the
Company has engaged primarily in research and development efforts
and the early stages of marketing its products. The Company may not
be successful in growing sales for its products. Moreover, required
regulatory clearances or approvals may not be obtained in a timely
manner, or at all. The Company’s products may not ever gain
market acceptance and the Company may not ever generate significant
revenues or achieve profitability. The development and
commercialization of the Company’s products requires
substantial development, regulatory, sales and marketing,
manufacturing and other expenditures. The Company expects operating
losses to continue for the foreseeable future as it continues to
expend substantial resources to complete development of its
products, obtain regulatory clearances or approvals, build its
marketing, sales, manufacturing and finance capabilities, and
conduct further research and development.
Certain
prior year amounts have been reclassified in order to conform to
the current year presentation.
Going
Concern
The
Company’s consolidated financial statements have been
prepared and presented on a basis assuming it will continue as a
going concern. The factors below raise substantial doubt about the
Company’s ability to continue as a going concern. The
financial statements do not include any adjustments that might be
necessary from the outcome of this uncertainty.
At June
30, 2020, the Company had a negative working capital of
approximately $7.8 million, accumulated deficit of $143.6 million,
and net loss of $4.0 million for the six months then ended (the net
loss was in part the result of a $2.5 million change in fair value
of warrants that was recorded in the period). Stockholders’
deficit totaled approximately $16.4 million at June 30, 2020,
primarily due to recurring net losses from operations, deemed
dividends on warrants and preferred stock, offset by proceeds from
the exercise of options and warrants and proceeds from sales of
stock.
The
Company has taken steps to improve its going concern opinion,
including:
●
During the end of
2019 and beginning of 2020, the Company was able to raise $4.0
million in equity and debt investments;
●
The Company has
executed several exchange agreements that converted to
approximately $2.3 million of debt for equity, as well as eliminate
some existing debt;
●
Subsequent to June
30, 2020, the Company uplisted to the Over the Counter (OTC)
bulletin board;
If
sufficient capital cannot be raised during 2020, the Company will
continue its plans of curtailing operations by reducing
discretionary spending and staffing levels and attempting to
operate by only pursuing activities for which it has external
financial support. However, there can be no assurance that such
external financial support will be sufficient to maintain even
limited operations or that the Company will be able to raise
additional funds on acceptable terms, or at all. In such a case,
the Company might be required to enter into unfavorable agreements
or, if that is not possible, be unable to continue operations, and
to the extent practicable, liquidate and/or file for bankruptcy
protection.
The
Company had warrants exercisable for approximately 28.3 million
shares of its common stock outstanding at June 30, 2020, with
exercise prices ranging between $0.04 and $1.82 per share.
Exercises of in the money warrants would generate a total of
approximately $5.0 million in cash, assuming full exercise,
although the Company cannot be assured that holders will exercise
any warrants. Management may obtain additional funds through the
public or private sale of debt or equity, and grants, if
available.
2. SIGNIFICANT
ACCOUNTING POLICIES
Use
of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates. Significant areas where estimates are used include the
allowance for doubtful accounts, inventory valuation and input
variables for Black-Scholes, Monte Carlo simulations and binomial
calculations. The Company uses the Monte Carlo simulations and
binomial calculations in the calculation of the fair value of the
warrant liabilities and the valuation of embedded conversion
options and freestanding warrants.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts
of Guided Therapeutics, Inc. and its wholly owned subsidiary. All
intercompany transactions are eliminated.
Accounting
Standard Updates
Recently Adopted Accounting Pronouncements
In June
2016, the FASB issued ASU 2016-13, Financial Instruments - Credit
Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. ASU 2016-13 requires that expected credit losses
relating to financial assets are measured on an amortized cost
basis and available-for-sale debt securities be recorded through an
allowance for credit losses. ASU 2016-13 limits the amount of
credit losses to be recognized for available-for-sale debt
securities to the amount by which carrying value exceeds fair value
and also requires the reversal of previously recognized credit
losses if fair value increases. The Company adopted the standard on
January 1, 2020. The adoption of ASU 2016-13 did not have a
material impact on the Company.
In
August 2018, the FASB issued Accounting Standards Update No.
2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework—Changes to the Disclosure Requirements for Fair
Value Measurement, or ASU 2018-13. The amendments in ASU 2018-13
eliminate, add, and modify certain disclosure requirements for fair
value measurements. The amendments are effective for the
Company’s interim and annual reporting periods beginning
after December 15, 2019, with early adoption permitted for either
the entire ASU or only the provisions that eliminate or modify
requirements. The amendments with respect to changes in unrealized
gains and losses, the range and weighted average of significant
unobservable inputs used to develop Level 3 fair value
measurements, and the narrative description of measurement
uncertainty are to be applied prospectively. All other amendments
are to be applied retrospectively to all periods presented. The
adoption of ASU 2016-13 did not have a material impact on the
Company.
A
variety of proposed or otherwise potential accounting standards are
currently under consideration by standard-setting organizations and
certain regulatory agencies. Because of the tentative and
preliminary nature of such proposed standards, management has not
yet determined the effect, if any, that the implementation of such
proposed standards would have on the Company’s consolidated
financial statements.
Cash
Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be a cash
equivalent.
Accounts
Receivable
The
Company performs periodic credit evaluations of its
distributors’ financial conditions and generally does not
require collateral. The Company reviews all outstanding accounts
receivable for collectability on a quarterly basis. An allowance
for doubtful accounts is recorded for any amounts deemed
uncollectable. Uncollectibility, is determined based on the
determination that a distributor will not be able to make payment
and the time frame has exceeded one year. The Company does not
accrue interest receivable on past due accounts
receivable.
Concentrations
of Credit Risk
The
Company, from time to time during the years covered by these
consolidated financial statements, may have bank balances in excess
of its insured limits. Management has deemed this a normal business
risk.
Inventory
Valuation
All
inventories are stated at lower of cost or net realizable value,
with cost determined substantially on a “first-in,
first-out” basis. Selling, general, and administrative
expenses are not inventoried, but are charged to expense when
incurred. At June 30, 2020 and December 31, 2019, our inventories
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
Raw
materials
|
$784
|
$781
|
|
Work in
process
|
81
|
81
|
|
Finished
goods
|
24
|
17
|
|
Inventory
reserve
|
(838)
|
(831)
|
|
Total
|
$51
|
$48
|
|
|
|
|
The
company periodically reviews the value of items in inventory and
provides write-downs or write-offs of inventory based on its
assessment of market conditions. Write-downs and write-offs are
charged to cost of goods sold.
Property
and Equipment
Property and
equipment are recorded at cost. Depreciation is computed using the
straight-line method over estimated useful lives of three to seven
years. Leasehold improvements are amortized at the shorter of the
useful life of the asset or the remaining lease term. Depreciation
and amortization expense are included in general and administrative
expense on the statement of operations. Expenditures for repairs
and maintenance are expensed as incurred. Property and equipment
are summarized as follows at June 30, 2020 and December 31, 2019
(in thousands):
|
|
|
|
|
|
|
|
|
Equipment
|
$1,350
|
$1,349
|
|
Software
|
740
|
740
|
|
Furniture and
fixtures
|
124
|
124
|
|
Leasehold
Improvement
|
180
|
180
|
|
|
2,394
|
2,393
|
|
Less accumulated
depreciation and amortization
|
(2,393)
|
(2,393)
|
|
Total
|
$1
|
$-
|
|
|
|
|
Debt
Issuance Costs
Debt
issuance costs are capitalized and amortized over the term of the
associated debt. Debt issuance costs are presented in the balance
sheet as a direct deduction from the carrying amount of the debt
liability consistent with the debt discount.
Patent
Costs (Principally Legal Fees)
Costs
incurred in filing, prosecuting, and maintaining patents are
recurring, and expensed as incurred. Maintaining patents are
expensed as incurred as the Company has not yet received U.S. FDA
approval and recovery of these costs is uncertain. Such costs
aggregated approximately $4,000 and $10,000 for the six months
ended June 30, 2020 and 2019,
respectively.
Leases
With the implementation of ASU 2016-02,
“Leases (Topic 842)”, the Company recorded a
lease-right-of-use asset and a lease liability. The implementation
required the analysis of certain criteria in determining its
treatment. The Company determined that its corporate office lease
met those criteria. The Company implemented the guidance using the
alternative transition method. Under this alternative, the
effective date would be the date of initial application. The
Company analyzed the lease at its effective date and calculated an
initial lease payment amount of $267,380 with a present value of
$213,000 using a 20% discount. As of June 30, 2020, the
balance of the lease-right-of-use
asset and lease liability was approximately
$86,000.
The
cumulative effect of initially applying the new guidance had an
immaterial impact on the opening balance of retained earnings. The
Company elected the practical expedients permitted under the
transition guidance within the new standards, which allowed the
Company to carry forward the historical lease
classification.
Accrued Liabilities
Accrued
liabilities are summarized as follows (in thousands):
|
|
|
|
|
Compensation
|
$1,174
|
$1,123
|
|
Professional
fees
|
23
|
181
|
|
Interest
|
1,361
|
1,603
|
|
Warranty
|
2
|
2
|
|
Vacation
|
37
|
41
|
|
Preferred
dividends
|
149
|
120
|
|
Other accrued
expenses
|
125
|
165
|
|
Total
|
$2,871
|
$3,235
|
Subscription
receivables
Cash
received from investors for common stock shares that has not
completed processing is recorded as a liability to subscription
receivables. As of June 30, 2020, the Company had not issued 50,000
common stock shares to an investor. As of June 30, 2020, the
outstanding subscription receivable was $5,820. As of December 31,
2019, the Company had reserved 1,270,000 common stock shares in
exchange for $635,000.
Revenue
Recognition
The
Company follows, ASC 606 Revenue from Contracts with Customers
establishes a single and comprehensive framework which sets out how
much revenue is to be recognized, and when. The core principle is
that a vendor should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects
the consideration to which the vendor expects to be entitled in
exchange for those goods or services. Revenue will now be
recognized by a vendor when control over the goods or services is
transferred to the customer. In contrast, Revenue based revenue
recognition around an analysis of the transfer of risks and
rewards; this now forms one of a number of criteria that are
assessed in determining whether control has been transferred. The
application of the core principle in ASC 606 is carried out in five
steps: Step 1 – Identify the contract with a customer: a
contract is defined as an agreement (including oral and implied),
between two or more parties, that creates enforceable rights and
obligations and sets out the criteria for each of those rights and
obligations. The contract needs to have commercial substance and it
is probable that the entity will collect the consideration to which
it will be entitled. Step 2 – Identify the performance
obligations in the contract: a performance obligation in a contract
is a promise (including implicit) to transfer a good or service to
the customer. Each performance obligation should be capable of
being distinct and is separately identifiable in the contract. Step
3 – Determine the transaction price: transaction price is the
amount of consideration that the entity can be entitled to, in
exchange for transferring the promised goods and services to a
customer, excluding amounts collected on behalf of third parties.
Step 4 – Allocate the transaction price to the performance
obligations in the contract: for a contract that has more than one
performance obligation, the entity will allocate the transaction
price to each performance obligation separately, in exchange for
satisfying each performance obligation. The acceptable methods of
allocating the transaction price include adjusted market assessment
approach, expected cost plus a margin approach, and, the residual
approach in limited circumstances. Discounts given should be
allocated proportionately to all performance obligations unless
certain criteria are met and reallocation of changes in standalone
selling prices after inception is not permitted. Step 5 –
Recognize revenue as and when the entity satisfies a performance
obligation: the entity should recognize revenue at a point in time,
except if it meets any of the three criteria, which will require
recognition of revenue over time: the entity’s performance
creates or enhances an asset controlled by the customer, the
customer simultaneously receives and consumes the benefit of the
entity’s performance as the entity performs, and the entity
does not create an asset that has an alternative use to the entity
and the entity has the right to be paid for performance to
date.
Revenue
by product line (in thousands):
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
Devices
|
$-
|
$-
|
|
Disposables
|
-
|
2
|
|
Other
|
-
|
15
|
|
Warranty
|
-
|
2
|
|
Total
|
$-
|
$19
|
Revenue
by geographic location (in thousands):
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
Asia
|
$-
|
$5
|
|
Europe
|
-
|
14
|
|
Total
|
$-
|
$19
|
Significant
Distributors
During
the six months ended June 30, 2020, the Company did not have any
revenues. Accounts receivable, that netted to nil, and were
reserved against, were from more than one distributor and
represents 100% of the balance as of June 30, 2020. During the six
months ended June 30, 2019, revenues were from two distributors and
for extended warranties. Revenues from these distributors totaled
$19,000 for the period ended June 30, 2019. Accounts receivable,
not reserved against, were from one distributor and represents 100%
of the balance for the period ended June 30, 2019.
Deferred revenue
The
Company defers payments received as revenue until earned based on
the related contracts and applying ASC 606 as required. As of June
30, 2020, and December 31, 2019, the Company had $101,000 in
deferred revenue.
Research
and Development
Research and
development expenses consist of expenditures for research conducted
by the Company and payments made under contracts with consultants
or other outside parties and costs associated with internal and
contracted clinical trials. All research and development costs are
expensed as incurred.
Income
Taxes
The
Company uses the liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and
tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Management provides valuation
allowances against the deferred tax assets for amounts that are not
considered more likely than not to be realized.
The
Company has entered into an agreed upon payment plan with the IRS
for delinquent payroll taxes and also with the Georgia Department
of State. The Company is currently in process of setting up a
payment arrangement for its delinquent state income taxes with the
State of Georgia and the returns are currently under review by
state authorities. Although the Company has been experiencing
recurring losses, it is obligated to file tax returns for
compliance with IRS regulations and that of applicable state
jurisdictions. At December 31, 2019, the Company has approximately
$76 million of cumulative net operating losses, but it has not
filed its Federal tax returns, therefore this number may not be
accurate. Once the returns are filed, the net operating losses will
be eligible to be carried forward for tax purposes at federal and
applicable states level. A full valuation allowance has been
recorded related the deferred tax assets generated from the net
operating losses.
The
current corporate tax rates in the U.S. is 21%.
Uncertain
Tax Positions
The
Company assesses each income tax position is assessed using a
two-step process. A determination is first made as to whether it is
more likely than not that the income tax position will be
sustained, based upon technical merits, upon examination by the
taxing authorities. If the income tax position is expected to meet
the more likely than not criteria, the benefit recorded in the
financial statements equals the largest amount that is greater than
50% likely to be realized upon its ultimate settlement. At June 30,
2020 and December 31, 2019, there were no uncertain tax
positions.
Warrants
The
Company has issued warrants, which allow the warrant holder to
purchase one share of stock at a specified price for a specified
period of time. The Company records equity instruments including
warrants issued to non-employees based on the fair value at the
date of issue. The fair value of warrants classified as equity
instruments at the date of issuance is estimated using the
Black-Scholes Model. The fair value of warrants classified as
liabilities at the date of issuance is estimated using the Monte
Carlo Simulation or Binomial model.
Stock
Based Compensation
The
Company records compensation expense related to options granted to
employees and non-employees based on the fair value of the award.
Compensation cost is recorded as earned for all unvested stock
options outstanding at the beginning of the first year based upon
the grant date fair value estimates, and for compensation cost for
all share-based payments granted or modified subsequently based on
fair value estimates.
For
the six months ended June 30, 2020 and 2019, share-based
compensation for options attributable to employees, non-employees,
officers and Board members were approximately nil and $8,000,
respectively. These amounts have been included in the
Company’s statements of operations. Compensation costs for
stock options which vest over time are recognized over the vesting
period. As of June 30, 2020, and 2019 the Company did not have any
unrecognized compensation costs related to granted stock options
that will be recognized.
Beneficial
Conversion Features of Convertible Securities
Conversion options
that are not bifurcated as a derivative pursuant to ASC 815 and not
accounted for as a separate equity component under the cash
conversion guidance are evaluated to determine whether they are
beneficial to the investor at inception (a beneficial conversion
feature) or may become beneficial in the future due to potential
adjustments. The beneficial conversion feature guidance in ASC
470-20 applies to convertible stock as well as convertible debt
which are outside the scope of ASC 815. A beneficial conversion
feature is defined as a nondetachable conversion feature that is in
the money at the commitment date. The beneficial conversion feature
guidance requires recognition of the conversion option’s
in-the-money portion, the intrinsic value of the option, in equity,
with an offsetting reduction to the carrying amount of the
instrument. The resulting discount is amortized as a dividend over
either the life of the instrument, if a stated maturity date
exists, or to the earliest conversion date, if there is no stated
maturity date. If the earliest conversion date is immediately upon
issuance, the dividend must be recognized at inception. When there
is a subsequent change to the conversion ratio based on a future
occurrence, the new conversion price may trigger the recognition of
an additional beneficial conversion feature on
occurrence.
Derivatives
The
Company reviews the terms of convertible debt issued to determine
whether there are embedded derivative instruments, including
embedded conversion options, which are required to be bifurcated
and accounted for separately as derivative financial instruments.
In circumstances where the host instrument contains more than one
embedded derivative instrument, including the conversion option,
that is required to be bifurcated, the bifurcated derivative
instruments are accounted for as a single, compound derivative
instrument.
Bifurcated embedded
derivatives are initially recorded at fair value and are then
revalued at each reporting date with changes in the fair value
reported as non-operating income or expense. When the equity or
convertible debt instruments contain embedded derivative
instruments that are to be bifurcated and accounted for as
liabilities, the total proceeds received are first allocated to the
fair value of all the bifurcated derivative instruments. The
remaining proceeds, if any, are then allocated to the host
instruments themselves, usually resulting in those instruments
being recorded at a discount from their face value. The discount
from the face value of the convertible debt, together with the
stated interest on the instrument, is amortized over the life of
the instrument through periodic charges to interest
expense.
3.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The
guidance for fair value measurements, ASC 820, Fair Value
Measurements and Disclosures, establishes the authoritative
definition of fair value, sets out a framework for measuring fair
value, and outlines the required disclosures regarding fair value
measurements. Fair value is the price that would be received to
sell an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at
the measurement date. The Company uses a three-tier fair value
hierarchy based upon observable and non-observable inputs as
follow:
|
|
|
● Level
1 – Quoted market prices in active markets for identical
assets and liabilities;
● Level
2 – Inputs, other than level 1 inputs, either directly or
indirectly observable; and
● Level
3 – Unobservable inputs developed using internal estimates
and assumptions (there is little or no market date) which reflect
those that market participants would use.
|
The
Company records its derivative activities at fair value, which
consisted of warrants as of June 30, 2020. The fair value of the
warrants was estimated using the Binomial Simulation model. Gains
and losses from changes to derivatives are included in change in
fair value of warrants in the statement of operations. The fair
value of the Company’s derivative warrants is classified as a
Level 3 measurement, since unobservable inputs are used in the
valuation.
The
following table presents the fair value for those liabilities
measured on a recurring basis as of June 30, 2020 and December 31,
2019:
FAIR
VALUE MEASUREMENTS (In Thousands)
The
following is summary of items that the Company measures at fair
value on a recurring basis:
|
|
Fair Value at
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued in
connection with Short-term loans
|
-
|
-
|
(138)
|
(138)
|
|
Warrants issued in
connection with Long-term loans
|
-
|
-
|
(3,512)
|
(3,512)
|
|
Warrants issued in
connection with Senior Secured Debt
|
-
|
-
|
(3,926)
|
(3,926)
|
|
Bifurcated
conversion option in connection with Auctus $700,000 loan on
December 17, 2019
|
-
|
-
|
-
|
-
|
|
Total
long-term liabilities at fair value
|
$-
|
$-
|
$(7,576)
|
$(7,576)
|
|
|
Fair Value at
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued in
connection with Distributor Debt
|
-
|
-
|
(114)
|
(114)
|
|
Warrants issued in
connection with Short-term loans
|
-
|
-
|
(83)
|
(83)
|
|
Warrants issued in
connection with Long-term loans
|
-
|
-
|
(893)
|
(893)
|
|
Warrants issued in
connection with Senior Secured Debt
|
-
|
-
|
(4,002)
|
(4,002)
|
|
Bifurcated
conversion option in connection with Auctus $700,000 loan on
December 17, 2019
|
-
|
-
|
-
|
-
|
|
Total
long-term liabilities at fair value
|
$-
|
$-
|
$(5,092)
|
$(5,092)
|
The
following is a summary of changes to Level 3 instruments during the
six months ended June 30, 2020:
|
|
Fair Value
Measurements Using Significant Unobservable Inputs (Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019
|
$(114)
|
$(83)
|
$(4,002)
|
$(893)
|
$(5,092)
|
|
Warrants
exchanged for fixed price warrants
|
67
|
-
|
-
|
-
|
67
|
|
Change
in fair value during the year
|
47
|
(55)
|
76
|
(2,619)
|
(2,551)
|
|
Balance, June
30, 2020
|
$-
|
$(138)
|
$(3,926)
|
$(3,512)
|
$(7,576)
|
As of
June 30, 2020, the fair value of warrants was approximately $7.6 million. A net
change of approximately $2.6 million has been recorded to
the accompanying statement of operations for the six months ended
June 30, 2020.
4.
STOCKHOLDERS’ DEFICIT
Common
Stock
The
Company has authorized 3,000,000,000 shares of common stock with
$0.001 par value, of which 12,764,629 were issued and outstanding
as of June 30, 2020. As of December 31, 2019, there were
3,000,000,000 authorized shares of common stock, of which 3,319,469
were issued and outstanding.
For the
six months ended June 30, 2020, the Company issued 9,445,160 shares
of common stock as listed below:
|
Exchange of Debt
for common stock shares and warrants
|
7,957,013
|
|
Shares issued for
manufacturing agreements
|
12,147
|
|
Investments
|
1,476,000
|
|
Issued during the
six months ended June 30, 2020
|
9,445,160
|
Summary
table of common stock share transactions:
|
Balance at December
31, 2019
|
3,319,469
|
|
Issued in
2020
|
9,445,160
|
|
Balance at June 30,
2020
|
12,764,629
|
Investments
During
June 2020, the Company received equity investments in the amount of
$853,000. These investors received a total of 853 Series E
preferred stock (if the Investor elects to convert their Series E
preferred stock, each Series E preferred stock shares converts into
4,000 shares of the Company’s common stock
shares).
During
January and April 2020, the Company received equity investments in
the amount of $128,000. These investors received a total of 256,000
common stock shares and 256,000 warrants issued to purchase common
stock shares at a strike price of $0.25, 256,000 warrants to
purchase common stock shares at a strike price of $0.75 and 128
Series D preferred stock (if the Investor elects to convert their
Series D preferred stock, each Series D preferred stock shares
converts into 3,000 shares of the Company’s common stock
shares). Of the amount invested $38,000 was from related
parties.
During
December 2019, the Company received equity investments in the
amount of $635,000. The $635,000 of investments were recorded as a
subscription liability in December 2019. The common stock shares
were issued in January 2020. These investors received a total of
1,270,000 common stock shares and 1,270,000 warrants to purchase
common stock shares at a strike price of $0.25, 1,270,000 warrants
issued to purchase common stock shares at a strike price of $0.75
and 635 Series D preferred stock (each Series D preferred stock
shares converts into 3,000 shares of the Company’s common
stock shares). Of the amount invested $350,000 was from related
parties.
Debt
Exchanges
On
January 8, 2020, the Company exchanged $2,064,366 in debt for
several equity instruments (noted below) that were determined to
have a total fair value of $2,065,548, resulting in a loss on
extinguishment of debt of $1,183 which is recorded in other income
(expense) on the accompanying consolidated statements of
operations. The Company also issued 6,957,013 warrants to purchase
common stock shares; with exercise prices of $0.25, $0.75 and
$0.20. In addition, one of the investors forgave approximately
$29,000 of debt, which was recorded as a gain for extinguishment of
debt.
On June
3, 2020, the Company exchanged $328,422 in debt from Auctus,
(summarized in footnote 10:
Convertible Notes), for 500,000 common stock shares and
700,000 warrants to purchase common stock shares. The fair value of
the common stock shares was $250,000 (based on a $0.50 fair value
for the Company’s stock) and of the warrants to purchase
common stock shares was $196,818 (based on a $0.281 black scholes
fair valuation). This resulted in a net loss on extinguishment of
debt of $118,396 ($446,818 fair value less the $328,422 of
exchanged debt).
On June
30, 2020, the Company exchanged $125,000 in debt (during June 2020,
$125,000 in payables had been converted into short-term debt) from
Mr. James Clavijo, for 500,000 common stock shares and 250,000
warrants to purchase common stock shares. The fair value of the
common stock shares was $250,000 (based on a $0.50 fair value for
the Company’s stock) and of the warrants to purchase common
stock shares was $99,963 (based on a $0.40 black scholes fair
valuation). This resulted in a net loss on extinguishment of debt
of $224,963 ($349,963 fair value less the $125,000 of exchanged
debt). After the exchange transaction a balance was due Mr. Clavijo
of $10,213 which was paid.
The
following table summarizes the debt exchanges:
|
|
Total Debt and
Accrued Interest
|
|
|
|
Warrants
(Exercise $0.25)
|
Warrants
(Exercise $0.75)
|
Warrants
(Exercise $0.20)
|
Warrants
(Exercise $0.15)
|
Warrants
(Exercise $0.50)
|
|
|
|
|
|
|
|
|
|
|
|
|
Aquarius
|
$145,544
|
107,500
|
38,044
|
291,088
|
145,544
|
145,544
|
-
|
-
|
-
|
|
K2 Medical (Shenghuo)3
|
803,653
|
771,927
|
31,726
|
1,905,270
|
704,334
|
704,334
|
496,602
|
-
|
-
|
|
Mr.
Blumberg
|
305,320
|
292,290
|
13,030
|
1,167,630
|
119,656
|
119,656
|
928,318
|
-
|
-
|
|
Mr.
Case
|
179,291
|
150,000
|
29,291
|
896,456
|
-
|
-
|
896,456
|
-
|
-
|
|
Mr.
Grimm
|
51,050
|
50,000
|
1,050
|
255,548
|
-
|
-
|
255,548
|
-
|
-
|
|
Mr.
Gould
|
111,227
|
100,000
|
11,227
|
556,136
|
-
|
-
|
556,136
|
-
|
-
|
|
Mr.
Mamula
|
15,577
|
15,000
|
577
|
77,885
|
-
|
-
|
77,885
|
-
|
-
|
|
Dr. Imhoff2
|
400,417
|
363,480
|
36,937
|
1,699,255
|
100,944
|
100,944
|
1,497,367
|
-
|
-
|
|
Ms. Rosenstock1
|
50,000
|
50,000
|
-
|
100,000
|
50,000
|
50,000
|
-
|
-
|
-
|
|
Mr.
James2
|
2,286
|
2,000
|
286
|
7,745
|
1,227
|
1,227
|
5,291
|
-
|
-
|
|
Auctus
|
328,422
|
249,119
|
79,303
|
500,000
|
-
|
-
|
-
|
700,000
|
-
|
|
Mr.
Clavijo
|
125,000
|
125,000
|
-
|
500,000
|
-
|
-
|
-
|
-
|
500,000
|
|
|
$2,517,787
|
$2,276,316
|
$241,471
|
7,957,013
|
1,121,705
|
1,121,705
|
4,713,603
|
700,000
|
500,000
|
1 Ms. Rosenstock also
forgave $28,986 in debt to the Company.
2 Mr. Imhoff and Mr.
James are members of the board of directors and therefore related
parties.
3 The Company’s
COO and director, Mark Faupel, is a shareholder of Shenghuo, and a
former director, Richard Blumberg, is a managing member of
Shenghuo.
Preferred
Stock
Overview
The
Company has authorized 5,000,000 shares of preferred stock with a
$.001 par value. The board of directors has the authority to issue
these shares and to set dividends, voting and conversion rights,
redemption provisions, liquidation preferences, and other rights
and restrictions. The board of directors designated 525,000 shares
of preferred stock redeemable convertible preferred stock, none of
which remain outstanding, 33,000 shares of preferred stock as
Series B Preferred Stock, none of which remain outstanding, 9,000
shares of preferred stock as Series C Convertible Preferred Stock,
(the “Series C Preferred Stock”), of which 286 were
issued and outstanding at June 30, 2020 and December 31, 2019,
respectively and 20,250 shares of preferred stock as Series C1
Preferred Stock, of which 1,050 shares were issued and outstanding
at June 30, 2020 and December 31, 2019. In addition, some
holders separately agreed to exchange
each share of the Series C1 Preferred Stock held for one (1) share
of the Company’s newly created Series C2 Preferred Stock. In
total, for 3,262.25 shares of Series C1 Preferred Stock to be
surrendered, the Company issued 3,262.25 shares of Series C2
Preferred Stock. At June 30, 2020, shares of Series C2 had a conversion price of
$0.50 per share, such that each share of Series C preferred stock
would convert into approximately 2,000 shares of the
Company’s common stock.
Series C Convertible Preferred Stock
Pursuant to the
Series C certificate of designations, shares of Series C preferred
stock are convertible into common stock by their holder at any time
and may be mandatorily convertible upon the achievement of
specified average trading prices for the Company’s common
stock. At June 30, 2020 and December 31, 2019, there were 286
shares outstanding with a conversion price of $0.50 per share, such
that each share of Series C preferred stock would convert into
approximately 2,000 shares of the Company’s common stock,
subject to customary adjustments, including for any accrued but
unpaid dividends and pursuant to certain anti-dilution provisions,
as set forth in the Series C certificate of designations. The
conversion price will automatically adjust downward to 80% of the
then-current market price of the Company’s common stock 15
trading days after any reverse stock split of the Company’s
common stock, and 5 trading days after any conversions of the
Company’s outstanding convertible debt.
Holders
of the Series C preferred stock are entitled to quarterly
cumulative dividends at an annual rate of 12.0% until 42 months
after the original issuance date (the “Dividend End
Date”), payable in cash or, subject to certain conditions,
the Company’s common stock. In addition, upon conversion of
the Series C preferred stock prior to the Dividend End Date, the
Company will also pay to the converting holder a “make-whole
payment” equal to the number of unpaid dividends through the
Dividend End Date on the converted shares. At December 31, 2019,
the “make-whole payment” for a converted share of
Series C preferred stock would convert to 200 shares of the
Company’s common stock. The Series C preferred stock
generally has no voting rights except as required by Delaware law.
Upon the Company’s liquidation or sale to or merger with
another corporation, each share will be entitled to a liquidation
preference of $1,000, plus any accrued but unpaid dividends. In
addition, the purchasers of the Series C preferred stock received,
on a pro rata basis, warrants exercisable to purchase an aggregate
of approximately 1 share of Company’s common stock. The
warrants contain anti-dilution adjustments in the event that the
Company issues shares of common stock, or securities exercisable or
convertible into shares of common stock, at prices below the
exercise price of such warrants. As a result of the anti-dilution
protection, the Company is required to account for the warrants as
a liability recorded at fair value each reporting period. At June
30, 2020, the exercise price per share was $512,000.
On May
23, 2016, an investor canceled certain of these warrants,
exercisable into 903 shares of common stock. The same investor also
transferred certain of these warrants, exercisable for 150 shares
of common stock, to two investors who also had participated in the
2015 Series C financing.
Series C1 Convertible Preferred Stock
Between
April 27, 2016 and May 3, 2016, the Company entered into various
agreements with certain holders of Series C preferred stock,
including directors John Imhoff and Mark Faupel, pursuant to which
those holders separately agreed to exchange each share of Series C
preferred stock held for 2.25 shares of the Company’s newly
created Series C1 Preferred Stock and 12 (9,600 pre-split) shares
of the Company’s common stock (the “Series C
Exchanges”). In connection with the Series C Exchanges, each
holder also agreed to roll over the $1,000 stated value per share
of the holder’s shares of Series C1 Preferred Stock into the
next qualifying financing undertaken by the Company on a
dollar-for-dollar basis and, except in the event of an additional
$50,000 cash investment in the Company by the holder, to execute a
customary “lockup” agreement in connection with the
financing. In total, for 1,916 shares of Series C preferred stock
surrendered, the Company issued 4,312 shares of Series C1 Preferred
Stock and 29 shares of common stock.
At June
30, 2020, there were 1,050 shares outstanding with a conversion
price of $0.50 per share, such that each share of Series C
preferred stock would convert into approximately 381,098 shares of
the Company’s common stock.
On
August 31, 2018, 3,262.25 shares of Series C1 Preferred Stock were
surrendered, and the Company issued 3,262.25 shares of Series C2
Preferred Stock.
The
Series C1 preferred stock has terms that are substantially the same
as the Series C preferred stock, except that the Series C1
preferred stock does not pay dividends (unless and to the extent
declared on the common stock) or at-the-market “make-whole
payments” and, while it has the same anti-dilution
protections afforded the Series C preferred stock, it does not
automatically reset in connection with a reverse stock split or
conversion of our outstanding convertible debt.
Series C2 Convertible Preferred Stock
On August 31, 2018, the Company entered into
agreements with certain holders of the Company’s Series C1
Preferred Stock, including the chairman of the Company’s
board of directors, and the Chief Operating Officer and a director
of the Company pursuant to which those holders separately agreed to
exchange each share of the Series C1 Preferred Stock held for one
(1) share of the Company’s newly created Series C2 Preferred
Stock. In total, for 3,262.25 shares of Series C1 Preferred Stock
to be surrendered, the Company issued 3,262.25 shares of Series C2
Preferred Stock. At June 30, 2020, shares of Series C2 had a conversion price of
$0.50 per share, such that each share of Series C preferred stock
would convert into approximately 2,000 shares of the
Company’s common stock.
The
terms of the Series C2 Preferred Stock are substantially the same
as the Series C1 Preferred Stock, except that (i) shares of Series
C1 Preferred Stock may not be convertible into the Company’s
common stock by their holder for a period of 180 days following the
date of the filing of the Certificate of Designation (the
“Lock-Up Period”); (ii) the Series C2 Preferred Stock
has the right to vote as a single class with the Company’s
common stock on an as-converted basis, notwithstanding the Lock-Up
Period; and (iii) the Series C2 Preferred Stock will automatically
convert into that number of securities sold in the next Qualified
Financing (as defined in the Exchange Agreement) determined by
dividing the stated value ($1,000 per share) of such share of
Series C2 Preferred Stock by the purchase price of the securities
sold in the Qualified Financing.
Series D Convertible Preferred Stock
On January 8, 2020, the Company entered
into a Security Agreement with the Series D Investors (the
“Series D Security Agreement”) pursuant to which all
obligations under the Series D Certificate of Designation are
secured by all of the Company’s assets and personal
properties, with certain accredited investors, including
the Chief Executive Officer, Chief
Operating Officer and a director of the Company. In total, for
$763,000 the Company issued 763 shares of Series D Preferred Stock,
1,526,000 common stock shares, 1,526,000 common stock warrants,
exercisable at $0.25, and 1,526,000 common stock warrants,
exercisable $0.75. Each Series D Preferred Stock is convertible
into 3,000 common stock shares. The Series D Preferred Stock
will have cumulative dividends at the rate per share of 10% per
annum. The stated value and
liquidation preference on the Series D Preferred Stock is
$554.
Each
share of Series D Preferred is convertible, at any time for a
period of 5 years after issuance, into that number of shares of
Common Stock, determined by dividing the Stated Value by $0.25,
subject to certain adjustments set forth in the Series D
Certificate of Designation (the “Series D Conversion
Price”). The conversion of Series D Preferred is subject to a
4.99% beneficial ownership limitation, which may be increased to
9.99% at the election of the holder of the Series D Preferred. If
the average of the VWAPs (as defined in the Series D Certificate of
Designation) for any consecutive 5 trading day period
(“Measurement Period”) exceeds 200% of the then Series
D Conversion Price and the average daily trading volume of the
Common Stock on the primary trading market exceeds 1,000 shares per
trading day during the Measurement Period (subject to adjustments),
the Company may redeem the then outstanding Series D Preferred, for
cash in an amount equal to aggregate Stated Value then outstanding
plus accrued but unpaid dividends .
The
Series D Warrants may be exercised cashlessly if there is no
effective registration statement covering the Common Stock issuable
upon exercise of the Series D Warrants. The Series D Warrants
contain a 4.99% beneficial ownership blocker which may be increased
to 9.99% at the holder’s election.
On
January 8, 2020, the Company also entered into a Registration
Rights Agreement (the “Series D Registration Rights Agreement
“) with the Series D Investors pursuant to which the Company
agreed to file with the SEC, a registration statement on a Form S-3
(or on other appropriate form if a Form S-3 is not available)
covering the Common Stock issuable upon conversion of the Series D
Warrants within 90 days of the date of the Registration Rights
Agreement and cause such registration statement to be declared
effective within 120 days of the date of the Registration Rights
Agreement. All reasonable expenses related to such registration
shall be borne by the Company.
Series E Convertible Preferred Stock
During June 2020, the Company entered into
a Security Agreement with the Series E Investors (the “Series
E Security Agreement”) pursuant to which all obligations
under the Series E Certificate of Designation are secured by all of
the Company’s assets and personal properties, with certain
accredited investors. In total, for
$853,000 the Company issued 853 shares of Series E Preferred Stock.
Each Series E Preferred Stock is convertible into 4,000 common
stock shares. The Series E Preferred Stock will have
cumulative dividends at the rate per share of 6% per annum.
The stated value and liquidation
preference on the Series E Preferred Stock is
$853.
Each
share of Series E Preferred is convertible, at any time for a
period of 5 years after issuance, into that number of shares of
Common Stock, determined by dividing the Stated Value by $0.25,
subject to certain adjustments set forth in the Series E
Certificate of Designation (the “Series E Conversion
Price”). The conversion of Series E Preferred is subject to a
4.99% beneficial ownership limitation, which may be increased to
9.99% at the election of the holder of the Series E Preferred. If
the average of the VWAPs (as defined in the Series E Certificate of
Designation) for any consecutive 5 trading day period
(“Measurement Period”) exceeds 200% of the then Series
E Conversion Price and the average daily trading volume of the
Common Stock on the primary trading market exceeds 1,000 shares per
trading day during the Measurement Period (subject to adjustments),
the Company may redeem the then outstanding Series E Preferred, for
cash in an amount equal to aggregate Stated Value then outstanding
plus accrued but unpaid dividends .
Warrants
The
following table summarizes transactions involving the
Company’s outstanding warrants to purchase common stock for
the six months ended June 30, 2020:
|
|
Warrants
(Underlying
Shares)
|
|
Outstanding,
January 1, 2020
|
46,016,840
|
|
Issuances
|
11,269,013
|
|
Cancelled /
Expired
|
(70)
|
|
Exchanged in debt
restructuring
|
(28,962,508)
|
|
Exercised
|
-
|
|
Outstanding, June
30, 2020
|
28,323,275
|
The
Company had the following shares reserved for the warrants as of
June 30, 2020:
Warrants(Underlying
Shares)
|
|
|
|
|
4,262
|
(1)
|
$1.824
per share
|
March
19, 2021
|
|
7,185,000
|
(2)
|
$0.20
per share
|
February 12,
2023
|
|
1,725,000
|
(3)
|
$0.04
per share
|
February 21,
2021
|
|
325,000
|
(4)
|
$0.18
per share
|
April
4, 2022
|
|
215,000
|
(5)
|
$0.25
per share
|
July 1,
2022
|
|
100,000
|
(6)
|
$0.25
per share
|
September 1,
2022
|
|
7,500,000
|
(7)
|
$0.20
per share
|
December 17,
2024
|
|
250,000
|
(8)
|
$0.16
per share
|
March
31, 2025
|
|
2,597,705
|
(9)
|
$0.25
per share
|
December 30,
2022
|
|
2,597,705
|
(10)
|
$0.75
per share
|
December 30,
2022
|
|
4,713,603
|
(11)
|
$0.20
per share
|
December 30,
2022
|
|
60,000
|
(12)
|
$0.25
per share
|
April
23, 2023
|
|
50,000
|
(13)
|
$0.25
per share
|
December 30,
2022
|
|
50,000
|
(14)
|
$0.75
per share
|
December 30,
2022
|
|
700,000
|
(15)
|
$0.15
per share
|
May 21,
2023
|
|
250,000
|
(16)
|
$0.50
per share
|
June
23, 2023
|
|
28,323,275*
|
|
|
|
* However, please refer to Footnote 10 - CONVERTIBLE DEBT in the
paragraph: Debt Restructuring for more information regarding our
warrants.
|
(1)
|
Issued
to investors for a loan in March 2018.
|
|
(2)
|
Exchanged in
January 2020 from amount issued as part of a February 2016 private
placement with senior secured
debt
holder
|
|
(3)
|
Issued
to a placement agent in conjunction with a February 2016 private
placement with senior secured debt holder
|
|
(4)
|
Issued
to investors for a loan in April 2019
|
|
(5)
|
Issued
to investors for a loan in July 2019
|
|
(6)
|
Issued
to investors for a loan in September 2019
|
|
(7)
|
Issued
to investors for a loan in December 2019
|
|
(8)
|
Issued
to investors for a loan in January 2020
|
|
(9)
|
Issued
to investors as part of Series D Preferred Stock Capital raise in
December 2020
|
|
(10)
|
Issued
to investors as part of Series D Preferred Stock Capital raise in
December 2020
|
|
(11)
(12)
(13)
(14)
(15)
(16)
|
Issued
to investors as part of Series D Preferred Stock Capital raise in
December 2020
Issued
to a consultant for services in April 2020
Issued
to an investor as part of Series D Preferred Stock Capital raise in
April 2020
Issued
to an investor as part of Series D Preferred Stock Capital raise in
April 2020
Issued
to an investor for a loan in May 2020
Issued
to an investor in exchange of debt in June 2020
|
Footnote (2) - On
January 16, 2020, the Company entered into an exchange agreement
with GPB. This exchange agreement canceled the existing outstanding
warrants, which were subject to anti-dilution and ratchet
provisions, to purchase 35,937,500 shares of common stock at an
exercise price of $0.04 per share and resulted in the issuance of
new warrants to purchase 7,185,000 share of common stock at a price
of $0.20 per share. The new warrants have fixed exercise prices of
$0.20; subject to the Company meeting the agreed upon terms of the
exchange agreement.
Warrant
to purchase 70 shares of common stock were not recorded as their
exercise price after considering reverse stock splits, were greater
than $60,000 and deemed to be immaterial for
disclosure
On
January 6, 2020, the Company entered into a finder’s fee
agreement. The finder will receive 5% cash and 5% warrants on all
funds it raises including bridge loans. The three-year common stock
share warrants will have an exercise price of $0.25. During 2019
and 2020, the finder helped the Company raise $300,000, therefore a
fee of $15,000 was paid and 60,000 warrants will be
issued.
On
January 22, 2020, the Company entered into a promotional agreement
with a consultant. The consultant will provide the Company investor
and public relations services. As compensation for these services,
the Company will issue a total of 5,000,000 common stock warrants
at a $0.25 strike price and expiring in three years, if the
following conditions occur: 1,250,000 common stock warrants, 6
months after the close of the Series D Preferred Stock units, if
the minimum common stock share price is a at least $0.50 based on a
30-day VWAP, with a two year term; 1,250,000 common stock warrants,
12 months after the close of the Series D Preferred Stock units, if
the minimum common stock share price is at least $0.75 based on a
30-day VWAP, with a one and half year term; 1,250,000 common stock
warrants, 18 months after the close of the Series D Preferred Stock
units, if the minimum common stock share price is a minimum of
$1.00 based on a 30-day VWAP, with a one year term; and 1,250,000
common stock warrants, 24 months after the close of the Series D
Preferred Stock units, if the minimum common stock share price is a
minimum of $1.25 based on a 30-day VWAP, with a one year term. The
consultant agrees to a 10.0% blocker at any single point in time it
cannot own 10.0% of the total common stock shares
outstanding.
5.
STOCK OPTIONS
The
Company’s 1995 Stock Plan (the “Plan”) has
expired pursuant to its terms, so zero shares remained available
for issuance at June 30, 2020 and December 31, 2019. The Plan
allowed for the issuance of incentive stock options, nonqualified
stock options, and stock purchase rights. The exercise price of
options was determined by the Company’s board of directors,
but incentive stock options were granted at an exercise price equal
to the fair market value of the Company’s common stock as of
the grant date. Options historically granted have generally become
exercisable over four years and expire ten years from the date of
grant. As of June 30, 2020, and December 31, 2019, there were no
stock options outstanding and exercisable.
On July
14, 2020, the Company granted 1,800,000 stock options to employees
and consultants. The new Stock Plan (the “Plan”) allows
for the issuance of incentive stock options, nonqualified stock
options, and stock purchase rights. The exercise price of options
was determined by the Company’s board of directors, but
incentive stock options were granted at an exercise price equal to
the fair market value of the Company’s common stock as of the
grant date. Options historically granted have generally become
exercisable over four years and expire ten years from the date of
grant.
6.
LITIGATION AND CLAIMS
From
time to time, the Company may be involved in various legal
proceedings and claims arising in the ordinary course of business.
Management believes that the dispositions of these matters,
individually or in the aggregate, are not expected to have a
material adverse effect on the Company’s financial condition.
However, depending on the amount and timing of such disposition, an
unfavorable resolution of some or all of these matters could
materially affect the future results of operations or cash flows in
a particular year.
As of
June 30, 2020, and December 31, 2019, there was no accrual recorded
for any potential losses related to pending
litigation.
7.
COMMITMENTS AND CONTINGENCIES
Operating
Leases
In
December 2009, the Company moved its offices, which comprise its
administrative, research and development, marketing and production
facilities to 5835 Peachtree Corners East, Suite B, Peachtree
Corners, Georgia 30092. The Company leased approximately 23,000
square feet under a lease that expired in June 2017. In July 2017,
the Company leased the offices on a month to month basis. On
February 23, 2018, the Company modified its lease to reduce its
occupancy to 12,835 square feet. The fixed monthly lease expense
will be: $13,859 each month for the period beginning January 1,
2018 and ending June 30, 2018; $8,022 each month for the period
beginning April 1, 2018 and ending June 30, 2019; $8,268 each month
for the period beginning April 1, 2019 and ending June 30, 2020;
and $8,514 each month for the period beginning April 1, 2020 and
ending March 31, 2021.
The
Company recognizes lease expense on a straight-line basis over the
estimated lease term and combine lease and non-lease components.
Future minimum rental payments at June 30, 2020 under
non-cancellable operating leases for office space and equipment are
as follows (in thousands):
|
Year
|
|
|
2020
|
60
|
|
2021
|
30
|
|
Total
|
90
|
|
Less:
Interest
|
6
|
|
Present value of
lease liability
|
84
|
Related
Party Contracts
On June
5, 2016, the Company entered into a license agreement with Shenghuo
Medical, LLC pursuant to which the Company granted Shenghuo an
exclusive license to manufacture, sell and distribute LuViva in
Taiwan, Brunei Darussalam, Cambodia, Laos, Myanmar, Philippines,
Singapore, Thailand, and Vietnam. Shenghuo was already the
Company’s exclusive distributor in China, Macau and Hong
Kong, and the license extended to manufacturing in those countries
as well. Under the terms of the license agreement, once Shenghuo
was capable of manufacturing LuViva in accordance with ISO 13485
for medical devices, Shenghuo would pay the Company a royalty equal
to $2.00 or 20% of the distributor price (subject to a discount
under certain circumstances), whichever is higher, per disposable
distributed within Shenghuo’s exclusive territories. In
connection with the license grant, Shenghuo was to underwrite the
cost of securing approval of LuViva with Chinese Food and Drug
Administration. At its option, Shenghuo also would provide up to
$1.0 million in furtherance of the Company’s efforts to
secure regulatory approval for LuViva from the U.S. Food and Drug
Administration, in exchange for the right to receive payments equal
to 2% of the Company’s future sales in the United States, up
to an aggregate of $4.0 million. Pursuant to the license agreement,
Shenghuo had the option to have a designee appointed to the
Company’s board of directors (former director Richard
Blumberg was the designee).
On July
24, 2019, Shandong Yaohua Medical Instrument Corporation
(“SMI”), agreed to modify its existing agreement. Under
the terms of this modification, the Company agreed to grant (1)
exclusive manufacturing rights, excepting the disposable cervical
guides for the Republic of Turkey, and the final assembly rights
for Hungary, and (2) exclusive distribution and sales for LuViva in
jurisdictions, subject to the following terms and conditions.
First, SMI shall complete the payment for parts, per the purchase
order, for five additional LuViva devices. Second, in consideration
for the $885,144 that the Company received, SMI will receive 12,147
common stock shares. Third, SMI shall honor all existing purchase
orders it has executed to date with the Company, in order to
maintain jurisdiction sales and distribution rights. If SMI needs
to purchase cervical guides then it will do so at a cost including
labor, plus ten percent markup. The Company will provide 200
cervical guides at no cost for the clinical trials. Fourth, the
Company and SMI will make best efforts to sell devices after CFDA
approval. With an initial estimate of year one sales of 200 LuViva
devices; year two sales of 500 LuViva devices; year three sales of
1,000 LuViva devices; and year four sales of 1,250 LuViva devices.
Fifth, SMI shall pay for entire costs of securing approval of
LuViva with the Chinese FDA. Sixth, SMI shall arrange, at its sole
cost, for a manufacturer in China to build tooling to support
manufacture. In addition, SMI retains the right to manufacture for
China, Hong Kong, Macau and Taiwan, where SMI has distribution and
sales rights. For each single-use cervical guide sold by SMI in the
jurisdictions, SMI shall transfer funds to escrow agent at a rate
of $1.90 per device chip. If within 18 months of the
license’s effective date, SMI fails to achieve
commercialization of LuViva in China, SMI shall no longer have any
rights to manufacture, distribute or sell LuViva. Commercialization
is defined as: filing an application with the Chinese FDA for the
approval of LuViva; any assembly or manufacture of the devices or
disposables that begins in China; and purchase of at least 10
devices and disposables for clinical evaluations and regulatory use
and or sales in the jurisdictions. On March 5, 2020 the Company had
recorded an accrued liability for SMI of $692,335, which was
reclassified to additional paid in capital and 12,147 common stock
shares.
On
September 6, 2016, the Company entered into a royalty agreement
with one of its directors, John Imhoff, and another stockholder,
Dolores Maloof, pursuant to which the Company sold to them a
royalty of future sales of single-use cervical guides for LuViva.
Under the terms of the royalty agreement, and for consideration of
$50,000, the Company will pay them an aggregate perpetual royalty
initially equal to $0.10, and from and after October 2, 2016, equal
to $0.20, for each disposable that the Company sells (or that is
sold by a third party pursuant to a licensing arrangement with the
Company).
Contingencies
Based
on the current outbreak of the Coronavirus SARS-CoV-2, the pathogen
responsible for COVID-19, which has already had an impact on
financial markets, there could be additional repercussions to the
Company’s operating business, including but not limited to,
the sourcing of materials for product candidates, manufacture of
supplies for preclinical and/or clinical studies, delays in
clinical operations, which may include the availability or the
continued availability of patients for trials due to such things as
quarantines, conduct of patient monitoring and clinical trial data
retrieval at investigational study sites.
The
future impact of the outbreak is highly uncertain and cannot be
predicted, and the Company cannot provide any assurance that the
outbreak will not have a material adverse impact on the
Company’s operations or future results or filings with
regulatory health authorities. The extent of the impact to the
Company, if any, will depend on future developments, including
actions taken to contain the coronavirus.
8.
NOTES PAYABLE
Notes
Payable in Default
At June
30, 2020 and December 31, 2019, the Company maintained notes
payable to both related and non-related parties totaling
approximately $309,000 and $776,000, respectively. These notes are
short term, straight-line amortizing notes. The notes carry annual
interest rates between 0% and 10% and have default rates as high as
20%. The Company is
accruing interest at the default rate of 18.0% on two of the loans.
As described in Note 4:
STOCKHOLDERS’ DEFICIT certain notes payable in default
outstanding had been exchanged for equity and cash as described in
the note.
As
described previously, the Company entered into an exchange
agreement with Dr. Imhoff. Based on this agreement the Company
exchanged $199,417 of short-term debt outstanding.
As
described previously, the Company entered into an exchange
agreement with Ms. Rosenstock. Based on this agreement the Company
exchanged $50,000 of short-term debt outstanding and forgave
$28,986.
On
February 8, 2019, a note payable in default to Aquarius as reported
in the Company’s Form 10-K report - Footnote 9: Notes payable – Note payable
in default, was exchanged for a note with a convertible
option. The balance on the note was $107,500 and accrued interest
was $38,044 for a total of $145,544 outstanding. As of June 30,
2020, the Company had entered into an exchange agreement with
Aquarius. Based on this agreement the Company exchanged $145,544 of
debt outstanding for: 291,088 common stock shares; 145,544 warrants
issued to purchase common stock shares at a strike price of $0.25;
and 145,544 warrants issued to purchase common stock shares at a
strike price of $0.75.
On July
1, 2019, the Company entered into a loan agreement with Accilent
Capital Management Inc / Rev Royalty Income and Growth Trust
(“Accilent”), providing for the purchase by Accilent of
an unsecured promissory note in the principal amount of $49,389
(CAD$ 65,500). The note was fully funded on July 9, 2019 (net of an
8% original issue discount and other expenses). The note bears an
interest rate of 16% and was due and payable on September 11, 2019.
Following maturity, demand, default, or judgment and until actual
payment in full, interest rate shall be paid at the rate of 19% per
annum. The Company issued 315,000 warrants at an exercise price of
$0.25 per warrant and exercisable within 3 years from issuance (the
“Initial Warrants”). As of June 30, 2020, the loan had
been paid off. As of December 31, 2019, $57,946 remained
outstanding, which included a fee of $4,951 and interest of
$4,606.
As
described previously, the Company entered into an exchange
agreement with Mr. Blumberg. Based on this agreement the Company
exchanged $70,320 of short-term debt outstanding.
As
described previously, the Company entered into an exchange
agreement with Mr. James. Based on this agreement the Company
exchanged $2,286 of short-term debt outstanding.
The
following table summarizes the Notes payable in default, including related
parties:
|
|
|
|
|
Dr.
Imhoff
|
$-
|
$199
|
|
Dr.
Cartwright
|
2
|
2
|
|
Ms.
Rosenstock
|
-
|
50
|
|
Mr.
Fowler
|
26
|
26
|
|
Mr.
Mermelstein
|
264
|
244
|
|
GPB
|
17
|
17
|
|
Aquarius
|
-
|
108
|
|
Accilent
|
-
|
58
|
|
Mr.
Blumberg
|
-
|
70
|
|
Mr.
James
|
-
|
2
|
|
Notes
payable in default
|
$309
|
$776
|
The
notes payable to related parties was $2,000 of the $309,000 balance
at June 30, 2020 and $349,000 of the $776,000 balance at December
31, 2019.
Short
Term Notes Payable
As
described previously, the Company entered into an exchange
agreement with Dr. Imhoff. Based on this agreement the Company
exchanged $167,000 of short-term debt outstanding.
The
Company issued promissory notes to Mr. Cartwright and Mr. Faupel,
in the amounts of approximately $48,000 and $5,000, respectively.
The notes were initially issued with 0% interest, however interest
increased to 6.0% interest 90 days after the Company received
$1,000,000 in financing proceeds.
On
August 22, 2018, the Company issued a promissory note to Mr. Case
for $150,000 in aggregate principal amount of a 6% promissory note
for an aggregate purchase price of $157,500 (representing a $7,500
original issue discount). As of June 30, 2020, the Company had
exchanged $179,291 of debt outstanding for: 896,456 common stock
shares; and 896,455 warrants issued to purchase common stock shares
at a strike price of $0.20. As of December 31, 2019, the Company
had not repaid the note and original issue discount of $157,500
($7,500 is recorded in accrued expenses).
As
described previously, the Company entered into an exchange
agreement with Mr. Mamula. Based on this agreement the Company
exchanged $15,577 of short-term debt outstanding.
On
September 19, 2018, and February 15, 2019, the Company issued
promissory notes to Mr. Gould for $50,000 each in aggregate
principal amount of a 6% promissory note for an aggregate purchase
price of $52,500 each (representing a $2,500 original issue
discount). As of June 30, 2020, the Company had entered into an
exchange agreement with Mr. Gould. Based on this agreement the
Company exchanged $111,227 of debt outstanding for: 556,136 common
stock shares; and 556,136 warrants issued to purchase common stock
shares at a strike price of $0.20. As of December 31, 2019, the
Company had not repaid the note and original issue discount of
$52,500 ($2,500 is recorded in accrued expenses) and therefore the
accrued interest rate increased to 12%.
As
described previously, the Company entered into an exchange
agreement with K2 Medical. Based on this agreement the Company
exchanged $203,000 of short-term debt outstanding.
On
February 14, 2019, the Company entered into a Purchase and Sale
Agreement with Everest Business Funding for the sale of its
accounts receivable. The transaction provided the Company with
$48,735 after $1,265 in debt issuance costs (bank costs) for a
total purchase amount of $50,000, in which the Company would have
to repay $68,500. At a minimum the Company would need to pay
$535.16 per day or 20.0% of the future collected accounts
receivable or “receipts.” The effective interest rate
as calculated for this transaction is approximately 132.5%. As of
December 31, 2019, $60,105 had been paid, leaving a balance of
$8,016. As of June 30, 2020, the balance of $68,121 had been paid
in full.
In July
2019, the Company entered into a premium finance agreement to
finance its insurance policies totaling $142,000. The note requires
monthly payments of $14,459, including interest at 4.91% and
matures in April 2020. As of June 30, 2020, a balance of $813
remained. The balance due on insurance policies totaled $57,483 at
December 31, 2019.
As
described previously, the Company entered into an exchange
agreement with Mr. Blumberg. Based on this agreement the Company
exchanged $223,000 of short-term debt outstanding.
As
described previously, the Company entered into an exchange
agreement with Mr. Grimm. Based on this agreement the Company
exchanged $51,050 of short-term debt outstanding.
At June
30, 2020 and December 31, 2019, the Company maintained short term
notes payable to both related and non-related parties totaling
$54,000 and $1,026,000, respectively. These notes are short term,
straight-line amortizing notes. The notes carry annual interest
rates between 5% and 19%.
On June
30, 2020, the Company exchanged $125,000 in debt (during June 2020,
$125,000 in payables had been converted into short-term debt) from
Mr. James Clavijo, for 500,000 common stock shares and 250,000
warrants to purchase common stock shares. The fair value of the
common stock shares was $250,000 (based on a $0.50 fair value for
the Company’s stock) and of the warrants to purchase common
stock shares was $99,963 (based on a $0.40 black scholes fair
valuation). This resulted in a net loss on extinguishment of debt
of $224,963 ($349,963 fair value less the $125,000 of exchanged
debt). After the exchange transaction a balance was due Mr. Clavijo
of $10,213 which was paid.
The
following table summarizes the Short-term notes payable, including related
parties:
|
|
|
|
|
Dr.
Imhoff
|
$-
|
$167
|
|
Dr.
Cartwright
|
48
|
48
|
|
Dr.
Faupel
|
5
|
5
|
|
Mr.
Case
|
-
|
150
|
|
Mr.
Mamula
|
-
|
15
|
|
Mr.
Gould
|
-
|
100
|
|
K2
(Shenghuo)
|
-
|
203
|
|
Everest
|
-
|
8
|
|
Premium Finance
(insurance)
|
1
|
58
|
|
Mr.
Blumberg
|
-
|
223
|
|
Mr.
Grimm
|
-
|
49
|
|
Short-term
notes payable, including related parties
|
$54
|
$1,026
|
The
short-term notes payable past due to related parties was $53,000 of
the $54,000 balance at June 30, 2020 and $646,000 of the $1,026,000
balance at December 31, 2019.
Troubled Debt Restructuring
The
debt extinguished for Notes Payable which closed on January 8,
2020, the Company exchanged $2,064,366 in debt for common stock
shares and warrants as described above that were determined to have
a total fair value of $2,065,548, resulting in a loss on
extinguishment of debt of $1,183 which is recorded in other income
(expense) on the accompanying consolidated statements of
operations. In addition, one of the investors forgave approximately
$29,000 of debt, which was recorded as a gain for extinguishment of
debt. Also, during June 2020, the Company exchanged $125,000 in
debt for common stock shares and warrants as described. This debt
extinguished met the criteria for troubled debt. The basic criteria
are that the borrower is troubled, ie., they are having financial
difficulties, and a concession is granted by the creditor. Due to
the Company being in default on several of its loans the debt is
considered troubled debt. The troubled debt restructuring for Notes
Payable, had an immaterial effect on the Company’s basic or
diluted earnings per share calculation for June 30, 2020 and
2019.
9.
SHORT-TERM CONVERTIBLE DEBT
Related
Party Convertible Note Payable – Short-Term
On June
5, 2016, the Company entered into a license agreement with a
distributor pursuant to which the Company granted the distributor
an exclusive license to manufacture, sell and distribute the
Company’s LuViva Advanced Cervical Cancer device and related
disposables in Taiwan, Brunei Darussalam, Cambodia, Laos, Myanmar,
Philippines, Singapore, Thailand, and Vietnam. The distributor was
already the Company’s exclusive distributor in China, Macau
and Hong Kong, and the license will extend to manufacturing in
those countries as well.
As
partial consideration for, and as a condition to, the license, and
to further align the strategic interests of the parties, the
Company agreed to issue a convertible note to the distributor, in
exchange for an aggregate cash investment of $200,000. The note
will provide for a payment to the distributor of $240,000, due upon
consummation of any capital raising transaction by the Company
within 90 days and with net cash proceeds of at least $1.0 million.
As of June 30, 2020, the note had been exchanged for common stock
shares and warrants. This was part of the exchange made on January
8, 2020, for $790,544 of debt outstanding for: 1,905,270 common
stock shares issued on March 23, 2020; 496,602 warrants issued to
purchase common stock shares at a strike price of $0.20; 692,446
warrants issued to purchase common stock shares at a strike price
of $0.25; and 692,446 warrants issued to purchase common stock
shares at a strike price of $0.75. As of December 31, 2019, the
Company had a note due of $512,719.
Troubled Debt Restructuring
The
debt extinguished for Related Party Convertible Note Payable
– Short-Term, which closed on January 8, 2020, the Company
exchanged in part $512,719 in debt for several common stock shares
and warrants as described above. This debt extinguished met the
criteria for troubled debt. The basic criteria are that the
borrower is troubled, i.e., they are having financial difficulties,
and a concession is granted by the creditor. Due to the Company
being in default on several of its loans the debt is considered
troubled debt. See Note 8: Notes Payable, for total gain or loss
recorded in the period. The troubled debt restructuring for Notes
Payable, had an immaterial effect on the Company’s basic or
diluted earnings per share calculation for June 30, 2020 and
2019.
Convertible
Note Payable – Short-Term
On
March 31, 2020, we entered into a securities purchase agreement
with Auctus Fund, LLC for the issuance and sale to Auctus of
$112,750 in aggregate principal amount of a 12% convertible
promissory note. On March 31, 2020, we issued the note to Auctus
and issued 250,000 five-year common stock warrants at an exercise
price of $0.16. On April 3, 2020, we received net proceeds of
$100,000. The note matures on January 26, 2021 and accrues interest
at a rate of 12% per year. We may not prepay the note, in whole or
in part. After the 90th calendar day after
the issuance date, and ending on the later of maturity date and the
date of payment of the default amount, Auctus may convert the note,
at any time, in whole or in part, provided such conversion does not
provide Auctus with more than 4.99% of the outstanding common share
stock. The conversion may be made converted into shares of the our
common stock, at a conversion price equal to the lesser of: (i) the
lowest Trading Price during the twenty-five (25) trading day period
on the last trading prior to the issue date and (ii) the variable
conversion price (55% multiplied by the market price, market price
means the lowest trading price for the common stock during the
twenty-five (25) trading day period ending on the latest complete
trading day prior to the conversion date. Trading price is the
lowest trade price on the trading market as reported. The note
includes customary events of default provisions and a default
interest rate of 24% per year. As of June 30, 2020, the note
outstanding was $112,750, which consisted of unamortized balance of
$57,354 of a beneficial conversion feature, unamortized original
issue discount of $10,200, unamortized debt issuance costs of
$11,034 and interest of $3,345 included in accrued expenses on the
accompanying consolidated balance sheet.
On May
15, 2019, the Company entered into a securities purchase agreement
with Eagle Equities, LLC, providing for the purchase by Eagle of a
convertible redeemable note in the principal amount of $57,750. The
note was fully funded on May 21, 2019, upon which the Company
received $45,000 of net proceeds (net of a 10% original issue
discount and other expenses). The note bears an interest rate of 8%
is due and payable on May 15, 2020. The note may be converted by
Eagle at any time after five months from issuance into shares of
the Company common stock (as determined in the notes) calculated at
the time of conversion. The conversion price of the notes will be
equal to 60% of the average of the two lowest closing bid prices of
the Company’s common stock shares as reported on OTC Markets
exchange, for the 20 prior trading days including the day upon
which the Company receives a notice of conversion. The notes may be
prepaid in accordance with the terms set forth in the notes. The
notes also contain certain representations, warranties, covenants
and events of default including if the Company are delinquent in
our periodic report filings with the SEC and increases in the
amount of the principal and interest rates under the notes in the
event of such defaults. In the event of default, at Eagle’s
option and in its sole discretion, Eagle may consider the notes
immediately due and payable. During 2020, Eagle provided a
forbearance to the Company on the default after a payment was made.
On May 15, 2019, the Company had recorded a $38,500 beneficial
conversion feature, $5,250 original issue discount and $7,500 of
debt issuance costs. As of December 31, 2019, the outstanding note
was for $25,651, which consisted of unamortized balance of $14,438
of a beneficial conversion feature, unamortized original issue
discount of $1,942, unamortized debt issuance costs of $2,774 and
interest of $1,166 included in accrued expenses on the accompanying
consolidated balance sheet. On May 14, 2020, the outstanding note
was paid off.
On May
15, 2019, the Company entered into a securities purchase agreement
with Adar Bays, LLC, providing for the purchase by Adar of a
convertible redeemable note in the principal amount of $57,750. The
note was fully funded on May 21, 2019, upon which the Company
received $45,000 of net proceeds (net of a 10% original issue
discount and other expenses). The note bears an interest rate of 8%
and are due and payable on May 15, 2020. The note may be converted
by Adar at any time after five months from issuance into shares of
the Company common stock (as determined in the notes) calculated at
the time of conversion. The conversion price of the notes will be
equal to 60% of the average of the two lowest closing bid prices of
the Company’s common stock shares as reported on OTC Markets
exchange, for the 20 prior trading days including the day upon
which the Company receives a notice of conversion. The notes may be
prepaid in accordance with the terms set forth in the notes. The
notes also contain certain representations, warranties, covenants
and events of default including if the Company are delinquent in
our periodic report filings with the SEC and increases in the
amount of the principal and interest rates under the notes in the
event of such defaults. In the event of default, at Adar’s
option and in its sole discretion, Adar may consider the notes
immediately due and payable. During 2020, Adar provided a
forbearance to the Company on the default after a payment was made.
On May 15, 2019, the Company had recorded a $38,500 beneficial
conversion feature, $5,250 original issue discount and $7,500 of
debt issuance costs. As of December 31, 2019, the note outstanding
increased to $84,780 as a default penalty of $27,030 was added to
the outstanding balance of the note, which consisted of unamortized
balance of $14,438 of a beneficial conversion feature, unamortized
original issue discount of $1,942, unamortized debt issuance costs
of $2,774 and interest of $3,190 included in accrued expenses on
the accompanying consolidated balance sheet. On May 22, 2020, the
outstanding note was paid off.
The
following table summarizes the Convertible notes payable:
|
|
|
|
|
Shenghuo
|
$-
|
$513
|
|
Auctus
|
113
|
-
|
|
Eagle
|
-
|
26
|
|
Adar
|
-
|
85
|
|
Debt discount and
issuance costs to be amortized
|
(23)
|
(9)
|
|
Debt discount
related to beneficial conversion
|
(57)
|
(29)
|
|
Short-term
convertible notes payable
|
$33
|
$586
|
10.
CONVERTIBLE DEBT
Senior Secured Promissory Note
Effective
February 12, 2016, the Company entered into a securities purchase
agreement with GPB Debt Holdings II LLC (“GPB”) for the
issuance of a $1,437,500 senior secured convertible note for an
aggregate purchase price of $1,029,000 (representing an original
issue discount of $287,500 and debt issuance costs of $121,000). On
May 28, 2016, the balance of the note was increased by $87,500 for
a total principal balance of $1,525,000. On December 7, 2016, the
Company entered into an exchange agreement with GPB and as a result
the principal balance increased by a transfer $312,500 (see –
“Senior Secured Promissory Note”) for a total principal
balance of $1,837,500. In addition, GPB received warrants for 2,246
shares of the Company’s common stock. The Company allocated
proceeds totaling $359,555 to the fair value of the warrants at
issuance and recorded an additional discount on the debt. The
warrant is exercisable at any time, pending availability of
sufficient authorized but unissued shares of the Company’s
common stock, at an exercise price per share equal to the
conversion price of the convertible note, subject to certain
customary adjustments and anti-dilution provisions contained in the
warrant. The warrant has a five-year term. At December 31, 2019,
the common stock purchase warrant exercise price had been adjusted
to $0.04 and the number of common stock shares exchangeable for was
35,937,500.
As
of June 30, 2020, and as a result of the January 15, 2020 exchange
agreement, the common stock purchase warrant exercise price had
been adjusted to $0.20 and the number of common stock shares
exchangeable for was 7,185,000. This exchange is subject to the
Company meeting repayment conditions. Those conditions involved in
part the repayment of $450,000, $100,000 and $950,000 for the
completion of each Auctus financing tranche. The Company has
executed Tranche 1 and 2 and has paid GPB $550,000. In addition,
the Company would need to begin repaying $50,000, in repayment of
$1,500,000, each month, beginning on September 15, 2020 (if the
Company is not in default it may request an additional four-month
forbearance on that repayment).
The
convertible note required monthly interest payments at a rate of
17% per year and was due on February 12, 2018. Subject to resale
restrictions and the availability of sufficient authorized but
unissued shares of the Company’s common stock, the note is
convertible at a conversion price equal to 70% of the average
closing price per share for the five trading days prior to
issuance. In an event of default the note will accrue interest at a
rate of 22%. Upon the occurrence of an event of default, the holder
may require the Company to redeem the convertible note at 120% of
the outstanding principal balance, but as of June 30, 2020 and
December 31, 2019, had not done so. The note is secured by a lien
on substantially all of the Company’s assets.
In
connection with the transaction, on February 12, 2016, the Company
and GPB entered into a four-year consulting agreement, pursuant to
which the investor will provide management consulting services to
the Company in exchange for a royalty payment, payable quarterly,
equal to 3.85% of the Company’s revenues from the sale of
products. As of June 30, 2020, and December 31, 2019, GPB had
earned approximately $32,000 and $31,000 in royalties that are
unpaid, respectively.
As
of June 30, 2020, the balance due on the convertible debt was
$1,828,062, consisting of principal of $1,479,093 and a prepayment
penalty of $347,026 and compared to December 31, 2019, where the
balance due on the convertible debt was $2,177,030 consisting of
principal of $1,830,000 and a prepayment penalty of $347,030.
Interest accrued on the note total $1,148,709 and $1,175,925 at
June 30, 2020 and December 31, 2019, respectively, and is included
in accrued expenses on the accompanying consolidated balance
sheet.
The
Company used a placement agent in connection with the transaction.
For its services, the placement agent received a cash placement fee
equal to 4% of the aggregate gross proceeds from the transaction
and a warrant to purchase shares of common stock equal to an
aggregate of 6% of the total number of shares underlying the
securities sold in the transaction, at an exercise price equal to,
and terms otherwise identical to, the warrant issued to the
investor. Finally, the Company agreed to reimburse the placement
agent for its reasonable out-of-pocket expenses.
Troubled Debt Restructuring
The
debt restructured for Convertible Debt, which closed on January 15,
2020, the Company restructured several re-payment plans as
described above and in addition cancelled warrants and issued new
warrants as part of the restructure. This debt restructure met the
criteria for troubled debt. The basic criteria are that the
borrower is troubled, i.e., they are having financial difficulties,
and a concession is granted by the creditor. Due to the Company
being in default on several of its loans the debt is considered
troubled debt. See Note 8: Notes Payable, for total gain or loss
recorded in the period. The troubled debt restructuring for
Convertible Debt, based on the reduction in warrants outstanding
would have an effect on the Company’s diluted earnings per
share calculation for June 30, 2020, but not on the basic earnings
per share calculation. The earnings per share value would have
adjusted from 0.041 to 0.029 for the three months ended March 31,
2020. However, for the six months ended June 30, 2020 the basic and
diluted earnings per share would have remained the same as the
Company had a loss.
Secured Promissory Note.
Effective
September 10, 2014, the Company sold a secured promissory note to
an accredited investor, GHS Investments, LLC (“GHS”),
with an initial principal amount of $1,275,000, for a purchase
price of $570,000 (less an original issue discount of $560,000 and
debt issuance costs of $145,000). The note is secured by the
Company’s current and future accounts receivable and
inventory and accrued interest at a rate of 18% per year. The note
has subsequently been assigned to different credited investors and
the terms of the note were amended extend the maturity until August
31, 2016. The balance of this note was reduced by a transfer of
$306,863 as part of a debt restructuring that occurred on December
7, 2016 (see – “Senior Secured Promissory Note”).
The holder may convert the outstanding balance into shares of
common stock at a conversion price per share equal to 75% of the
lowest daily volume average price of common stock during the five
days prior to conversion. The balance due on the note was $91,596
and $148,223 at June 30, 2020 and December 31, 2019,
respectively.
Other
Convertible Debt in Default
GHS
Effective May 19,
2017, the Company entered into a securities purchase agreement with
GHS for the purchase of a $66,000 convertible promissory note for
the purchase of $60,000 in net proceeds (representing a 10%
original issue discount of $6,000). The accrued interest rate of 8%
per year until it matured in December 31, 2017. Beginning February
2018, the note is convertible, in whole or in part, at the
holder’s option, into shares of the Company’s stock at
a conversion price equal to 60% of the lowest trading price during
the 25 trading days prior to conversion. Upon the occurrence of an
event of default, the note will bear interest at a rate of 20% per
year and the holder of the note may require the Company to redeem
or convert the note at 150% of the outstanding principal balance.
At June 30, 2020 and December 31, 2019, the balance due on this
note was $83,094, including a default penalty of $37,926 and
accrued interest of $19,956, and $83,094 including a default
penalty of $37,926 and accrued interest of $16,641, respectively.
GHS converted $12,700 of principal and accrued interest during the
year ended December 31, 2019.
Effective May 17,
2018, the Company entered into a securities purchase agreement with
GHS for the purchase of a convertible promissory note with a
principal of $9,250 for a purchase price of $7,500 (representing an
original issue discount of $750 and debt issuance costs of $1,000).
The note accrued interest at a rate of 8% per year until its
matured June 17, 2019. Beginning February 2018, the note is
convertible, in whole or in part, at the holder's option, into
shares of the Company's stock at a conversion price equal to 70% of
the lowest trading price during the 25 trading days prior to
conversion (if the note cannot be converted due to Depository Trust
Company freeze then rate decreases to 60%). Upon the occurrence of
an event of default, the note will bear interest at a rate of 20%
per year and the holder of the note may require the Company to
redeem or convert the note at 150% of the outstanding principal
balance. At June 30, 2020 and December 31, 2019, the balance due on
this note was $14,187, including a default penalty of $4,937.
Interest accrued on the note totals $4,420 and $3,972 at June 30,
2020 and December 31, 2019, respectively, and is included in
accrued expenses on the accompanying consolidated balance
sheet.
Effective June 22,
2018, the Company entered into a securities purchase agreement with
GHS for the purchase of a $68,000 convertible promissory note for a
purchase price of $60,000 (representing an original issue discount
of $6,000 and debt issuance costs of $2,000). At issuance, the
Company recorded a $29,143 beneficial conversion feature, which was
fully amortized at December 31, 2019. The accrued interest at a
rate of 10% per year until it matured on June 22, 2019. Beginning
May 2019, the note is convertible, in whole or in part, at the
holder's option, into shares of the Company's stock at a conversion
price equal to 70% of the lowest trading price during the 25
trading days prior to conversion (if the note cannot be converted
due to Depository Trust Company freeze then rate decreases to 60%).
Upon the occurrence of an event of default, the note will bear
interest at a rate of 20% per year and the holder of the note may
require the Company to redeem or convert the note at 150% of the
outstanding principal balance. At June 30, 2020 and December 31,
2019, the balance due on this note was $103,285, including a
default penalty of $35,285. Interest accrued on the note totals
$34,437 and $29,287 at June 30, 2020 and December 31, 2019,
respectively, and is included in accrued expenses on the
accompanying consolidated balance sheet.
Auctus
On May
22, 2020, the Company entered into an exchange agreement with
Auctus. Based on this agreement the Company exchanged three
outstanding notes, in the amounts of $150,000, $89,250, and $65,000
for a total amount $328,422 of debt outstanding, as well as any
accrued interest and default penalty, for: $160,000 in cash
payments (payable in monthly payments of $20,000), converted a
portion of the notes pursuant to original terms of the notes into
500,000 restricted common stock shares (shares were issued on June
3, 2020); and 700,000 warrants issued to purchase common stock
shares at a strike price of $0.15. The fair value of the common
stock shares was $250,000 (based on a $0.50 fair value for the
Company’s stock) and of the warrants to purchase common stock
shares was $196,818 (based on a $0.281 black scholes fair
valuation). As of June 30, 2020, a balance of $140,000 remained to
be paid for these exchanged loans.
Auctus notes exchanged in the May 22, 2020 transaction
Effective March 20,
2018, the Company entered into a securities purchase with Auctus
Fund, LLC ("Auctus") for the issuance of a $150,000 convertible
promissory note and warrants exercisable for 4,262 shares of the
Company's common stock. At issuance, the Company recorded a $97,685
beneficial conversion feature, which was fully amortized at
December 31, 2018. The warrants are exercisable at any time, at an
exercise price equal to $0.04 per share, subject to certain
customary adjustments and price-protection provisions contained in
the warrant. The warrants have a five-year term. The note accrued
interest at a rate of 12% per year until it matured in December
2018. Beginning December 2018, the note is convertible, in whole or
in part, at the holder's option, into shares of the Company's stock
at a conversion price equal to 60% of the lowest trading price
during the 20 trading days prior to conversion. Upon the occurrence
of an event of default, the note will bear interest at a rate of
24% per year and the holder of the note may require the Company to
redeem or convert the note at 150% of the outstanding principal
balance. At June 30, 2020, the balance due on this note was
$140,000. On May 22, 2020, the default penalty and outstanding
interest was exchanged as described in the preceding paragraph. At
December 31, 2019, the balance due on this total was $192,267,
including a default penalty of $70,931, respectively. Interest
accrued on the note totals $45,629 at December 31, 2019,
respectively, and is included in accrued expenses on the
accompanying consolidated balance sheet. Auctus converted nil and
$14,236 of principal and accrued interested during the six months
and year ended June 30, 2020 and December 31, 2019, respectively.
At June 30, 2020, the balance due on this note was
$140,000.
Effective July 3,
2018, the Company entered into a securities purchase with Auctus
for the issuance of a $89,250 convertible promissory note. At
issuance, the Company recorded a $59,000 beneficial conversion
feature, which was fully amortized at December 31, 2019. The note
accrued interest at a rate of 12% per year until it matured in
April 2019. Beginning April 2019, the note is convertible, in whole
or in part, at the holder's option, into shares of the Company's
stock at a conversion price equal to 60% of the lowest trading
price during the 20 trading days prior to conversion. Upon the
occurrence of an event of default, the note will bear interest at a
rate of 24% per year and the holder of the note may require the
Company to redeem or convert the note at 150% of the outstanding
principal balance. At December 31, 2019, the balance due on this
total was $90,641, including a default penalty of $56,852,
respectively. Interest accrued on the note totals $16,436 at
December 31, 2019, respectively, and is included in accrued
expenses on the accompanying consolidated balance sheet. At June
30, 2020, the balance due on this note was nil.
Effective March 29,
2019, the Company entered into a securities purchase with Auctus
for the issuance of a $65,000 convertible promissory note. At
issuance, the Company recorded a $65,000 beneficial conversion
feature, which was fully amortized at December 31, 2019. The note
accrued interest at a rate of 12% until it matured in December
2019. Beginning December 2019, the note is convertible, in whole or
in part, at the holder's option, into shares of the Company's stock
at a conversion price equal to 50% of the lowest trading price
during the 25 trading days prior to conversion. Upon the occurrence
of an event of default, the note will bear interest at a rate of
24% per year and the holder of the note may require the Company to
redeem or convert the note at 150% of the outstanding principal
balance. At December 31, 2019, the balance due on this total was
$106,210, including a default penalty of $41,210, respectively.
Interest accrued on the note totaled $142 at December 31, 2019 and
is included in accrued expenses on the accompanying consolidated
balance sheet. At June 30, 2020, the balance due on this note was
nil.
The
following table summarizes the Convertible notes (including debt in
default):
|
|
|
|
|
|
|
GPB
|
|
$1,828
|
|
$2,177
|
|
GHS
|
$92
|
|
$149
|
|
|
|
83
|
|
83
|
|
|
|
14
|
|
14
|
|
|
|
103
|
292
|
103
|
349
|
|
Auctus
|
$140
|
|
$192
|
|
|
|
-
|
|
91
|
|
|
|
-
|
140
|
106
|
389
|
Convertible
notes (including debt in default)
|
$2,260
|
|
$2,915
|
The
convertible notes payable in default was $432,000 of the $2,260,000
balance at June 30, 2020 and the total balance of $2,915,000 at
December 31, 2019.
Troubled Debt Restructuring
The
debt restructured for Convertible Debt in default from Auctus,
which closed on May 22, 2020, the Company restructured several
re-payment plans as described above and in addition cancelled
warrants and issued new warrants as part of the restructure. This
debt restructure met the criteria for troubled debt. The basic
criteria are that the borrower is troubled, i.e., they are having
financial difficulties, and a concession is granted by the
creditor. Due to the Company being in default on several of its
loans the debt is considered troubled debt. The troubled debt
restructuring for Convertible Debt in default from Auctus, had an
immaterial effect on the Company’s basic or diluted earnings
per share calculation for June 30, 2020 and 2019.
11.
LONG-TERM DEBT
Long-term
Debt – Related Parties
On July
24, 2019, Dr. Faupel and Mr. Cartwright agreed to an addendum to
the debt restructuring exchange agreement and to modify the terms
of the original exchange agreement. Under this modification Dr.
Faupel and Mr. Cartwright agreed to extend the note to be due in
full on the third anniversary of that agreement. The modification
also included simple interest at a 6% rate, with the principal and
accrued interest due in total at the date of maturity or September
4, 2021.
During
the quarter ended September 30, 2018, the Company entered into an
exchange agreement dated July 14, 2018, Dr Faupel, agreed to
exchange outstanding amounts due to him for loans, interest, bonus,
salary and vacation pay in the amount of $661,000 for a $207,000
promissory note dated September 4, 2018. As a result of the
exchange agreement, the Company recorded a gain for extinguishment
of debt of $199,000 and a capital contribution of $235,000 during
the year ended December 31, 2018. The resulting difference of
$20,000 was recorded to accrued interest. In the July 20, 2018
exchange agreement, Dr, Cartwright, agreed to exchange outstanding
amounts due to him for loans, interest, bonus, salary and vacation
pay in the amount of $1,621,000 for a $319,000 promissory note
dated September 4, 2018. As a result of the exchange agreement, the
Company recorded a gain for extinguishment of debt of $840,000 and
a capital contribution of $432,000 during the year ended December
31, 2018. The resulting difference of $30,000 was recorded to
accrued interest and elimination of debt.
Troubled Debt Restructuring
The
debt extinguished for Mr. Cartwright and Mr. Faupel meet the
criteria for troubled debt. The basic criteria are that the
borrower is troubled, i.e., they are having financial difficulties,
and a concession is granted by the creditor. Due to the Company
being in default on several of its loans the debt is considered
troubled debt. The troubled debt restructuring for Long-term Debt
– Related Parties, had an immaterial effect on the
Company’s basic or diluted earnings per share calculation for
June 30, 2020 and 2019 as the gain was recorded in
2018.
The
table below summarizes the detail of the exchange
agreement:
For Dr.
Faupel:
|
Salary
|
$134
|
|
Bonus
|
20
|
|
Vacation
|
95
|
|
Interest on
compensation
|
67
|
|
Loans to
Company
|
196
|
|
Interest on
loans
|
149
|
|
Total
outstanding prior to exchange
|
$661
|
|
Amount forgiven
during the quarter ended September 30, 2018
|
(454)
|
|
Promissory
note dated September 4, 2018
|
$207
|
|
Interest
accrued through December 31, 2019
|
17
|
|
Balance
outstanding at December 31, 2019
|
$224
|
|
Interest
accrued through June 30, 2020
|
6
|
|
Balance
outstanding at June 30, 2020
|
$230
|
For Dr.
Cartwright:
|
Salary
|
$337
|
|
Bonus
|
675
|
|
Interest on
compensation
|
59
|
|
Loans to
Company
|
528
|
|
Interest on
loans
|
22
|
|
Total
outstanding prior to exchange
|
$1,621
|
|
Amount
forgiven during the quarter ended September 30, 2018
|
(1,302)
|
|
Promissory
note dated September 4, 2018
|
$319
|
|
Interest
accrued through December 31, 2019
|
26
|
|
Balance
outstanding at December 31, 2019
|
$345
|
|
Interest
accrued through June 30, 2020
|
9
|
|
Balance
outstanding at June 30, 2020
|
$354
|
Future
debt obligations at June 30, 2020 for Long-term Debt –
Related Parties are as follows (in thousands):
|
Year
|
|
|
2020
|
-
|
|
2021
|
-
|
|
2022
|
200
|
|
2023
|
200
|
|
2024
|
184
|
|
Totals
|
584
|
Long-term
Convertible Notes Payable, net
On
December 17, 2019, the Company entered into a securities purchase
agreement and convertible note with Auctus. The convertible note
issued to Auctus will be for a total of $2.4 million. The first
tranche of $700,000 was received in December 2019 and matures
December 17, 2021 and accrues interest at a rate of ten percent
(10%). The note may not be prepaid in whole or in part except as
otherwise explicitly allowed. Any amount of principal or interest
on the note which is not paid when due shall bear interest at the
rate of the lessor of 24% or the maximum permitted by law (the
“default interest”). The variable conversion prices
shall equal the lesser of: (i) the lowest trading price on the
issue date, and (ii) the variable conversion price. The variable
conversion price shall mean 95% multiplied by the market price (the
market price means the average of the five lowest trading prices
during the period beginning on the issue date and ending on the
maturity date), minus $0.04 per share, provided however that in no
event shall the variable conversion price be less than $0.15. If an
event of default under this note occurs and/or the note is not
extinguished in its entirety prior to December 17, 2020 the $0.15
price shall no longer apply. In connection with the first tranche
of $700,000, the Company issued to 7,500,000 warrants to purchase
common stock at an exercise price of $0.20. The fair value of the
warrants at the date of issuance was $745,972 and was $635,000
allocated to the warrant liability and a loss of $110,972 was
recorded at the date of issuance for the amount of the fair value
in excess of the net proceeds received of $635,000. The $700,000
proceeds were received net of debt issuance costs of $65,000 (net
proceeds of $635,000, after administrative and legal expenses
Company received $570,000). The Company used $65,000 of the
proceeds to make a partial payment of the $89,250 convertible
promissory note issued on July 3, 2018 to Auctus. On May 27, 2020,
the second tranche of $400,000 was received. The last tranche of
$1.3 million will be received within 60 days of the S-1
registration statement becoming effective. The conversion price of
the notes will be at market value with a minimum conversion amount
of $0.15. The last two tranches will have warrants attached. As of
June 30, 2020, and December 31, 2019, $700,000 remained outstanding
and accrued interest of $38,111 and $2,722, respectively. Further,
as of June 30, 2020, and December 31, 2019, the Company had
unamortized debt issuance costs of $47,396 and $64,000,
respectively and an unamortized debt discount on warrants of
$463,020, and $622,000, respectively and providing a net balance of
$190,000 and $15,000, respectively.
On May
27, 2020, the Company received the second tranche in the amount of
$400,000, from the December 17, 2019, securities purchase agreement
and convertible note with Auctus. The net amount paid to the
Company was $313,000 This second tranche is part of the convertible
note issued to Auctus for a total of $2.4 million of which $700,000
has already been provided by Auctus. The notes maturity date is
December 17, 2021 and an interest rate of ten percent (10%). The
note may not be prepaid in whole or in part except as otherwise
explicitly allowed. Any amount of principal or interest on the note
which is not paid when due shall bear interest at the rate of the
lessor of 24% or the maximum permitted by law (the “default
interest”). The variable conversion prices shall equal the
lesser of: (i) the lowest trading price on the issue date, and (ii)
the variable conversion price. The variable conversion price shall
mean 95% multiplied by the market price (the market price means the
average of the five lowest trading prices during the period
beginning on the issue date and ending on the maturity date), minus
$0.04 per share, provided however that in no event shall the
variable conversion price be less than $0.15. If an event of
default under this note occurs and/or the note is not extinguished
in its entirety prior to December 17, 2020 the $0.15 price shall no
longer apply. The last tranche of $1.3 million will be received
within 60 days of the S-1 registration statement becoming
effective. The conversion price of the notes will be at market
value with a minimum conversion amount of $0.15. In addition, as
part of this transaction the Company was required to pay a 2.0% fee
to a registered broker-dealer. As of June 30, 2020, $400,000
remained outstanding and accrued interest of $3,778. Further, as of
June 30, 2020, the Company had unamortized debt issuance costs of
$63,836, providing a net balance of $336,164.
In
addition, the Company determined that the conversion option needed
to be bifurcated from the debt arrangement and will be valued at
fair value each reporting period. The initial value at the date of
issuance deemed to be $0 due to the presence of the $0.15 floor
price.
Future
debt obligations at June 30, 2020 for Long-term Convertible Notes
Payable, net are as follows (in thousands):
|
Year
|
|
|
2020
|
-
|
|
2021
|
1,100
|
|
2022
|
-
|
|
2023
|
-
|
|
2024
|
-
|
|
Totals
|
1,100
|
Long-term
debt
On May
4, 2020, the Company received a loan from the Small Business
Administration (SBA) pursuant to the Paycheck Protection Program
(PPP) as part of the Coronavirus Aid, Relief, and Economic Security
Act (CARES Act) in the amount of $50,184. The loan bears interest
at a rate of 1.00%, and matures in 24 months, with the principal
and interest payments being deferred until the date of forgiveness
with interest accruing, then converting to monthly principal and
interest payments, at the interest rate provided herein, for the
remaining eighteen (18) months. Lender will apply each payment
first to pay interest accrued to the day Lender received the
payment, then to bring principal current, and will apply any
remaining balance to reduce principal. Payments must be made on the
same day as the date of this Note in the months they are due.
Lender shall adjust payments at least annually as needed to
amortize principal over the remaining term of the Note. Under the
provisions of the PPP, the loan amounts will be forgiven as long
as: the loan proceeds are used to cover payroll costs, and most
mortgage interest, rent, and utility costs over a 24 week period
after the loan is made; and employee and compensation levels are
maintained. In addition, payroll costs are capped at $100,000 on an
annualized basis for each employee. Not more than 40% of the
forgiven amount may be for non-payroll costs. As of June 30, 2020,
the outstanding balance was $50,226 including $41 in accrued
interest.
12.
INCOME (LOSS) PER COMMON SHARE
Basic
net income (loss) per share attributable to common stockholders,
amounts are computed by dividing the net income (loss) plus
preferred stock dividends and deemed dividends on preferred stock
by the weighted average number of shares outstanding during the
year.
Diluted
net income (loss) per share attributable to common stockholders
amounts are computed by dividing the net income (loss) plus
preferred stock dividends, deemed dividends on preferred stock,
after-tax interest on convertible debt and convertible dividends by
the weighted average number of shares outstanding during the year,
plus Series C and Series D convertible preferred stock, convertible
debt, convertible preferred dividends and warrants convertible into
common stock shares.
The
following table sets forth pertinent data relating to the
computation of basic and diluted net loss per share attributable to
common shareholders.
|
In thousands
|
Six months ended June 30,
|
|
|
|
|
|
|
|
|
|
Net loss
|
$(4,049)
|
$(2,878)
|
|
Basic weighted average number of shares outstanding
|
8,463
|
3,319
|
|
Net income loss per share (basic)
|
$(0.48)
|
$(0.87)
|
|
Diluted weighted average number of shares outstanding
|
8,463
|
3,319
|
|
Net income (loss) per share (diluted)
|
$(0.48)
|
$(0.87)
|
|
|
|
|
|
Dilutive equity instruments (number of equivalent
units):
|
|
|
|
Stock options
|
-
|
-
|
|
Preferred stock
|
-
|
-
|
|
Convertible debt
|
31,228
|
38,786
|
|
Warrants
|
5,341
|
30,235
|
|
Total Dilutive instruments
|
36,569
|
69,021
|
13.
SUBSEQUENT EVENTS
During
July 2020, the Company received equity investments in the amount of
$773,000. These investors will receive 773 Series E Preferred Stock
(each Series E Preferred Stock share converts into 4,000 shares of
the Company’s common stock shares). The Series E Preferred
Stock will have cumulative dividends at the rate per share of 6%
per annum. The stated value of the Series E Preferred Stock is
$1,000.
During
July and August 2020, GHS converted outstanding debt in the amount
of $50,454 for 175,000 common stock shares.
On July
14, 2020, the Company granted stock options to employees and
consultants. The new Stock Plan (the “Plan”) allows for
the issuance of incentive stock options, nonqualified stock
options, and stock purchase rights. The exercise price of options
was determined by the Company’s board of directors, but
incentive stock options were granted at an exercise price equal to
the fair market value of the Company’s common stock as of the
grant date. Options historically granted have generally become
exercisable over four years and expire ten years from the date of
grant.
Stock
options granted have a 10-year life and expire 90 days after
employment of consulting engagement terminates. Vesting schedule
varies per grantee. Generally stock options granted vest as
follows: 25% vest immediately, and the remaining stock options vest
over 33 months, beginning three months after grant.
The
following lists the stock options granted:
|
|
|
|
|
Number of Stock
Options Granted
|
|
|
|
|
|
|
|
|
|
|
|
Cartwright,
Gene
|
07/14/2020
|
07/12/2030
|
Immediate
|
400,000
|
$0.49
|
$0.483
|
|
Faupel,
Mark
|
07/14/2020
|
07/12/2030
|
Immediate
|
400,000
|
$0.49
|
$0.483
|
|
Imhoff,
John
|
07/14/2020
|
07/12/2030
|
36
months
|
50,000
|
$0.49
|
$0.483
|
|
James,
Michael
|
07/14/2020
|
07/12/2030
|
36
months
|
50,000
|
$0.49
|
$0.483
|
|
Clavijo,
James
|
07/14/2020
|
07/12/2030
|
36
months
|
300,000
|
$0.49
|
$0.483
|
|
Battle,
Lisa
|
07/14/2020
|
07/12/2030
|
36
months
|
178,000
|
$0.49
|
$0.483
|
|
Sufka,
Melissa
|
07/14/2020
|
07/12/2030
|
36
months
|
178,000
|
$0.49
|
$0.483
|
|
Waterstreet,
Alesandra
|
07/14/2020
|
07/12/2030
|
36
months
|
178,000
|
$0.49
|
$0.483
|
|
Sufka,
Melissa
|
07/14/2020
|
07/12/2030
|
18
months
|
66,000
|
$0.49
|
$0.483
|
|
|
1,800,000
|
|
|
During
August 2020, the Company issued 106,560 common stock shares for the
payment of Series D Preferred Stock dividends accrued.
