Item
1. Financial Statements.
Advanced
Medical Isotope Corporation
Condensed
Balance Sheets
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
369,449
|
|
|
$
|
27,889
|
|
Prepaid
expenses
|
|
|
6,823
|
|
|
|
11,990
|
|
Total
current assets
|
|
|
376,272
|
|
|
|
39,879
|
|
|
|
|
|
|
|
|
|
|
Fixed assets,
net of accumulated depreciation
|
|
|
-
|
|
|
|
1,473
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
669
|
|
|
|
644
|
|
Total
other assets
|
|
|
669
|
|
|
|
644
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
376,941
|
|
|
$
|
41,996
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued expenses
|
|
$
|
860,189
|
|
|
$
|
1,137,086
|
|
Related party
accounts payable
|
|
|
105,043
|
|
|
|
109,718
|
|
Accrued interest
payable
|
|
|
311,829
|
|
|
|
114,755
|
|
Payroll liabilities
payable
|
|
|
373,197
|
|
|
|
499,502
|
|
Convertible notes
payable, net
|
|
|
1,477,099
|
|
|
|
544,508
|
|
Derivative liability
|
|
|
9
|
|
|
|
324,532
|
|
Related
party promissory note
|
|
|
383,771
|
|
|
|
332,195
|
|
Total
current liabilities
|
|
|
3,511,137
|
|
|
|
3,062,296
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
3,511,137
|
|
|
|
3,062,296
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Mezzanine Equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $.001 par value, 20,000,000 shares authorized Series A preferred stock, $.001 par value, 5,000,000 shares authorized;
3,287,582 and 3,773,592 shares issued and outstanding, respectively
|
|
|
12,007,059
|
|
|
|
14,144,571
|
|
Total
mezzanine equity
|
|
|
12,007,059
|
|
|
|
14,144,571
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
(deficit):
|
|
|
|
|
|
|
|
|
Common stock,
$.001 par value; 2,000,000,000 shares authorized; 50,119,710 and 31,743,797 shares issued and outstanding, respectively
|
|
|
50,120
|
|
|
|
31,744
|
|
Paid in capital
|
|
|
44,613,625
|
|
|
|
40,672,825
|
|
Accumulated
deficit
|
|
|
(59,805,000
|
)
|
|
|
(57,869,440
|
)
|
Total
stockholders’ equity (deficit)
|
|
|
(15,141,255
|
)
|
|
|
(17,164,871
|
)
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity (deficit)
|
|
$
|
376,941
|
|
|
$
|
41,996
|
|
The
accompanying notes are an integral part of these condensed financial statements.
Advanced
Medical Isotope Corporation
Condensed
Statements of Operations
(unaudited)
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
4,054
|
|
|
$
|
4,054
|
|
|
$
|
8,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
expenses
|
|
|
15,251
|
|
|
|
135,708
|
|
|
|
41,249
|
|
|
|
147,544
|
|
Depreciation
and amortization
|
|
|
733
|
|
|
|
737
|
|
|
|
1,473
|
|
|
|
1,475
|
|
Professional
fees
|
|
|
295,544
|
|
|
|
1,631,616
|
|
|
|
430,148
|
|
|
|
1,702,585
|
|
Stock options
granted
|
|
|
27,059
|
|
|
|
584,916
|
|
|
|
55,299
|
|
|
|
584,916
|
|
Payroll expenses
|
|
|
181,494
|
|
|
|
166,577
|
|
|
|
286,275
|
|
|
|
331,577
|
|
General
and administrative expenses
|
|
|
99,090
|
|
|
|
703,350
|
|
|
|
173,496
|
|
|
|
1,141,392
|
|
Total
operating expenses
|
|
|
619,171
|
|
|
|
3,222,904
|
|
|
|
987,940
|
|
|
|
3,909,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(619,171
|
)
|
|
|
(3,218,850
|
)
|
|
|
(983,886
|
)
|
|
|
(3,901,381
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(781,139
|
)
|
|
|
(400,524
|
)
|
|
|
(1,309,090
|
)
|
|
|
(449,733
|
)
|
Net gain on sale
of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
2,800
|
|
|
|
-
|
|
Net gain (loss)
on settlement of debt
|
|
|
-
|
|
|
|
(1,832,468
|
)
|
|
|
-
|
|
|
|
(1,766,631
|
)
|
Net gain (loss)
on debt extinguishment
|
|
|
(201,574
|
)
|
|
|
-
|
|
|
|
(53,863
|
)
|
|
|
-
|
|
Gain
(loss) on derivative liability
|
|
|
83,089
|
|
|
|
1,268,958
|
|
|
|
408,479
|
|
|
|
(3,871,040
|
)
|
Non-operating
income (expense), net
|
|
|
(899,624
|
)
|
|
|
(964,034
|
)
|
|
|
(951,674
|
)
|
|
|
(6,087,404
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Income Taxes
|
|
|
(1,518,795
|
)
|
|
|
(4,182,884
|
)
|
|
|
(1,935,560
|
)
|
|
|
(9,988,785
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax
Provision
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
|
$
|
(1,518,795
|
)
|
|
$
|
(4,182,884
|
)
|
|
$
|
(1,935,560
|
)
|
|
$
|
(9,988,785
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Income (Loss) per
Common Share
|
|
$
|
(0.0327
|
)
|
|
$
|
(0.0021
|
)
|
|
$
|
(0.0457
|
)
|
|
$
|
(0.0050
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
46,454,069
|
|
|
|
19,992,576
|
|
|
|
42,375,108
|
|
|
|
19,980,959
|
|
The
accompanying notes are an integral part of these condensed financial statements.
Advanced
Medical Isotope Corporation
Condensed
Statements of Cash Flow
(Unaudited)
|
|
Six
months ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
CASH FLOW FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(1,935,560
|
)
|
|
$
|
(9,988,785
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income
(loss) to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
of fixed assets
|
|
|
1,473
|
|
|
|
1,475
|
|
Amortization
of licenses and intangible assets
|
|
|
|
|
|
|
-
|
|
Amortization
of convertible debt discount
|
|
|
957,499
|
|
|
|
379,290
|
|
Gain on sale
of assets
|
|
|
(2,800
|
)
|
|
|
-
|
|
Preferred stock
issued for loan fees
|
|
|
-
|
|
|
|
596,496
|
|
Common stock
issued for services
|
|
|
171,090
|
|
|
|
-
|
|
Preferred stock
for services
|
|
|
-
|
|
|
|
357,403
|
|
Preferred stock
for wages
|
|
|
-
|
|
|
|
64,982
|
|
Stock options
for services
|
|
|
55,299
|
|
|
|
584,916
|
|
Warrants issued
for services
|
|
|
-
|
|
|
|
1,069,353
|
|
(Gain) loss on
derivative liability
|
|
|
(408,479
|
)
|
|
|
3,871,040
|
|
(Gain) loss on
settlement of debt
|
|
|
53,863
|
|
|
|
1,766,631
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
5,142
|
|
|
|
(3,286
|
)
|
Accounts payable
|
|
|
39,949
|
|
|
|
(292,802
|
)
|
Related party
accounts payable
|
|
|
(4,675
|
)
|
|
|
-
|
|
Payroll liabilities
|
|
|
(60,212
|
)
|
|
|
37,220
|
|
Accrued
interest
|
|
|
350,468
|
|
|
|
70,443
|
|
Net
cash used by operating activities
|
|
|
(776,944
|
)
|
|
|
(1,485,624
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Sale
of fixed assets
|
|
|
2,800
|
|
|
|
-
|
|
Net cash from
vesting activities
|
|
|
2,800
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payments made for loan fees
|
|
|
(101,631
|
)
|
|
|
-
|
|
Proceeds from shareholder advances
|
|
|
137,000
|
|
|
|
-
|
|
Proceeds from exercise of warrants
|
|
|
|
|
|
|
250
|
|
Payments on convertible debt
|
|
|
-
|
|
|
|
(10,000
|
)
|
Proceeds from
convertible debt
|
|
|
1,080,334
|
|
|
|
1,316,525
|
|
Net cash provided
by financing activities
|
|
|
1,115,703
|
|
|
|
1,306,775
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash
|
|
|
341,560
|
|
|
|
(178,849
|
)
|
Cash,
beginning of period
|
|
|
27,889
|
|
|
|
179,032
|
|
|
|
|
|
|
|
|
|
|
CASH,
END OF PERIOD
|
|
$
|
369,449
|
|
|
$
|
183
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash
flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these condensed financial statements.
Advanced
Medical Isotope Corporation
Notes
to Condensed Financial Statements
(Unaudited)
NOTE
1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The
accompanying condensed financial statements of Advanced Medical Isotope Corporation (the “
Company
”) have been
prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and
disclosures required by accounting principles generally accepted in the United States have been condensed or omitted pursuant
to such rules and regulations. These condensed financial statements reflect all adjustments that, in the opinion of management,
are necessary to present fairly the results of operations of the Company for the period presented. The results of operations for
the six months ended June 30, 2017, are not necessarily indicative of the results that may be expected for any future period or
the fiscal year ending December 31, 2017 and should be read in conjunction with the Company’s form 10-K for the year ended
December 31, 2016, filed with the Securities and Exchange Commission on March 9, 2017.
In
April of 2017, the Company filed a Certificate of Merger with the Delaware Division of Corporations in order to merge the Company’s
wholly-owned subsidiary, IsoPet Solutions Corporation, with and into the Company. The Company therefore no longer prepares Consolidated
Financial Statements.
Use
of Estimates
The
preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Fair
Value of Financial Instruments
Fair
value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet,
where it is practicable to estimate that value. As of June 30, 2017 and December 31, 2016, the balances reported for cash, prepaid
expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The Financial Accounting Standards Board (“
FASB
”) issued
Accounting Standards Update (“
ASU
”) Topic 820, “
Fair Value Measurements
,” established a
three-tier fair value hierarchy to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority
to unobservable inputs (level 3 measurements). These tiers include:
Level
1, defined as observable inputs such as quoted prices for identical instruments in active markets;
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not
active; and
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are
unobservable.
The
Company measures certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value
on a recurring basis were calculated using the Black-Scholes pricing model and are as follows at June 30, 2017 and December 31,
2016:
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability
|
|
$
|
9
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9
|
|
Total Liabilities Measured at Fair Value
|
|
$
|
9
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability
|
|
$
|
324,532
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
324,532
|
|
Total Liabilities Measured at Fair Value
|
|
$
|
324,532
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
324,532
|
|
Recent
Accounting Pronouncements
There
are no recently issued accounting pronouncements that the Company believes are applicable or would have a material impact on the
financial statements of the Company.
NOTE
2: GOING CONCERN
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has
suffered recurring losses and has used significant cash in support of its operating activities and the Company’s cash position
is not sufficient to support the Company’s operations. Historically, the Company has relied upon outside investor funds
to maintain the Company’s operations and develop the Company’s business. The Company anticipates it will continue
to require funding from investors for working capital, as well as business expansion during this fiscal year and it can provide
no assurance that additional investor funds will be available on acceptable terms. These factors, among others, indicate that
there is substantial doubt regarding the Company’s ability to continue as a going concern within one year of the date these
financial statements are issued. In addition, the Company’s ability to continue as a going concern must be considered in
light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive
environment in which it operates.
The
Company anticipates a requirement of $1.5 million in funds over the next twelve months to maintain current operating activities.
The Company may also require up to approximately $4.6 million to retire outstanding debt and past due payables. As of June 30,
2017 the Company had convertible promissory notes in the aggregate principal amount of $3,254,130 outstanding (the “
Outstanding
Notes
”), of which approximately $45,000 are currently past due and payable.
Over
the next 12 to 24 months, the Company believes it will cost approximately $5 million to $10 million to fund: (1) the Food and
Drug Administration (“
FDA
”) approval process and initial deployment of the brachytherapy products and (2) initiate
regulatory approval processes outside of the United States. The continued deployment of the brachytherapy products and a worldwide
regulatory approval effort will require additional resources and personnel. The principal variables in the timing and amount of
spending for the brachytherapy products in the next 12 to 24 months will be the FDA’s classification of the Company’s
brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies which may possibly
include clinical studies. Thereafter, the principal variables in the amount of the Company’s spending and its financing
requirements are the timing of any approvals and the nature of the Company’s arrangements with third parties for manufacturing,
sales, distribution and licensing of those products and the products’ success in the U.S. and elsewhere. The Company intends
to fund its activities through strategic transactions such as licensing and partnership agreements and/or additional capital raises.
As
of June 30, 2017, the Company has $369,449 cash on hand. There are currently commitments to vendors for products and services
purchased, accrued compensation expenses and the Company’s current lease commitments that, in the absence of additional
capital, would result in a liquidation of the Company. The current level of cash is not sufficient to cover the fixed and variable
obligations of the Company.
Assuming
the Company is successful in the its sales/development effort, the Company believes that it will be able to raise additional funds
through strategic agreements or the sale of the Company’s securities to either current stockholders or new investors. However,
there is no guarantee that the Company will be able to raise additional funds or to do so at an advantageous price.
The
financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern
is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain
profitability. The Company plans to seek additional funding to maintain its operations through debt and equity financing and to
improve operating performance through a focus on strategic products and increased efficiencies in business processes and improvements
to the cost structure. There is no assurance that the Company will be successful in its efforts to raise additional working capital
or achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
NOTE
3: FIXED ASSETS
Fixed
assets consist of the following at June 30, 2017 and December 31, 2016:
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
Production equipment
|
|
$
|
15,182
|
|
|
$
|
1,938,532
|
|
Office equipment
|
|
|
-
|
|
|
|
32,769
|
|
|
|
|
15,182
|
|
|
|
1,971,301
|
|
Less accumulated depreciation
|
|
|
(15,182
|
)
|
|
|
(1,969,828
|
)
|
|
|
$
|
-
|
|
|
$
|
1,473
|
|
Depreciation
expense for the above fixed assets for the three months ended June 30, 2017 and 2016, respectively was $733 and $737 and for the
six months ended June 30, 2017 and 2016, respectively, was $1,473 and $1,475.
NOTE
4: INTANGIBLE ASSETS
Intangible
assets consist of the following at June 30, 2017 and December 31, 2016:
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
License
Fee
|
|
$
|
-
|
|
|
$
|
112,500
|
|
Less
accumulated amortization
|
|
|
-
|
|
|
|
(112,500
|
)
|
|
|
|
|
|
|
|
|
|
Patents
and intellectual property
|
|
|
-
|
|
|
|
-
|
|
Intangible
assets net of accumulated amortization
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company did not incur any amortization expense during the three and six months ended June 30, 2017 and 2016.
NOTE
5: RELATED PARTY TRANSACTIONS
Related
Party Convertible Notes Payable
In
March 2017, the Company combined Outstanding Notes owed to a director and major stockholder, along with $51,576 of accrued interest
payable, into one promissory note (the “
Related Party Note
”). The Related Party Note accrues interest at a
rate of 10% and will become due and payable on December 31, 2017. As of June 30, 2017 and December 31, 2016 the balance of the
Related Party Note was $383,771 and $332,195, respectively.
Rent
Expenses
The
Company was renting office space from a significant shareholder and director of the Company on a month-to-month basis with a monthly
payment of $1,500. This rental agreement was terminated as of April 1, 2017.
Rental
expense was $0 and $4,500 for each of the three months ended June 30, 2017 and 2016 and is recorded in general and administrative
expense. Rental expense was $4,500 and $9,000 for the six months ending June 30, 2017 and 2016, respectively, and is recorded
in general and administrative expense.
NOTE
6: CONVERTIBLE NOTES PAYABLE
As
of June 30, 2017 and December 31, 2016, the Company had the following convertible notes outstanding:
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
Principal
(net)
|
|
|
Accrued Interest
|
|
|
Principal
(net)
|
|
|
Accrued Interest
|
|
July and August 2012 $1,060,000 Notes convertible into common stock at $4.60 per share, 12% interest, due December 2013 and January 2014
|
|
$
|
45,000
|
|
|
$
|
26,503
|
|
|
$
|
95,000
|
|
|
|
50,365
|
|
May through October 2015 $605,000 Notes convertible into preferred stock at $1 per share, 8-10% interest, due September 30, 2015
|
|
|
-
|
|
|
|
17,341
|
|
|
|
-
|
|
|
|
17,341
|
|
October through December 2015 $613,000 Notes convertible into preferred stock at $1 per share, 8% interest, due June 30, 2016, net of debt discount of $0 and $560,913, respectively
|
|
|
-
|
|
|
|
5,953
|
|
|
|
-
|
|
|
|
5,953
|
|
January through March 2016 $345,000 Notes convertible into preferred stock at $1 per share, 8% interest, due June 30, 2016
|
|
|
-
|
|
|
|
696
|
|
|
|
-
|
|
|
|
696
|
|
November 2016 $979,162 Notes convertible into common stock at a variable conversion price, 10% interest, due May 2017, net of debt discounts of $0 and $540,720, respectively
|
|
|
-
|
|
|
|
-
|
|
|
|
438,442
|
|
|
|
12,397
|
|
January and March 2017 $335,838 Notes convertible into common stock at a variable conversion price, 10% interest, due May 2017, net of debt discounts of $0 and $0, respectively
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
May 2017 $2,378,155 Notes convertible into common stock after December 15, 2017 at a $0.20 conversion price (subject to adjustment), 7.5% interest, due May 2018, net of debt discounts of $1,321,989 and $0, respectively
|
|
|
1,056,166
|
|
|
|
178,304
|
|
|
|
-
|
|
|
|
-
|
|
May 2017 $694,539 Notes convertible into common stock after December 15, 2017 at a $0.12 conversion price (subject to adjustment), 7.5% interest, due May 2018, net of debt discounts of $383,140 and $0, respectively
|
|
|
311,399
|
|
|
|
56,319
|
|
|
|
-
|
|
|
|
-
|
|
May 2017 $130,312 Notes convertible after December 31, 2017 into common stock at a $0.13 conversion price (subject to adjustment), 7.5% interest, due May 2018, net of debt discounts of $71,901 and $0, respectively
|
|
|
58,411
|
|
|
|
15,773
|
|
|
|
-
|
|
|
|
-
|
|
Penalties on notes in default
|
|
|
6,123
|
|
|
|
-
|
|
|
|
11,066
|
|
|
|
-
|
|
Total Convertible Notes Payable, Net
|
|
$
|
1,477,099
|
|
|
$
|
300,889
|
|
|
$
|
544,508
|
|
|
$
|
86,752
|
|
During
the six months ending June 30, 2017, the Company received proceeds from the issuance of 7.5% Original Issue Discount Senior Secured
Convertible Debentures (“
Debentures
”) of $1,080,334 and obtained advances from shareholders of $137,000 that
were reclassified into Debentures. The Company also assigned or exchanged $1,358,750 worth of Outstanding Notes into Debentures,
while also reclassifying $120,403 worth of accrued interest to note principal. Each Debenture is convertible at the option of
the holder into that number of shares of common stock equal to the outstanding principal balance, plus all accrued by unpaid interest,
divided by $0.20. The Debentures accrue interest at a rate of 7.5% per annum and will become due and payable on or about May 9,
2018. The Company recorded original issue discounts and loan fees on Debentures of $757,696 and $386,758, respectively, which
also increased the debt discounts recorded on the Debentures.
The Company recorded $255,881 of conversions
on certain Outstanding Notes and a total gain on settlement of $5,831 representing the write-off of Outstanding Note principal.
Each of the Company’s Outstanding Notes have a conversion rate that is variable or has adjustment provisions. As a result
of recording derivative liabilities at note inception, the Company increased the debt discount recorded on Outstanding Notes by
$99,661 during the six months ending June 30, 2017. The Company also recorded amortization of $957,501 on Outstanding Note
debt discounts. Lastly, the Company paid $101,631 in cash for loan fees and issued 743,699 shares of the Company’s Series
A Convertible Preferred Stock (“
Series A Preferred
”) as loan fees in connection with the issuance of the Debentures.
The Company therefore increased its debt discount by $1,116,110, which represented the portion of the proceeds from the Debentures
that were allocated to preferred stock.
NOTE
7: COMMON STOCK OPTIONS AND WARRANTS
Common
Stock Options
The
Company recognizes in the financial statements compensation related to all stock-based awards, including stock options and warrants,
based on their estimated grant-date fair value. The Company has estimated expected forfeitures and is recognizing compensation
expense only for those awards expected to vest. All compensation is recognized by the time the award vests.
The
following schedule summarizes the changes in the Company’s stock options:
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Options
Outstanding
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
Exercise
|
|
|
|
Of
|
|
|
Price
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Price
|
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Life
|
|
|
Value
|
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
|
2,402,500
|
|
|
$
|
0.50-15
|
|
|
|
4.05
years
|
|
|
$
|
-
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Options
exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Options
expired
|
|
|
(180,000
|
)
|
|
$
|
0.50-1.00
|
|
|
|
-
|
|
|
|
|
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2017
|
|
|
2,222,500
|
|
|
$
|
0.50-15
|
|
|
|
3.67
years
|
|
|
$
|
-
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at June 30, 2017
|
|
|
1,964,034
|
|
|
$
|
0.50-15
|
|
|
|
3.63
years
|
|
|
$
|
-
|
|
|
$
|
0.85
|
|
Common
Stock Warrants
The
following schedule summarizes the changes in the Company’s stock warrants:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Warrants
Outstanding
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
Exercise
|
|
|
|
Of
|
|
|
Price
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Price
|
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Life
|
|
|
Value
|
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
|
3,579,505
|
|
|
$
|
0.10-10
|
|
|
|
0.52
years
|
|
|
$
|
749
|
|
|
$
|
4.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Warrants
exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Warrants
expired/cancelled
|
|
|
(3,196,818
|
)
|
|
$
|
0.10-4.60
|
|
|
|
-
|
|
|
|
|
|
|
$
|
4.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2017
|
|
|
382,687
|
|
|
$
|
0.10-10
|
|
|
|
1.37
years
|
|
|
$
|
-
|
|
|
$
|
3.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at June 30, 2017
|
|
|
382,687
|
|
|
$
|
0.10-10
|
|
|
|
1.37
years
|
|
|
$
|
-
|
|
|
$
|
3.32
|
|
NOTE
8: STOCKHOLDERS’ EQUITY
Common
Stock
During
the six months ending June 30, 2017, the Company issued 2,469,830 shares of its common stock valued at $281,657 for the settlement
of debt, 1,596,483 shares of its common stock valued at $168,600 for accounts payable, 1,312,500 shares of its common stock valued
at $171,089 for services, and 12,997,100 shares of its common stock valued at $3,282,531 for conversions of 1,239,710 shares of
Series A Preferred.
Preferred
Stock
During
the six months ending June 30, 2017 the Company issued 743,699 shares of Series A Preferred valued at $1,116,110 as loan fees
in connection with the issuance of the Debentures, and 10,000 shares of Series A Preferred valued at $28,908 for accrued payroll.
NOTE
9: SUPPLEMENTAL CASH FLOW INFORMATION
During
the six months ending June 30, 2017, the Company had the following non-cash investing and financing activities:
●
|
Increased
convertible notes payable by $68,827, increased related party notes payable by $51,576, and decreased accrued interest by
$120,403 for the reclassification of accrued interest to principal.
|
|
|
●
|
Increased
derivative liabilities for $99,661 to record a debt discount on convertible notes payable.
|
|
|
●
|
Increased
convertible notes payable and decreased loan from shareholder by $137,000 to roll proceeds from shareholder advances to a
formal convertible note payable.
|
|
|
●
|
Issued
743,699 shares of Series A Preferred for loan fees that increased the convertible note debt discount by $968,895.
|
|
|
●
|
Issued
12,997,100 shares of common stock in exchange for 1,239,710 shares of Series A Preferred decreasing preferred stock by $3,282,530,
increasing common stock by $12,997, and increasing paid in capital by $3,269,533.
|
|
|
●
|
Issued
996,483 shares of common stock valued at $108,600 for the reduction of $205,283 of accounts payable, recording $96,683 as
a gain on extinguishment of debt.
|
|
|
●
|
Issued
600,000 shares of common stock valued at $60,000 and 10,000 shares of Series A Preferred A valued at $28,908 for the reduction
of $66,093 of accrued payroll, recording $22,815 as a loss on extinguishment of debt.
|
|
|
●
|
Issued
2,469,830 shares of common stock valued at $281,657 for the reduction of $255,881 of convertible notes payable and $32,991
of accrued interest, reducing debt discount by $197,062 and reducing derivative liability by $91,821, and recording $98,026
as a gain on extinguishment of debt.
|
|
|
●
|
Issued
1,312,500 shares of common stock valued at $171,089 for services.
|
NOTE
10: COMMITMENTS AND CONTINGENCIES
Effective June 21, 2017, the Company entered
into a separation agreement with an individual previously associated with the Company, at times as a consultant and as an employee
at other times. Pursuant to the agreement, the Company agreed to pay regular bi-weekly checks beginning July 7, 2017 and ending
September 15, 2017, for a total of six checks in the aggregate amount of $28,846. The Company has accrued $28,846 for the payments
to be made under this agreement and has recorded them in accounts payable as of June 30, 2017.
NOTE
11: SUBSEQUENT EVENTS
In
July of 2017, the Company issued 370,000 shares of common stock upon conversion of 37,000 shares of Series A Preferred.
In
July of 2017, the Company issued 416,563 common stock shares in exchange for $46,500 of convertible debt principal and $3,488
of accrued interest.
In
July of 2017, the Company, in exchange for $206,072 of unpaid compensation, issued 1,500,000 common stock shares and 150,000 Series
A Preferred and $10,000 cash plus $165,000 to be paid at the rate of 5% of the net proceeds retained by the Company in connection
with all capital raises or net proceeds from revenue generated from licensing or similar transactions. The agreement also included
the cancellation of 1,000.000 stock options issued June 21, 2016.
In
August 2017, the Company, in exchange for $27,198 of accounts payable, issued 302,194 common stock shares.
In
August 2017, the Company issued 150,000 common stock shares to consultants in exchange for services.
The
Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no additional subsequent events
to disclose.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Except
for statements of historical fact, certain information described in this Form 10-Q report contains “forward-looking statements”
that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,”
“should,” “will,” “would” or similar words. The statements that contain these or similar words
should be read carefully because these statements discuss the Company’s future expectations, including its expectations
of its future results of operations or financial position, or state other “forward-looking” information. Advanced
Medical Isotope Corporation believes that it is important to communicate its future expectations to its investors. However, there
may be events in the future that the Company is not able to accurately predict or to control. Further, the Company urges you to
be cautious of the forward-looking statements which are contained in this Form 10-Q report because they involve risks, uncertainties
and other factors affecting its operations, market growth, service, products and licenses. The risk factors in the section captioned
“Risk Factors” in Item 1A of the Company’s previously filed Form 10-K for the year ended December 31, 2016,
filed with the Securities and Exchange Commission on March 9, 2017, as well as other cautionary language in this report on Form
10-Q, describe such risks, uncertainties and events that may cause the Company’s actual results and achievements, whether
expressed or implied, to differ materially from the expectations the Company describes in its forward-looking statements. The
occurrence of any of the events described as risk factors could have a material adverse effect on the Company’s business,
results of operations and financial position.
General
Statement of Business
Advanced
Medical Isotope Corporation (the
“Company,” “AMI”
or
“we”
) was incorporated
under the laws of Delaware on December 23, 1994 as Savage Mountain Sports Corporation (
“SMSC”
). On September
6, 2006, the Company changed its name to Advanced Medical Isotope Corporation. AMI has authorized capital of 2,000,000,000 shares
of common stock, $0.001 par value per share and 20,000,000 shares of preferred stock, $0.001 par value per share. Our common stock
is quoted on the OTC PINK Marketplace under the symbol,
“ADMD”.
Recent
Developments
On
or about May 10, 2017, the Company entered into Securities Purchase Agreements (the “
Purchase Agreement
”) with
certain accredited investors to purchase 7.5% Original issue Discount Senior Secured Convertible Debentures (“
Debentures
”)
in the aggregate principal amount of $1,179,581, including an original issue discount of $235,916 and loan fees of $30,000. The
principal, original issue discount, and loan fees accrue interest at a rate of 7.5% per annum, and will become due and payable
one year from the issuance date. Holders of the Debentures may elect to convert the principal and original issue discount, as
well as any accrued by unpaid interest (the “
Outstanding Balance
”), into that number of shares of the Company’s
common stock equal to the Outstanding Balance, divided by $0.20 (the “
Conversion Price
”).
On the same date, the
Company also entered into Securities Exchange Agreements (the “
Exchange Agreement
”) with certain holders of
outstanding convertible promissory notes to exchange such notes and their accrued interest for Debentures, resulting in the issuance
of Debentures in the aggregate principal amount of $2,229,306 including an original issue discount of $445,961 and loan
fees of $356,758. The Debentures issued pursuant to the Exchange Agreement have terms substantially similar to those issued
pursuant to the Purchase Agreement, expect that certain of the Debentures issued pursuant to Exchange Agreements have a Conversion
Price of $0.13 and $0.12 per share.
The
Company paid loan fees in connection with the issuance of the Debentures, both pursuant to the Purchase Agreements and Exchange
Agreements, of 20% of the principal and original issue discount of the Debentures in shares of its Series A Preferred Stock (“
Series
A Preferre
d”). In addition, the Company granted to each of the holders of the Debentures a continuing security interest
in substantially all of the Company’s assets, pursuant to the terms and conditions of a Security Agreement. Forms of the
Purchase Agreement, Debenture, Exchange Agreement and Security Agreement are attached to this report on Form 10-Q.
Overview
The
Company is a late stage radiation oncology medical device company engaged in the development of its yttrium-90 based brachytherapy
device, RadioGel™, for the treatment of non-resectable tumors. A prominent team of radiochemists, scientists and engineers,
collaborating with strategic partners, including national laboratories, universities and private corporations, lead the Company’s
development efforts. The Company’s overall vision is to globally empower physicians, medical researchers and patients by
providing them with new isotope technologies that offer safe and effective treatments for cancer.
The
Company’s current focus is on the development of its RadioGel™ device. RadioGel™ is an injectable particle-gel
for brachytherapy radiation treatment of cancerous tumors in people and animals. RadioGel™ is comprised of a hydrogel, or
a substance that is liquid at room temperature and then gels when reaching body temperature after injection into a tumor. In the
gel are small, one micron, yttrium-90 phosphate particles (“
Y-90
”). Once injected, these inert particles are
locked in place inside the tumor by the gel, delivering a very high local radiation dose. The radiation is beta, consisting of
high-speed electrons. These electrons only travel a short distance so the device can deliver high radiation to the tumor with
minimal dose to the surrounding tissue. Optimally, patients can go home immediately following treatment without the risk of radiation
exposure to family members. Since Y-90 has a half-life of 2.7 days, the radioactively drops to 5% of its original value after
ten days.
The
Company’s lead brachytherapy product, RadioGel™, incorporates patented technology developed for Battelle Memorial
Institute (“
Battelle
”) at Pacific Northwest National Laboratory, a leading research institute for government
and commercial customers. Battelle has granted the Company an exclusive license to patents covering the manufacturing, processing
and applications of RadioGel™ (the “
Battelle License
”). Other intellectual property protection includes
proprietary production processes and trademark protection in 17 countries. The Company plans to continue efforts to develop new
refinements on the production process, and the product and application hardware, as a basis for future patents.
The
Company is currently focusing on obtaining approval from the Food and Drug Administration (“
FDA
”) to market
and sell RadioGel™ as a Class II medical device. The Company first requested FDA approval of RadioGel™ in June 2013,
at which time the FDA classified RadioGel™ as a medical device. The Company then followed with a 510(k) submission which
the FDA responded, in turn, with a request for a physician letter of substantial equivalence and a reformatted 510(k) summary,
which the Company provided January 2014. In February 2014 the FDA ruled the device as not substantially equivalent due to a lack
of predicate device and it was classified to Class III. The Company is currently developing test plans to address issues raised
by the FDA in connection with the Company’s previous submissions regarding RadioGel™, including developing specific
test plans and specific indication of use. The Company intends to request FDA approval to apply for
de novo
classification
of RadioGel™, which would reclassify the device from a Class III device to a Class II device, further simplifying the path
to FDA approval.
In
previous FDA submittals, the Company proposed applying RadioGel™ for a very broad range of cancer therapies, referred to
as Indication for Use. The FDA has requested that the Company reduce its Indications for Use. To comply with that request, the
Company has expanded its Medical Advisory Board (“
MAB
”) and engaged doctors from respected hospitals who have
evaluated the candidate cancer therapies based on three criteria: (1) potential for FDA approval and successful therapy;
(2) notable advantage over current therapies; and (3) probability of wide spread acceptance by the medical community.
The
MAB selected eighteen applications for RadioGel™, each of which meet the criteria described above. This large number confirms
the wide applicability of the device and defines the path for future business growth. The Company intends to apply to the FDA
for a single Indication for Use, treatment of basal cell and squamous cell skin cancers, followed by subsequent applications for
additional Indications for Use. We anticipate that this initial application will facilitate each subsequent application, and the
testing for many of the subsequent applications could be conducted in parallel, depending on available resources.
The
Company’s IsoPet Solutions division was established in May 2016 to focus on the veterinary oncology market, namely engagement
of university veterinarian hospital to develop the detailed therapy procedures to treat animal tumors and ultimately use of the
technology in private clinics. The Company has engaged four different university veterinarian hospitals to begin using RadioGel™
for treatment of four different cancer types in dogs and cats. Washington State University Veterinary Hospital has tested one
cat to demonstrate the procedures and the absence of any significant toxicity effect. The other three centers are expected to
begin therapy during the second quarter of 2017 after their internal administrative review process is completed.
These animal therapies
will focus on creating labels that describe the procedures in detail as a guide to future veterinarians. The labels will be voluntarily
submitted to the FDA for review. They will then be used as data for future FDA applications in the medical sector and as key intellectual
property for licensing to private veterinary clinics. Dr. Alice Villalobos, the Chair of our Veterinarian Advisory Board,
has expressed an interest in being the first to utilize RadioGel™ in her private clinic, but is also introducing the
Company to other clinics with an interest in utilizing RadioGel™ and to demonstrate the business model.
The
Company anticipates that future profit will be derived from direct sales of RadioGel™ and related services, and from licensing
to private medical and veterinary clinics in the U.S. and internationally.
Based
on the Company’s financial history since inception, its auditor has expressed substantial doubt as to the Company’s
ability to continue as a going concern. The Company has limited revenue, nominal cash, and has accumulated deficits since inception.
If the Company cannot obtain sufficient additional capital, the Company will be required to delay the implementation of its business
strategy and not be able to continue operations.
Results
of Operations
Comparison
of the Three Months Ended June 30, 2017 and 2016
The
following table sets forth information from our statements of operations for the three months ended June 30, 2017 and 2016.
|
|
Three
Months Ended
June 30, 2017
|
|
|
Three
Months Ended
June 30, 2016
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
4,054
|
|
Operating
expenses
|
|
|
619,171
|
|
|
|
3,222,904
|
|
Operating
loss
|
|
|
(619,171
|
)
|
|
|
(3,218,850
|
)
|
Non-operating
income (expense):
|
|
|
|
|
|
|
|
|
Gain
(loss) on derivative liability
|
|
|
83,089
|
|
|
|
1,268,958
|
|
Gain
(loss) on debt extinguishment
|
|
|
(201,574
|
)
|
|
|
-
|
|
Net
gain (loss) on settlement of debt
|
|
|
-
|
|
|
|
(1,832,468
|
)
|
Interest
expense
|
|
|
(781,139
|
)
|
|
|
(400,524
|
)
|
Net
income (loss)
|
|
$
|
(1,518,795
|
)
|
|
$
|
(4,182,884
|
)
|
Revenue
Revenue
was $0 and $4,054 for the three months ended June 30, 2017 and June 30, 2016. The decrease was a result of a loss of consulting
revenue, currently our only source of revenue, during the first half of the fiscal year. Consulting revenues consist of providing
a company with assistance in strategic targetry services, and research into production of radiophamaceuticals and the operations
of radioisotope production facilities. No proprietary information belonging to our Company is shared during the process of this
consulting.
Management
does not anticipate that the Company will generate revenue sufficient to sustain operations until such time as the Company secures
revenue-generating arrangements with respect to RadioGel™ and/or any of our other brachytherapy technologies.
Operating
Expenses
Operating
expenses for the three months ended June 30, 2017 and 2016 consists of the following:
|
|
Three
months ended
June 30, 2017
|
|
|
Three
months ended
June 30, 2016
|
|
Depreciation and amortization
expense
|
|
$
|
733
|
|
|
$
|
737
|
|
Professional fees
|
|
|
295,544
|
|
|
|
1,631,616
|
|
Stock options granted
|
|
|
27,059
|
|
|
|
584,916
|
|
Payroll expenses
|
|
|
181,494
|
|
|
|
166,577
|
|
General and administrative expenses
|
|
|
99,090
|
|
|
|
703,350
|
|
Sales and marketing
expense
|
|
|
15,251
|
|
|
|
135,708
|
|
|
|
$
|
619,171
|
|
|
$
|
3,222,904
|
|
Operating
expenses for the three months ended June 30, 2017 and 2016 was $619,171 and $3,222,904, respectively. The decrease in operating
expenses from 2016 to 2017 can be attributed to the decrease in professional fees expense ($1,631,616 for the three months ended
June 30, 2016 versus $295,544 or the three months ended June 30, 2017); a decrease in sales and marketing expense from 2016 to
2017 ($135,708 for the three months ended June 30, 2016 versus $15,251 for the three months ended June 30, 2017); a decrease in
stock options granted from 2016 to 2017 ($584,916 for the three months ended June 30, 2016 versus $27,059 for the three months
ended June 30, 2017); and the decrease in general and administrative expense ($703,350 for the three months ended June 30, 2016
versus $99,090 for the three months ended June 30, 2017). The main contributors to the decrease in general and administrative
expense was a decrease in loan fees ($0 for the three months ended June 30, 2017 versus $294,703 for the three months ended June
30, 2016); repairs and maintenance ($14 for the three months ended June 30, 2017 versus $222,281 for the three months ended June
30, 2016); and a decrease in research expense ($80,523 for the three months ended June 30, 2017 versus $111,304 for the three
months ended June 30, 2016).
Non-Operating
Income (Expense)
Non-operating
income (expense) for the three months ended June 30, 2017 and 2016 consists of the following:
|
|
Three
months
ended
June 30, 2017
|
|
|
Three
months
ended
June 30, 2016
|
|
Interest
expense
|
|
$
|
(781,139
|
)
|
|
$
|
(400,524
|
)
|
Net
gain on sale of assets
|
|
|
-
|
|
|
|
-
|
|
Net
gain (loss) on settlement of debt
|
|
|
-
|
|
|
|
(1,832,468
|
)
|
Net
gain (loss) on debt extinguishment
|
|
|
(201,574
|
)
|
|
|
-
|
|
Gain
(loss) on derivative liability
|
|
|
83,089
|
|
|
|
1,268,958
|
|
|
|
$
|
(899,624
|
)
|
|
$
|
(964,034
|
)
|
Non-operating
income (expense) for the three months ended June 30, 2017 varied from the three months ended June 30, 2016 primarily due to a
decrease in the gain on derivative liability of $1,268,958 for the three months ended June 30, 2016 versus a gain of $83,089 for
the three months ended June 30, 2017; and a decrease in loss on settlement of debt for the three months ended June 30, 2017 of
$0 versus a loss of $1,832,468 for the three months ended June 30, 2016. This was partially offset by an increase in interest
expense from $400,524 for the three months ended June 30, 2016 to $781,139 for the three months ended June 30, 2017; and an increase
in loss on debt extinguishment for the three months ended June 30, 2017 of $201,574 versus $0 for the three months ended June
30, 2016.
Net
Loss
Our
net income (loss) for the three months ended June 30, 2017 and 2016 was $(1,518,795) and $(4,182,884) respectively.
Comparison
of the Six Months Ended June 30, 2017 and 2016
The
following table sets forth information from our statements of operations for the six months ended June 30, 2017 and 2016.
|
|
Six
Months Ended
June
30, 2017
|
|
|
Six
Months Ended
June
30, 2016
|
|
Revenues
|
|
$
|
4,054
|
|
|
$
|
8,108
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
987,940
|
|
|
|
3,909,489
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(983,886
|
)
|
|
|
(3,901,381
|
)
|
Non-operating
income (expense)
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(1,309,090
|
)
|
|
|
(449,733
|
)
|
Net
gain on sale of assets
|
|
|
2,800
|
|
|
|
-
|
|
Net
gain (loss) on settlement of debt
|
|
|
-
|
|
|
|
(1,766,631
|
|
Net
gain (loss) on debt extinguishment
|
|
|
(53,863
|
)
|
|
|
-
|
|
Gain
(loss) on derivative liability
|
|
|
408,479
|
|
|
|
(3,871,040
|
)
|
Net
Gain (Loss)
|
|
$
|
(1,935,560
|
)
|
|
$
|
(9,988,785
|
)
|
Revenue
Revenue
was $4,054 for the six months ended June 30, 2017, compared to $8,108 for the six months ended June 30, 2016, a period over period
decrease of $4,054. The decrease was a result of a loss of consulting revenue, currently our only source of revenue, during the
first half of the fiscal year. Consulting revenue consists of providing clients with assistance in strategic targetry services,
and research into production of radiopharmaceuticals and the operations of radioisotope production facilities. No proprietary
information belonging to our Company is shared during the process of this consulting. Consulting services are currently our only
source of revenue. The Company does not have any current contracts or arrangements for consulting services, and, until such time
as the Company secures contracts or arrangements to provide consulting services, the Company does not expect to generate any additional
revenue during the third or fourth quarter of 2017 and beyond.
Management
does not anticipate that the Company will generate revenue sufficient to sustain operations until such time as the Company secures
revenue-generating arrangements with respect to RadioGel™ and/or any of our other brachytherapy technologies.
Operating
Expense
Operating
expenses for the six months ended June 30, 2017 and 2016 consists of the following:
|
|
Six
months ended
June
30, 2017
|
|
|
Six
months ended
June
30, 2016
|
|
Depreciation
and amortization expense
|
|
$
|
1,473
|
|
|
$
|
1,475
|
|
Professional
fees
|
|
|
430,148
|
|
|
|
1,702,585
|
|
Stock
options granted
|
|
|
55,299
|
|
|
|
584,916
|
|
Payroll
expenses
|
|
|
286,275
|
|
|
|
331,577
|
|
General
and administrative expenses
|
|
|
173,496
|
|
|
|
1,141,392
|
|
Sales
and marketing expense
|
|
|
41,249
|
|
|
|
147,544
|
|
|
|
$
|
987,940
|
|
|
$
|
3,909,489
|
|
Operating
expenses for the six months ended June 30, 2017 and 2016 was $987,940 and $3,909,489, respectively. The decrease in operating
expenses from 2016 to 2017 can be attributed to the decrease in professional fees expense ($1,702,585 for the six months ended
June 30, 2016 versus $430,148 for the six months ended June 30, 2017); a decrease in sales and marketing expense from 2016 to
2017 ($147,544 for the six months ended June 30, 2016 versus $41,249 for the six months ended June 30, 2017); a decrease in stock
options granted from 2016 to 2017 ($584,916 for the six months ended June 30, 2016 versus $55,299 for the six months ended June
30, 2017); and the decrease in general and administrative expense ($1,141,392 for the six months ended June 30, 2016 versus $173,496
for the six months ended June 30, 2017). The main contributors to the decrease in general and administrative expense was a decrease
in loan fees ($595,197 for the six months ended June 30, 2016 versus $0 for the six months ended June 30, 2017); rent ($9,000
for the six months ended June 30, 2016 versus $4,500 for the six months ended June 30, 2017); repairs and maintenance ($224,365
for the six months ended June 30, 2016 versus $3,648 for the six months ended June 30, 2017); and research expense ($206,848 for
the six months ended June 30, 2017 versus $113,410 for the six months ended June 30, 2017).
Non-Operating
Income (Expense)
Non-Operating
income (expense) for the six months ended June 30, 2017 and 2016 consists of the following:
|
|
Six
months ended
June
30, 2017
|
|
|
Six
months ended
June
30, 2016
|
|
Interest
expense
|
|
$
|
(1,309,090
|
)
|
|
$
|
(449,733
|
)
|
Net
gain on sale of assets
|
|
|
2,800
|
|
|
|
-
|
|
Net
gain (loss) on settlement of debt
|
|
|
-
|
|
|
|
(1,766,631
|
)
|
Net
gain (loss) on debt extinguishment
|
|
|
(53,863
|
)
|
|
|
-
|
|
Gain
(loss) on derivative liability
|
|
|
408,479
|
|
|
|
(3,871,040
|
)
|
|
|
$
|
(951,674
|
)
|
|
$
|
(6,087,404
|
)
|
The
Company had non-operating expense of $6,087,404 during the six months ended June 30, 2016, as compared to non-operating expense
of $951,674 during the six months ended June 30, 2017. As shown above, this decrease in non-operating expense is primarily due
to a loss on derivative liability of $3,871,040 for the six months ended June 30, 2016, as compared to a gain of $408,479 during
the same period in 2017. The $3,871,040 loss on derivative liability was due to an increase in the Company’s stock price
from June 30, 2015 ($0.09) to June 30, 2016 ($0. 37) and an increase in preferred shares value which is also used to value derivatives.
The Company’s stock price is used in the Black Scholes calculations to compute the derivative liability at the end of the
quarter. Additionally, the Company experienced a decrease in non-operating expense due to a loss on settlement of debt of $1,766,631
for the six months ended June 30, 2016, as compared to a loss on settlement of debt of $0 for the six months ended June 30, 2017.
Net
Gain (Loss)
Our
net income (loss) for the six months ended June 30, 2017 and 2016 was $(1,935,560) and $(9,988,785) respectively.
Liquidity
and Capital Resources
At
June 30, 2017, the Company had negative working capital of $3,134,196, as compared to $4,914,618 at June 30, 2016. During the
six months ended June 30, 2017 the Company experienced negative cash flow from operations of $776,944 and it received $2,800 for
investing activities and added $1,115,703 of cash flows from financing activities. As of June 30, 2017, the Company had $0 commitments
for capital expenditures.
Cash
used in operating activities decreased from $1,485,624 for the six month period ending June 30, 2016 to $776,944 for the six month
period ending June 30, 2017. Cash used in operating activities was primarily a result of the Company’s net loss and the
non-cash gain (loss) on derivative liability, partially offset by non-cash item amortization of convertible debt discount, and
depreciation, included in that net loss and preferred and common stock issued for services and other expenses. The Company had
no cash used in investing activities for the six month period ended June 30, 2016 and received $2,800 in investing activities
for the six month period ending June 30, 2017. Cash provided from financing activities decreased from $1,306,775 for the six month
period ending June 30, 2016 to $1,115,703 for the six month period ending June 30, 2017. The decrease in cash provided from financing
activities was primarily a result of decrease in proceeds from convertible debt.
The
Company has generated material operating losses since inception. The Company had a net loss of $1,935,560 for the six months ended
June 30, 2017, and $9,988,785 for the six months ended June 30, 2016. The Company expects to continue to experience net operating
losses. Historically, the Company has relied upon investor funds to maintain its operations and develop the Company’s business.
The Company anticipates raising additional capital within the next twelve months from investors for working capital as well as
business expansion, although the Company can provide no assurance that additional investor funds will be available on terms acceptable
to the Company. If the Company is unable to obtain additional financing to meet its working capital requirements, it may have
to curtail its business.
The
Company anticipates raising additional capital within the next twelve months from investors for working capital as well as business
expansion, although the Company can provide no assurance that additional investor funds will be available on terms acceptable
to the Company. If the Company is unable to obtain additional financing to meet its working capital requirements, it may have
to cease operations.
The
Company requires funding of at least $1.5 million per year to maintain current operating activities. Over the next 12-24 months,
the Company believes it will cost approximately $5 million to $10 million to fund: (1) the FDA approval process and initial deployment
of the brachytherapy products and (2) initiate regulatory approval processes outside of the United States. The continued deployment
of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel. The
principal variables in the timing and amount of spending for the brachytherapy products in the next 12-24 months will be the FDA’s
classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements
for additional studies which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company’s
spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements
with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the
U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership
agreements or additional capital raises.
Although
the Company is seeking the foregoing funding and has engaged in numerous discussions with potential finders, investment bankers
and investors with respect to the initial portion thereof, the Company has not received firm commitments for the required funding.
Based upon its discussions, the Company anticipates that if the Company is able to obtain the funding required to retire outstanding
debt, pay past due payables and maintain its current operating activities that the terms thereof will be materially dilutive to
existing shareholders.
The
recent economic events, including the inherent instability and volatility in global capital markets, as well as the lack of liquidity
in the capital markets, could impact the Company’s ability to obtain financing and its ability to execute its business plan.
The Company believes healthcare institutions will continue to purchase the medical solutions that it distributes.
Accounting
Policies and Estimates
The
preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited
condensed financial statements and accompanying notes. Management bases its estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates
under different assumptions or conditions. During the period ended June 30, 2017, we believe there have been no significant changes
to the items disclosed as significant accounting policies in management’s notes to the condensed financial statements in
our annual report on Form 10-K for the year ended December 31, 2016, filed on March 9, 2017.
Off-Balance
Sheet Arrangements
The
Company does not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on the
Company’s financial condition, revenues, results of operations, liquidity or capital expenditures.