Post-Qualification
Amendment No. 2
File
No. 024-11627
This
Post-Qualification Amendment No. 2 amends the Offering
Statement of Vivos Inc. (the “Company”), originally filed with the Securities and Exchange Commission (the “SEC”)
on September 1, 2021 (File number 024-11627), as supplemented,
and as amended on October
4, 2022 to add, update and/or replace the information contained in the Offering Statement.
PRELIMINARY
OFFERING CIRCULAR DATED OCTOBER 10, 2023
AN
OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY
MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION
OF THE COMPANY’S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL
OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.
Vivos
Inc.
719
Jadwin Avenue
Richland,
Washington 99352
(509)
736-4000
http://www.radiogel.com
Up
to 50,000,000 Shares of Common Stock, par value $0.001 per share, at
an
offering price of $0.08 per Share ($4,000,000)
SEE
“DESCRIPTION OF CAPITAL STOCK” AT PAGE 48.
| Securities
Offered by the Company | |
Price
Per Share
to Public | | |
Total
Number of Shares Being Offered | | |
Broker-Dealer
discount and commissions (1) | | |
Proceeds
to
issuer (2) | |
| Per
Share of Common Stock | |
$ | 0.08 | | |
| | | |
$ | - | | |
$ | | |
| Total
Minimum | |
$ | 0.08 | | |
| 1 | | |
$ | - | | |
$ | 0.08 | |
| Total
Maximum | |
$ | 4,000,000 | | |
| 50,000,000 | | |
$ | - | | |
$ | 4,000,000 | |
| (1)
|
We
may offer the shares of our common stock through registered broker-dealers or a selling agent and we may pay finders, although we
have no current arrangements to do so. We currently do not have any specific plans or arrangements to use a selling agent, broker-dealer
or finder; however, if we choose to do so in the future, information about any such broker dealer, selling agent, or finder shall
be disclosed in an amendment to this Offering Circular. |
| |
|
| (2) |
This
does not account for the payment of expenses of this offering, which is currently estimated to be approximately $100,000. See “Plan
of Distribution.” |
Vivos
Inc. (the “Company”) is offering up to 50,000,000 shares of common stock, par value $0.001 per share, at an offering
price of $0.08 per share. The offering will terminate at the earlier of: (i) the date at which the maximum offering amount has
been sold, (ii) the date which is one year from this offering being qualified by the Securities and Exchange Commission (“SEC”),
or (iii) the date at which the offering is earlier terminated by us in our sole discretion, which may occur at any time.
This
offering is being conducted on a “best efforts” basis without any minimum offering amount pursuant to Regulation A of Section
3(6) of the Securities Act for Tier 2 offerings. We reserve the right to undertake one or more closings on a rolling basis. Until we
complete a closing, the proceeds for the offering will not be kept in an escrow account. All funds derived by us from this offering will
be immediately available for use by us, in accordance with the uses set forth in the section of this Offering Circular entitled “Use
of Proceeds.” If there are no sales of our common stock pursuant to this Offering Circular, or upon termination of this offering
without any corresponding sales, the investments for this offering will be promptly returned to investors, without deduction and generally
without interest. There is no minimum purchase requirement for investors. See “Plan of Distribution.”
We
have yet to identify a broker-dealer or selling agent to act as our lead managing selling agent to offer shares of our common stock to
prospective investors on a “best efforts” basis. In the event that we do identify and make arrangements with a selling agent
to offer our securities, the selling agent may engage one or more co-managing selling agents, sub selling agents or selected dealers.
A selling agent is not required to purchase the shares of common stock being offered pursuant to this Offering Circular and is not required
to sell any specific number or dollar amount of shares of common stock in the offering.
We
expect to commence the offer and sale of the shares of common stock being offered pursuant to this Offering Circular as of the date on
which the offering statement of which this Offering Circular is a part (the “Offering Statement”) is qualified by
the SEC.
THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE
TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE
SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT
DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION
GENERALLY,
NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME
OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT
DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING,
WE ENCOURAGE YOU TO REFER TO www.investor.gov.
This
offering is inherently risky. See “Risk Factors” located on page 8 for a discussion of certain risks that
you should consider in connection with an investment in our common stock.
The
Company is following the Form S-1 format of disclosure under Regulation A pursuant to general instructions of
Part II(a)(1)(ii) of Form 1-A for this Offering Circular.
TABLE
OF CONTENTS
In
this Offering Circular, the term “Vivos” or the “Company” refers to Vivos Inc. and its subsidiaries.
STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
THIS
OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN
AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY
AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,”
“BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO
RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING
STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
Industry
and Market Data
Although
we are responsible for all disclosure contained in this Offering Circular, in some cases we have relied on certain market and industry
data obtained from third-party sources that we believe to be reliable. Market estimates are calculated by using independent industry
publications in conjunction with our assumptions regarding the medical device industry and market. While we are not aware of any misstatements
regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change
based on various factors, including those discussed under the headings “Statement Regarding Forward- Looking Statements”
and “Risk Factors” in this Offering Circular.
OFFERING
CIRCULAR SUMMARY
This
summary highlights selected information contained elsewhere in this Offering Circular. This summary is not complete and does not contain
all the information that you should consider before deciding whether to invest in our common stock. You should carefully read the entire
Offering Circular, including the risks associated with an investment in the Company’s securities discussed in the “Risk Factors”
section of this Offering Circular, before making an investment decision. Some of the statements in this Offering Circular are forward
looking- statements. See the section entitled “Statement Regarding Forward- Looking Statements.”
Overview
Vivos
Inc. (the “Company”, “we”, “us”, “our”) is a 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
Offering
The
Company’s stock offering under Regulation A+ was qualified by the Securities and Exchange Commission
(“SEC”) on June 3, 2020. An amendment to the Regulation A+ Offering Circular was qualified by the SEC on
September 15, 2021 to offer 50,000,000 shares at a price of $0.10 for a maximum of $5,000,000. The Company amended
the Regulation A+ Offering Circular to raise an additional $1,200,000 in July 2022 at $0.08 per share (15,000,000 additional shares)
and sold 20,000,000 warrants for $20,000. An additional amendment to the Regulation A+ Offering Circular was filed in October
2022 to raise the remaining $3,800,000 of the $5,000,000. In April 2023, $640,000 was raised as a result of the issuance of
8,000,000 shares, 2,665,000 Series A warrants and 8,000,000 Series B warrants along with $10,665 from the issuance and sale of the
warrants.
The
Company’s Regulation A+ offerings have raised approximately $5,200,000 to date under the Regulation A+ Offering Circular,
the proceeds from which have been used as follows:
For
the animal therapy market:
| |
● |
Fund
the effort to communicate the benefits of IsoPet® to the veterinary community and the pet parents. |
| |
● |
Conduct
additional clinical studies to generate more data for the veterinary community |
| |
● |
Subsidize
some IsoPet® therapies, if necessary, to ensure that all viable candidates are treated. |
| |
● |
Assist
new regional clinics with their license and certification training. |
For
the human market:
| |
● |
Enhance
the pedigree of the Quality Management System. |
| |
● |
Complete
the previously defined pre-clinical testing and additional testing on an animal model closely aligned with our revised indication
for use. Report the results to the FDA in a pre-submission meeting. |
| |
● |
Use
the feedback from that meeting to write the IDE (Investigational Device Exemption), which is required to initiate clinical trials. |
Research
and development of the Company’s brachytherapy product line has been funded with proceeds from the sale of equity and debt securities.
The Company may require additional funding of approximately $2.5 million annually to maintain current operating activities. Over the
next 12 to 48 months, the Company believes it will cost approximately $9 million to: (1) fund the FDA approval process to conduct human
clinical trials, (2) conduct Phase I, pilot, clinical trials, (3) activate several regional clinics to administer IsoPet® across
the county, (4) create an independent production center within the current production site to create a template for future international
manufacturing, and (5) initiate regulatory approval processes outside of the United States. The proceeds to be raised from the recent
qualified Regulation A+, including the proceeds raised under this post-effective amendment, will be used to continue to fund this development.
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 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
from proceeds to be raised from the recent qualified Regulation A+, including the proceeds raised under this post-effective amendment.
Following
receipt of required regulatory approvals and financing, in the U.S., the Company intends to outsource material aspects of manufacturing,
distribution, sales and marketing. Outside of the U.S., the Company intends to pursue licensing arrangements and/or partnerships to facilitate
its global commercialization strategy.
In
the longer-term, subject to the Company receiving adequate funding, regulatory approval for RadioGel™ and other brachytherapy
products, and thereafter being able to successfully commercialize its brachytherapy products, the Company intends to consider resuming
research efforts with respect to other products and technologies intended to help improve the diagnosis and treatment of cancer and other
illnesses.
Based
on the Company’s financial history since inception, the Company’s independent registered public accounting firm 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 may not be able to continue operations.
The Company has been
impacted from the effects of COVID-19. The Company’s headquarters are in Northeast Washington; however, its focus on the
animal therapy market has been in the Northwestern sector of the United States. The Company continues its marketing to the animal
therapy market and its attempt to increase the exposure to its product and generate revenue accordingly.
As
of June 30, 2023, the Company has $1,748,767 cash on hand. There are currently commitments to vendors for products and
services purchased. To continue the development of the Company’s products, the current level of cash may not be enough to cover
the fixed and variable obligations of the Company.
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.
Risk
Factors
| ● |
we
are a development stage company with no current revenue, and limited experience developing medical devices, including those intended
for use in the radiation oncology field, which makes it difficult to assess our future viability; |
| |
|
| ● |
the
conservative veterinary community is very slow to use a new product such as IsoPet without a great deal of data which requires investment
and time; |
| |
|
| ● |
we
depend heavily on the success of RadioGel™, and we cannot be certain that we will be able to obtain regulatory approval for,
or successfully commercialize, RadioGel™, or any other future product candidates; |
| |
|
| ● |
failures
or delays in the commencement or business plan could delay, prevent or limit our ability to generate revenue and continue our business; |
| |
|
| ● |
we
face significant competition, and if we are unable to compete effectively, we may not be able to achieve or maintain significant
market penetration or improve our results of operations; |
| |
|
| ● |
future
sales or issuances of our securities, including the sale of securities being offered hereby,
may cause immediate and substantial dilution to existing stockholders;
|
| ● |
there
is only one supplier of Y-90 in the United States, requiring us to rely entirely on this supplier to provide the Y-90 particles needed
to produce RadioGelTM. If we are unable to obtain a sufficient supply of Y-90 particles, we will not be able to proceed
with our development of RadioGelTM and our business will be materially harmed; |
| |
|
| ● |
if
we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents that are sufficient to protect
our product candidates, others could compete against us more directly, which would have a material adverse impact on our business,
results of operations, financial condition and prospects; and |
| |
|
| ● |
we
have incurred significant net losses since inception and we will continue to incur substantial operating losses for the foreseeable
future. |
See
the section entitled “Risk Factors” for a more thorough discussion of risks related to an investment in our common
stock.
Corporate
Information
Vivos
Inc. 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, and on December 28, 2017, to Vivos Inc. The
Company has authorized capital of 950,000,000 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
principal place of business is located at 719 Jadwin Avenue, Richland, WA 99352. Our telephone number is (509) 736-4000. Our corporate
website address is http://www.radiogel.com. Our common stock is currently quoted on the OTC Pink Marketplace under the symbol “RDGL.”
THE
OFFERING
| Issuer: |
|
Vivos
Inc.
|
Securities
offered by the Company:
|
|
A
maximum of 50,000,000 shares of our common stock, par value $0.001 per share. See the section entitled “Plan of Distribution.” |
| |
|
|
Number
of shares of common stock outstanding before the offering:
|
|
370,541,528 shares |
Number
of shares of common stock to be outstanding after the offering:
|
|
Up
to 420,541,528 shares |
Price
per share:
|
|
$0.08
per share |
Minimum
offering amount:
|
|
1
share of common stock ($0.08)
|
Maximum
offering amount:
|
|
50,000,000
shares of common stock ($4,000,000)
|
Trading
market
|
|
OTC
Pink Marketplace |
Use
of proceeds:
|
|
We
currently intend to use the majority of the proceeds we receive from this offering to expand our animal therapy business to new regional
clinics and to complete the pre-clinical testing necessary to file the Investigational Device Exemption (“IDE”),
which will set the stage for clinical trials. Our intent is to initiate and target to complete the Phase I, Pilot trials. This
is dependent on the responsiveness and timing of FDA comments on the IDE. In addition, we intend to apply certain proceeds towards
international patent protection, up-listing, the repayment of certain debt, offering expenses, public company and corporate costs,
research and development and other application development, and working capital. See the section entitled “Use of Proceeds”
for additional details regarding out intended use of proceeds. |
Summary
Financial Information
The
following table summarizes the relevant financial data for our business and should be read with our financial statements, which are included
later in this Offering Circular.
| | |
Six Months Ended June 30, | | |
Year Ended December 31, | |
| | |
2023 | | |
2022 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| Revenues, net | |
$ | 12,500 | | |
$ | 23,500 | | |
$ | 36,499 | | |
$ | 14,887 | |
| Cost of Goods sold | |
| (16,536 | ) | |
| (5,018 | ) | |
| (28,779 | ) | |
| (12,000 | ) |
| Gross (loss) profit | |
| (4,036 | ) | |
| 18,482 | | |
| 7,720 | | |
| 2,887 | |
| | |
| | | |
| | | |
| | | |
| | |
| OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | |
| Professional fees, including stock-based compensation | |
| 692,963 | | |
| 1,098,507 | | |
| 1,755,316 | | |
| 1,838,323 | |
| Payroll expenses | |
| 144,521 | | |
| 140,656 | | |
| 275,240 | | |
| 267,477 | |
| Research and development | |
| 219,728 | | |
| 241,301 | | |
| 343,802 | | |
| 286,848 | |
| General and administrative expenses | |
| 101,475 | | |
| 73,049 | | |
| 151,111 | | |
| 112,037 | |
| Total Operating Expenses | |
| 1,158,687 | | |
| 1,553,513 | | |
| 2,525,469 | | |
| 2,504,685 | |
| | |
| | | |
| | | |
| | | |
| | |
| OPERATING LOSS | |
| (1,162,723 | ) | |
| (1,535,031 | ) | |
| (2,517,749 | ) | |
| (2,501,798 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| NON-OPERATING INCOME (EXPENSE) | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
| 11,879 | | |
| - | | |
| - | | |
| (25,375 | ) |
| Gain (loss) on debt extinguishment | |
| - | | |
| 47,588 | | |
| 47,588 | | |
| (137,038 | ) |
| Forgiveness of debt | |
| - | | |
| - | | |
| - | | |
| 136,445 | |
| Total Non-Operating Income (Expenses) | |
| 11,879 | | |
| 47,588 | | |
| 47,588 | | |
| (25,968 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| NET LOSS BEFORE PROVISION FOR INCOME TAXES | |
| (1,150,844 | ) | |
| (1,487,443 | ) | |
| (2,470,161 | ) | |
| (2,527,766 | ) |
| Provision for income taxes | |
| - | | |
| - | | |
| - | | |
| - | |
| NET LOSS | |
$ | (1,150,844 | ) | |
$ | (1,487,443 | ) | |
$ | (2,470,161 | ) | |
$ | (2,527,766 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Net loss per share - basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
| Weighted average common shares outstanding – basic | |
| 365,370,257 | | |
| 343,761,071 | | |
| 351,425,912 | | |
| 325,851,906 | |
| | |
At
December 31, | | |
At June
30, 2023 | |
| Consolidated Balance Sheet Data: | |
2022 | | |
Actual | | |
Pro Forma (1) | |
| Cash | |
$ | 1,706,065 | | |
$ | 1,748,767 | | |
$ | | |
| Total assets | |
| 1,742,736 | | |
| 1,789,650 | | |
| | |
| Accounts payable and accrued expenses | |
| 81,692 | | |
| 112,810 | | |
| | |
| Total stockholders’ equity | |
| 1,661,044 | | |
| 1,676,840 | | |
| | |
| (1) |
The
pro forma information included herein assumes that we sell the maximum number of shares of common stock offered hereby at public
offering price of $0.08 per share. |
RISK
FACTORS
Investing
in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information
in this Offering Circular, including our financial statements and the related notes and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” before deciding whether to invest in our securities. The occurrence of any of
the events or developments described below could harm our business, financial condition, operating results, and growth prospects. In
such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
RISKS
ASSOCIATED WITH THE COMPANY’S BUSINESS
Our
independent registered public accounting firms’ reports on its financial statements questions the Company’s ability to continue
as a going concern.
The
Company’s independent registered public accounting firms’ reports on the Company’s financial statements for the years
ended December 31, 2022 and 2021 express substantial doubt about the Company’s ability to continue as a going concern.
The reports include an explanatory paragraph stating that the Company has suffered recurring losses, used significant cash in support
of its operating activities and based on its current operating levels, requires additional capital or restructuring to sustain its operation
for the foreseeable future. There is no assurance that the Company will be able to obtain sufficient additional capital to continue its
operations and to alleviate doubt about its ability to continue as a going concern. If the Company obtains additional financing, such
funds may not be available on favorable terms and likely would entail considerable dilution to existing shareholders. Any debt financing,
if available, may involve restrictive covenants that restrict its ability to conduct its business. It is extremely remote that the Company
could obtain any financing on any basis that did not result in considerable dilution for shareholders. Inclusion of a “going concern
qualification” in the report of its independent accountants or in any future report may have a negative impact on its ability to
obtain debt or equity financing and may adversely impact its stock price.
A
combination of our current financial condition and the FDA’s determinations to date regarding our brachytherapy products raise
material concerns about ability to continue as a going concern.
The
Company will not be able to continue as a going concern unless the Company obtains financing. Depending upon the amount of financing,
if any, the Company is able to obtain, the Company may not receive adequate funds to continue the approval process for RadioGel™
or other brachytherapy products with the FDA.
The
Company has generated operating losses since inception, which are expected to continue, and has increasing cash requirements, which it
may be unable to satisfy.
The
Company has generated material operating losses since inception. The Company has had recurring net losses since inception which has resulted
in an accumulated deficit of $80,706,872, $79,556,028 and $77,085,867 as of June 30, 2023, December 31, 2022 and December
31, 2021, respectively, including net losses of $1,150,844 for the six months ended June 30, 2023, net losses of
$2,470,161 for the year ended December 31, 2022 and net losses of $2,527,766 for the year ended December 31, 2021. Historically,
the Company has relied upon investor funds to maintain its operations and develop its business. The Company needs to raise additional
capital from investors for working capital as well as business expansion, and there is no assurance that additional investor funds will
be available on terms acceptable to the Company, or at all. If the Company is unable to unable to obtain additional financing to meet
its working capital requirements, the Company likely would cease operations.
The
Company requires funding of at least $5 million per year to maintain current operating activities. Over the next 24 months, the
Company believes it will cost approximately $9 million to: (1) fund the FDA approval process to conduct human clinical trials,
(2) conduct Phase I, pilot, clinical trials, (3) activate several regional clinics to administer IsoPet® across the county,
(4) create an independent production center within the current production site to create a template for future international manufacturing,
and (5) initiate regulatory approval processes outside of the United States.
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 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.
Recent
economic events, including the COVID-19 pandemic, the inherent instability in global capital markets, as well as the lack of liquidity
in the capital markets, could adversely impact the Company’s ability to obtain financing and its ability to execute its business
plan.
The
Company has a limited operating history, which may make it difficult to evaluate its business and prospects.
The
Company has a limited operating history upon which one can base an evaluation of its business and prospects. As a company in the development
stage, there are substantial risks, uncertainties, expenses and difficulties to which its business is subject. To address these risks
and uncertainties, the Company must do the following:
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successfully
develop and execute the business strategy; |
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respond
to competitive developments; and |
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attract,
integrate, retain and motivate qualified personnel. |
There
is no assurance that the Company will achieve or maintain profitable operations or that the Company will obtain or maintain adequate
working capital to meet its obligations as they become due. The Company cannot be certain that its business strategy will be successfully
developed and implemented or that the Company will successfully address the risks that face its business. In the event that the Company
does not successfully address these risks, its business, prospects, financial condition, and results of operations could be materially
and adversely affected.
The
Company’s products are regulated and require appropriate clearances and approvals to be marketed in the U.S. and globally.
There
is no assurance the FDA or other global regulatory authorities will grant the Company permission to market the Company’s brachytherapy
Y-90 RadioGel™ device.
The
Company has been working with the FDA to obtain clearance for its brachytherapy Y-90 RadioGelTM device, but no assurances
have been received. On December 23, 2014, the Company announced that it submitted a de novo to the FDA for marketing clearance
for its patented Y-90 RadioGelTM device pursuant to Section 513(f)(2) of the U.S. Food, Drug and Cosmetic Act (the “Act”).
In June 2015, the FDA notified the Company the de novo was not granted. In February 2014, the FDA found the same device under
Section 510(k) of the Act not substantially equivalent and concluded that the device is classified by statute as a Class III medical
device, unless the device is reclassified. The Company is seeking reclassification of the product to Class II. If the Company is successful
in seeking reconsideration of the Company’s de novo application, as a regulatory matter, the device could be on an easier
and faster path to market in the United States. However, there would still be the requirements to complete the in vitro and in vivo testing,
and then some human clinical trials. That testing date is submitted in a de novo pre-market application and if accepted we could then
go to market. As a practical matter, the Company would still need to secure funding and commercial arrangements before marketing could
commence. If the de novo is declined and if the Company obtains funding to permit it to continue operations, the Company will
explore steps toward seeking approval for the device as a Class III medical device. Generally, the time period and cost of seeking approval
as a Class III medical device is materially greater than the time period and cost of seeking approval as a Class II medical device. If
the Company seeks approval as a Class III device, human clinical trials will be necessary. Generally, human trials for Class III products
are larger, of longer duration and costlier than those for Class II devices.
If
human clinical trials are necessary, there will be additional cost and time to reach marketing clearance or approval. Unless the Company
obtains sufficient funding, it will be unable to do the foregoing activities. There can be no assurance that the product will be approved
as either a Class II or Class III device by the FDA even if additional data is provided. In August 2017, the Company met again with the
FDA in a pre-submission meeting to once again go through the requirements for pre-clinical testing and to answer the previous FDA questions
submitted years before. There can be no assurance that the Company will receive FDA approval, or if it does, the timing thereof.
RISKS RELATED TO THE
COMPANY’S COMMON STOCK
If
the Company is successful in increasing the size of its organization, the Company may experience difficulties in managing growth.
The
Company is a small organization with a minimal number of employees. If the Company is successful, it may experience a period of significant
expansion in headcount, facilities, infrastructure and overhead and further expansion may be required to address potential growth and
market opportunities. Any such future growth will impose significant added responsibilities on members of management, including the need
to improve the Company’s operational and financial systems and to identify, recruit, maintain and integrate additional managers.
The Company’s future financial performance and its ability to compete effectively will depend, in part, on the ability to manage
any future growth effectively.
The
Company’s business is dependent upon the continued services of the Company’s Chief Executive Officer, Michael Korenko. Should
the Company lose the services of Dr. Korenko, the Company’s operations will be negatively impacted.
The
Company’s business is dependent upon the expertise of its Chief Executive Officer, Michael Korenko. Dr. Korenko is essential to
the Company’s operations. Accordingly, an investor must rely on Dr. Korenko’s management decisions that will continue to
control the Company’s business affairs. The Company does not maintain key man insurance on Dr. Korenko’s life. The loss of
the services of Dr. Korenko would have a material adverse effect upon the Company’s business. To mitigate this risk, David Swanberg
has been groomed as a replacement candidate. He has extensive experience as a co-founder of IsoRay and has been actively working with
Dr. Korenko as a consultant for the last two years.
The
Company is heavily dependent on consultants for many of the services necessary to continue operations. The loss of any of these consultants
could have a material adverse effect on the Company’s business, results of operations and financial condition.
The
Company’s success is heavily dependent on the continued active participation of certain consultants and collaborating scientists.
Certain key employees and consultants have no written employment contracts. Loss of the services of any one or more of its consultants
could have a material adverse effect upon the Company’s business, results of operations and financial condition.
If
the Company is unable to hire and retain additional qualified personnel, the business and financial condition may suffer.
The
Company’s success and achievement of its growth plans depend on its ability to recruit, hire, train and retain highly qualified
technical, scientific, regulatory and managerial employees, consultants and advisors. Competition for qualified personnel among pharmaceutical
and biotechnology companies is intense, and an inability to attract and motivate additional highly skilled personnel required for the
expansion of the Company’s activities, or the loss of any such persons, could have a material adverse effect on its business, results
of operations and financial condition.
The
Company’s revenues have historically been derived from sales made to a small number of customers. The Company has discontinued
prior operations related to its core business. To succeed, we will need to recommence our operations and achieve sales to a materially
larger number of customers.
The
Company’s consulting revenues relate to their commercializing of its products or expanding the number of customers
purchasing its products and services. The Company had $12,500 in operating revenues, net of discounts, for the six months
ended June 30, 2023, and $36,499 and $14,887 in operating revenues, net of discounts for the years ended December 31, 2022 and
2021, respectively as they have commenced sales of IsoPet®.
Many
of the Company’s competitors have greater resources and experience than the Company has.
Many
of the Company’s competitors have greater financial resources, longer history, broader experience, greater name recognition, and
more substantial operations than the Company has, and they represent substantial long-term competition for us. The Company’s competitors
may be able to devote more financial and human resources than the Company can to research, new product development, regulatory approvals,
and marketing and sales. The Company’s competitors may develop or market products that are viewed by customers as more effective
or more economical than the Company’s products. There is no assurance that the Company will be able to compete effectively against
current and future competitors, and such competitive pressures may adversely affect the Company’s business and results of operations.
The
Company’s future revenues depend upon acceptance of its current and future products in the markets in which they compete.
The
Company’s future revenues depend upon receipt of financing, regulatory approval and the successful production, marketing, and sales
of the various isotopes the Company might market in the future. The rate and level of market acceptance of each of these products, if
any, may vary depending on the perception by physicians and other members of the healthcare community of its safety and efficacy as compared
to that of any competing products; the clinical outcomes of any patients treated; the effectiveness of its sales and marketing efforts
in the United States, Europe, Far East, Middle East, and Russia; any unfavorable publicity concerning its products or similar products;
the price of the Company’s products relative to other products or competing treatments; any decrease in current reimbursement rates
from the Centers for Medicare and Medicaid Services or third-party payers; regulatory developments related to the manufacture or continued
use of its products; availability of sufficient supplies to either purchase or manufacture its products; its ability to produce sufficient
quantities of its products; and the ability of physicians to properly utilize its products and avoid excessive levels of radiation to
patients. Any material adverse developments with respect to the commercialization of any such products may adversely affect revenues
and may cause the Company to continue to incur losses in the future.
The
Company currently relies on a single supplier for Y-90 particles, and that supplier is the only supplier in the United States. An inability
to procure Y-90 particles will harm the Company’s business.
There
is only one supplier of Y-90 particles in the United States, requiring us to rely entirely on this supplier to provide the Y-90 particles
needed to produce RadioGelTM. If we are unable to obtain a sufficient supply of Y-90 particles, we will not be able to proceed
with our development of RadioGelTM and our business may be materially harmed.
The
Company currently subcontracts the manufacturing of RadioGelTM to IsoTherapeutics. PerkinElmer Inc. is the sole supplier
of the Y-90 particles used by IsoTherapeutics and is the only supplier of Y-90 particles in the United States. In the event PerkinElmer
is unable to satisfy our supply requirements or stope producing Y-90 particles, we will be unable to continue with development of RadioGel™
and our business would be materially harmed.
The
Company will rely heavily on a limited number of suppliers for the foreseeable future.
Some
of the products the Company might market, and components thereof are currently available only from a limited number of suppliers, several
of which are international suppliers. Failure to obtain deliveries from these sources could have a material adverse effect on the Company’s
ability to operate.
The
Company may incur material losses and costs as a result of product liability claims that may be brought against it.
The
Company faces an inherent business risk of exposure to product liability claims in the event that products supplied by the Company fail
to perform as expected or such products result, or is alleged to result, in bodily injury. Any such claims may also result in adverse
publicity, which could damage the Company’s reputation by raising questions about the safety and efficacy of its products and could
interfere with its efforts to market its products. A successful product liability claim against the Company in excess of its available
insurance coverage or established reserves may have a material adverse effect on its business. Although the Company currently maintains
liability insurance in amounts it believes are commercially reasonable, any product liability the Company may incur may exceed its insurance
coverage.
The
Company is subject to the risk that certain third parties may mishandle the Company’s products.
If
the Company markets products, the Company likely will rely on third parties, such as commercial air courier companies, to deliver the
products, and on other third parties to package the products in certain specialized packaging forms requested by customers. The Company
thus would be subject to the risk that these third parties may mishandle its product, which could result in material adverse effects,
particularly given the radioactive nature of some of the products.
The
Company is subject to uncertainties regarding reimbursement for use of its products.
Hospitals
and freestanding clinics may be less likely to purchase the Company’s products if they cannot be assured of receiving favorable
reimbursement for treatments using its products from third-party payers, such as Medicare and private health insurance plans. Third-party
payers are increasingly challenging the pricing of certain medical services or devices, and there is no assurance that they will reimburse
the Company’s customers at levels sufficient for it to maintain favorable sales and price levels for the Company’s products.
There is no uniform policy on reimbursement among third-party payers, and there is no assurance that the Company’s products will
continue to qualify for reimbursement from all third-party payers or that reimbursement rates will not be reduced. A reduction in or
elimination of third-party reimbursement for treatments using the Company’s products would likely have a material adverse effect
on the Company’s revenues.
The
Company’s future growth is largely dependent upon its ability to develop new technologies that achieve market acceptance with appropriate
margins.
The
Company’s business operates in global markets that are characterized by rapidly changing technologies and evolving industry standards.
Accordingly, future growth rates depend upon a number of factors, including the Company’s ability to (i) identify emerging technological
trends in the Company’s target end-markets, (ii) develop and maintain competitive products, (iii) enhance the Company’s products
by adding innovative features that differentiate the Company’s products from those of its competitors, and (iv) develop, manufacture
and bring products to market quickly and cost-effectively. The Company’s ability to develop new products based on technological
innovation can affect the Company’s competitive position and requires the investment of significant resources. These development
efforts divert resources from other potential investments in the Company’s business, and they may not lead to the development of
new technologies or products on a timely basis or that meet the needs of the Company’s customers as fully as competitive offerings.
In addition, the markets for the Company’s products may not develop or grow as it currently anticipates. The failure of the Company’s
technologies or products to gain market acceptance due to more attractive offerings by the Company’s competitors could significantly
reduce the Company’s revenues and adversely affect the Company’s competitive standing and prospects.
The
Company may rely on third parties to represent it locally in the marketing and sales of its products in international markets and its
revenue may depend on the efforts and results of those third parties.
The
Company’s future success may depend, in part, on its ability to enter into and maintain collaborative relationships with one or
more third parties, the collaborator’s strategic interest in the Company’s products and the Company’s products under
development, and the collaborator’s ability to successfully market and sell any such products.
The
Company intends to pursue collaborative arrangements regarding the marketing and sales of its products; however, it may not be able to
establish or maintain such collaborative arrangements, or if it is able to do so, the Company’s collaborators may not be effective
in marketing and selling its products. To the extent that the Company decides not to, or is unable to, enter into collaborative arrangements
with respect to the sales and marketing of its products, significant capital expenditures, management resources and time will be required
to establish and develop an in-house marketing and sales force with technical expertise. To the extent that the Company depends on third
parties for marketing and distribution, any revenues received by the Company will depend upon the efforts and results of such third parties,
which may or may not be successful.
The
Company may pursue strategic acquisitions that may have an adverse impact on its business.
Executing
the Company’s business strategy may involve pursuing and consummating strategic transactions to acquire complementary businesses
or technologies. In pursuing these strategic transactions, even if the Company does not consummate them, or in consummating such transactions
and integrating the acquired business or technology, the Company may expend significant financial and management resources and incur
other significant costs and expenses. There is no assurance that any strategic transactions will result in additional revenues or other
strategic benefits for the Company’s business. The Company may issue the Company’s stock as consideration for acquisitions,
joint ventures or other strategic transactions, and the use of stock as purchase consideration could dilute the interests of its current
stockholders. In addition, the Company may obtain debt financing in connection with an acquisition. Any such debt financing may involve
restrictive covenants relating to capital-raising activities and other financial and operational matters, which may make it more difficult
for the Company to obtain additional capital and pursue business opportunities, including potential acquisitions. In addition, such debt
financing may impair the Company’s ability to obtain future additional financing for working capital, capital expenditures, acquisitions,
general corporate or other purposes, and a substantial portion of cash flows, if any, from the Company’s operations may be dedicated
to interest payments and debt repayment, thereby reducing the funds available to the Company for other purposes.
The
Company will need to hire additional qualified accounting personnel in order to remediate a material weakness in its internal control
over financial accounting, and the Company will need to expend any additional resources and efforts that may be necessary to establish
and to maintain the effectiveness of its internal control over financial reporting and its disclosure controls and procedures.
As
a public company, the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and the Sarbanes-Oxley
Act of 2002. The Company’s management is required to evaluate and disclose its assessment of the effectiveness of the Company’s
internal control over financial reporting as of each year-end, including disclosing any “material weakness” in the Company’s
internal control over financial reporting. A material weakness is a control deficiency, or combination of control deficiencies, that
results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented
or detected. As a result of its assessment, management has determined that there is a material weakness due to the lack of segregation
of duties and, due to this material weakness, management concluded that, as of December 31, 2022 and 2021, the Company’s
internal control over financial reporting was ineffective. This material weakness has the potential of adversely impacting the Company’s
financial reporting process and the Company’s financial reports. Because of this material weakness, management also concluded that
the Company’s disclosure controls and procedures were ineffective as of December 31, 2022 and 2021. The Company needs
to hire additional qualified accounting personnel in order to resolve this material weakness. The Company also will need to expend any
additional resources and efforts that may be necessary to establish and to maintain the effectiveness of the Company’s internal
control over financial reporting and disclosure controls and procedures.
The
Company’s patented or other technologies may infringe on other patents, which may expose it to costly litigation.
It
is possible that the Company’s patented or other technologies may infringe on patents or other rights owned by others. The Company
may have to alter its products or processes, pay licensing fees, defend infringement actions or challenge the validity of the patents
in court, or cease activities altogether because of patent rights of third parties, thereby causing additional unexpected costs and delays
to the Company. Patent litigation is costly and time consuming, and the Company may not have sufficient resources to pursue such litigation.
If the Company does not obtain a license under such patents, if it is found liable for infringement, or if it is not able to have such
patents declared invalid, the Company may be liable for significant money damages, may encounter significant delays in bringing products
to market or may be precluded from participating in the manufacture, use or sale of products or methods of treatment requiring such licenses.
Protecting
the Company’s intellectual property is critical to its innovation efforts.
The
Company owns or has a license to use several U.S. and foreign patents and patent applications, trademarks and copyrights. The Company’s
intellectual property rights may be challenged, invalidated or infringed upon by third parties, or it may be unable to maintain, renew
or enter into new licenses of third party proprietary intellectual property on commercially reasonable terms. In some non-U.S. countries,
laws affecting intellectual property are uncertain in their application, which can adversely affect the scope or enforceability of the
Company’s patents and other intellectual property rights. Any of these events or factors could diminish or cause the Company to
lose the competitive advantages associated with the Company’s intellectual property, subject the Company to judgments, penalties
and significant litigation costs, or temporarily or permanently disrupt its sales and marketing of the affected products or services.
The
Company may not be able to protect its trade secrets and other unpatented proprietary technology, which could give competitors an advantage.
The
Company relies upon trade secrets and other unpatented proprietary technology. The Company may not be able to adequately protect its
rights with regard to such unpatented proprietary technology, or competitors may independently develop substantially equivalent technology.
The Company seeks to protect trade secrets and proprietary knowledge, in part through confidentiality agreements with its employees,
consultants, advisors and collaborators. Nevertheless, these agreements may not effectively prevent disclosure of the Company’s
confidential information and may not provide the Company with an adequate remedy in the event of unauthorized disclosure of such information,
and as result the Company’s competitors could gain a competitive advantage.
The
Company is subject to extensive government regulation in jurisdictions around the world in which it does business. Regulations address,
among other things, environmental compliance, import/export restrictions, healthcare services, taxes and financial reporting, and those
regulations can significantly increase the cost of doing business, which in turn can negatively impact operations, financial results
and cash flow.
If
the Company is successful in developing manufacturing capability, the Company will be subject to extensive government regulation and
intervention both in the U.S. and in all foreign jurisdictions in which it conducts business. Compliance with applicable laws and regulations
will result in higher capital expenditures and operating costs, and changes to current regulations with which the Company complies can
necessitate further capital expenditures and increases in operating costs to enable continued compliance. Additionally, from time to
time, the Company may be involved in proceedings under certain of these laws and regulations. Foreign operations are subject to political
instabilities, restrictions on funds transfers, import/export restrictions, and currency fluctuation.
RISKS
RELATED TO THE COMPANY’S COMMON STOCK
The
Company’s common stock is currently quoted on the OTCQB Marketplace. Failure to develop or maintain a more active trading
market may negatively affect the value of the Company’s common stock, may deter some potential investors from purchasing the Company’s
common stock or other equity securities, and may make it difficult or impossible for stockholders to sell their shares of common stock.
The
Company’s average daily volume of shares traded for the years ended December 31, 2022 and 2021 was 496,720 and 2,074,138, respectively. Failure to develop or maintain an active trading market may negatively affect the value of the Company’s
common stock, may make some potential investors unwilling to purchase the Company’s common stock or equity securities that are
convertible into or exercisable for the Company’s common stock, and may make it difficult or impossible for the Company’s
stockholders to sell their shares of common stock and recover any part of their investment.
The
Company’s outstanding securities, the stock or other securities that it may become obligated to issue under existing agreements,
and certain provisions of those securities, may cause immediate and substantial dilution to existing stockholders and may make it more
difficult to raise additional equity capital.
The
Company had 370,541,528 shares of common stock outstanding on September 18, 2023. The Company also had outstanding on that
date dilutive securities consisting of preferred stock, restricted stock units, options, and warrants (collectively, “Common
Stock Equivalents”) that if they had been exercised and converted in full on September 18, 2023, would have resulted
in the issuance of up to 40,002,379 additional shares of common stock. The issuance of shares upon the exercise of the Common
Stock Equivalents may result in substantial dilution to each stockholder by reducing that stockholder’s percentage ownership of
the Company’s total outstanding shares of common stock. The issuance of some or all those warrants and any exercise of those warrants
will have the effect of further diluting the percentage ownership of the Company’s other stockholders.
Future
sales of the Company’s securities, including sales following exercise or conversion of derivative securities, or the perception
that such sales may occur, may depress the price of common stock and could encourage short sales.
The
sale or availability for sale of substantial amounts of the Company’s shares in the public market, including shares issuable upon
exercise of the Common Stock Equivalents, or the perception that such sales may occur, may adversely affect the market price of the Company’s
common stock. Any decline in the price of the Company’s common stock may encourage short sales, which could place further downward
pressure on the price of the Company’s common stock.
The
Company’s stock price is likely to be volatile.
For
the six months ended June 30, 2023, the reported low closing price for the Company’s common stock was $0.0425 per
share, and the reported high closing price was $0.1091 per share. For the year ended December 31, 2022, the reported low closing price
for the Company’s common stock was $0.04 per share, and the reported high closing price was $0.1264 per share. For the year
ended December 31, 2021, the reported low closing price for the Company’s common stock was $0.068 per share, and the reported high
closing price was $0.2592 per share. There is generally significant volatility in the market prices, as well as limited liquidity, of
securities of early-stage companies, particularly early stage medical product companies. Contributing to this volatility
are various events that can affect the Company’s stock price in a positive or negative manner. These events include, but are not
limited to: governmental approvals, refusals to approve, regulations or other actions; market acceptance and sales growth of the Company’s
products; litigation involving the Company or the Company’s industry; developments or disputes concerning the Company’s patents
or other proprietary rights; changes in the structure of healthcare payment systems; departure of key personnel; future sales of its
securities; fluctuations in its financial results or those of companies that are perceived to be similar to us; investors’ general
perception of us; and general economic, industry and market conditions. If any of these events occur, it could cause the Company’s
stock price to fall, and any of these events may cause the Company’s stock price to be volatile.
The
Company’s common stock is subject to the “Penny Stock” rules of the SEC and the trading market in its securities is
limited, which makes transactions in its common stock cumbersome and may reduce the value of an investment in the Company’s stock.
The
SEC has adopted Rule 3a51-1, which establishes the definition of a “penny stock,” for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires that a broker or dealer approve
a person’s account for transactions in penny stocks and that the broker or dealer receive from the investor a written agreement
to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and
investment experience and objectives of the person and must make a reasonable determination that the transactions in penny stocks are
suitable for that person and that the person has sufficient knowledge and experience in financial matters to be capable of evaluating
the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to
the penny stock market, which sets forth the basis on which the broker or dealer made the suitability determination, and that the broker
or dealer received a signed, written agreement from the investor prior to the transaction.
Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more
difficult for investors to dispose of the Company’s common stock and may cause a decline in the market value of its stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies
available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the limited market in penny stocks.
As
a result of the Company issuing preferred stock, the rights of holders of the Company’s common stock and the value of the Company’s
common stock may be adversely affected.
The
Company’s Board of Directors is authorized to issue classes or series of preferred stock, without any action on the part of the
stockholders. The Company’s Board of Directors also has the power, without stockholder approval, to set the terms of any such classes
or series of preferred stock, including voting rights, dividend rights and preferences over the common stock with respect to dividends
or upon the liquidation, dissolution or winding-up of its business, and other terms. The Company has issued preferred stock that has
a preference over the common stock with respect to the payment of dividends or upon liquidation, dissolution or winding-up, and with
respect to voting rights. In accordance with that and with the issuance of preferred stock, our common stockholders voting rights have
been diluted and it is possible that the rights of holders of the common stock or the value of the common stock have been adversely affected.
The
Company does not expect to pay any dividends on common stock for the foreseeable future.
The
Company has not paid any cash dividends on its common stock to date and does not anticipate it will pay cash dividends on its common
stock in the foreseeable future. Accordingly, stockholders must be prepared to rely on sales of their common stock after price appreciation
to earn an investment return, which may never occur. Any determination to pay dividends in the future will be made at the discretion
of the Company’s board of directors and will depend on the Company’s results of operations, financial conditions, contractual
restrictions, restrictions imposed by applicable law, and other factors that the Company’s board deems relevant.
Pandemics
including COVID-19 may adversely affect our business.
The
unprecedented events related to COVID-19 and the variants, the disease caused by the novel coronavirus (SARS-CoV-2), have had
significant health, economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot
predict as the global pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations
also cannot be predicted.
Our
ability to access the capital markets is unknown during the COVID-19 pandemic. Any such limitation on available financing would adversely
affect our business.
GENERAL
RISK FACTORS
Volatility
in raw material and energy costs, interruption in ordinary sources of supply, and an inability to recover from unanticipated increases
in energy and raw material costs could result in lost sales or could increase significantly the cost of doing business.
Market
and economic conditions affecting the costs of raw materials, utilities, energy costs, and infrastructure required to provide for the
delivery of the Company’s products and services are beyond the Company’s control. Any disruption or halt in supplies, or
rapid escalations in costs, could adversely affect the Company’s ability to manufacture products or to competitively price the
Company’s products in the marketplace. To date, the ultimate impact of energy costs increases has been mitigated through price
increases or offset through improved process efficiencies; however, continuing escalation of energy costs could have a negative impact
upon the Company’s business and financial performance.
General
economic conditions in markets in which the Company does business can impact the demand for the Company’s goods and services. Decreased
demand for the Company’s products and services could have a negative impact on its financial performance and cash flow.
Demand
for the Company’s products and services, in part, depends on the general economic conditions affecting the countries and industries
in which the Company does business. A downturn in economic conditions in a country or industry that the Company serves may adversely
affect the demand for the Company’s products and services, in turn negatively impacting the Company’s operations and financial
results. Further, changes in demand for the Company’s products and services can magnify the impact of economic cycles on the Company’s
businesses. Unanticipated contract terminations by customers can negatively impact operations, financial results and cash flow. The Company’s
earnings, cash flow and financial position are exposed to financial market risks worldwide, including interest rate and currency exchange
rate fluctuations and exchange rate controls. Fluctuations in domestic and world financial markets could adversely affect interest rates
and impact the Company’s ability to obtain credit or attract investors.
RISKS
RELATED TO THIS OFFERING
Purchasers
in this offering will experience immediate and substantial dilution in the book value of their investment.
Because
the public offering price per share is substantially higher than the book value per share of our common stock, you will incur immediate
and substantial dilution in the net tangible book value of the common stock you purchase in this offering. After giving effect to the
assumed sale by us of the maximum of 50,000,000 shares of our common stock at an assumed public offering price of $0.08 per share, and
after deducting the estimated offering expenses payable by us, which we estimate will be approximately $100,000, you will suffer immediate
and substantial dilution of $0.07 per share in the pro forma net tangible book value of the common stock you purchase in this
offering.
To
the extent outstanding options, warrants or other derivative securities are ultimately exercised or converted, or if we issue restricted
stock to our employees under our 2015 Omnibus Securities and Incentive Plan, there will be further dilution to investors who purchase
shares in this offering. In addition, if we issue additional equity securities or derivative securities, investors purchasing shares
in this offering will experience additional dilution. For a further description of the dilution that you will experience immediately
after this offering, see “Dilution” on page 19.
We
may allocate the net proceeds from this offering in ways that differ from our estimates based on our current plans and assumptions discussed
in the section titled “Use of Proceeds” and with which you may not agree.
The
allocation of net proceeds of the offering set forth in the “Use of Proceeds” section of this Offering Circular represents
our estimates based upon our current plans and assumptions regarding industry and general economic conditions, our future revenues and
expenditures. The amounts and timing of our actual expenditures will depend on numerous factors, including market conditions, cash generated
by our operations, business developments and related rate of growth. We may find it necessary or advisable to use portions of the proceeds
from this offering for other purposes. Circumstances that may give rise to a change in the use of proceeds and the alternate purposes
for which the proceeds may be used are discussed in the section in this Offering Circular entitled “Use of Proceeds.”
You may not have an opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use
our proceeds. As a result, you and other stockholders may not agree with our decisions. See “Use of Proceeds” on page
18 for additional information.
Sales
of a substantial number of shares of our common stock, or the perception that such sales may occur, may adversely impact the price of
our common stock.
Sales
of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception that
such sales may occur, may adversely impact the price of our common stock, even if there is no relationship between such sales and the
performance of our business. As of September 18, 2023, we had 370,541,528 shares of common stock outstanding, as well as
outstanding options to purchase an aggregate of 2,252,809 shares of our common stock at a weighted average exercise price of $0.04 per
share, 2,656,672 shares of common stock issuable upon conversion of outstanding shares of our preferred stock, outstanding warrants
to purchase up to an aggregate of 25,665,000 shares of our common stock at a weighted average exercise price of $0.079
per share, and 2,175,000 outstanding restricted stock units at a weighted average value of $0.091 per share. The exercise
of such outstanding derivative securities may result in further dilution of your investment.
USE
OF PROCEEDS
The
maximum gross proceeds from the sale of the shares of our common stock being offered hereby is $4,000,000. Assuming that we sell the
maximum number of shares of common stock being offered pursuant to this Offering Circular, we currently estimate that we will receive
net proceeds of approximately $3,900,000 after the payment of estimated offering expenses payable by us. The estimate of the budget
for offering costs is an estimate only, and the actual offering costs may differ from those expected by management.
We
currently intend to use the majority of the proceeds we receive from this offering to expand our animal therapy business. This includes
supporting the startup of regional centers beyond our initial pilot clinic, polymer developmental testing to optimize the production
parameters to reduce production costs and to enhance reproducibility with FDA Good Manufacturing Practices (“GMP”)
protocols, enhance product yield and shorten the product ordering to delivery cycle. We also intend to expand animal testing at the University
of Missouri to include equoid sarcoids in horses and to engage other universities for additional animal studies to generate more data
to help market IsoPet to the veterinary community. We will also continue our emphasis on intellectual property protection by expanding
the number of allowed claims on our current patent applications and completing the previous filing on particle production filing in both
the United States and international markets. We will enhance our propriety polymer intellectual property by investing in several production
runs to optimize the specification ranges. We intend to complete the pre-clinical testing required to file an IDE with the FDA to initiate
and target to complete the pilot clinical trials for Papillary thyroid carcinoma to demonstrate product safety, which we believe will
significantly improve our ability to partner and/or license our product for human therapy. In the event we secure less than $4,000,000
from this offering, we intend to proceed with preparing the IDE, but may require additional financing to complete the submission.
In
addition, we intend to apply certain proceeds towards offering expenses, public company and corporate costs, research and development
and other application development, and working capital. We expect that approximately 10% to 20% of the proceeds from this offering will
be used for general working capital purposes.
Pending
these uses, we intend to invest the net proceeds from this offering in short-term, investment-grade interest-bearing securities such
as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government.
The
precise amounts that we will devote to each of the foregoing items, and the timing of expenditures, will vary depending on numerous factors.
The
expected use of net proceeds from this offering represents our intentions based on our current plans and business conditions, which could
change in the future as our plans and business conditions evolve and change. The amounts and timing of our actual expenditures, specifically
with respect to working capital, may vary significantly depending on numerous factors. As a result, the Company reserves the right to
change the above use of proceeds if management believes it is in the best interests of the Company.
In
the event we do not sell all of the shares being offered, we may seek additional financing from other sources to support the intended
use of proceeds indicated above. If we secure additional equity funding, investors in this offering would be diluted. No plans for additional
financing are currently being contemplated by the Company; however, in the event only the minimum proceeds are received in this offering,
management may seek additional financing. No assurances can be given that additional financing would be available, and if available,
on terms acceptable to us.
The
following table sets forth the uses of proceeds assuming the sale of 100%, 75%, 50% and 30% of the securities offered for sale
by the Company at $0.08 per share. No assurance can be given that we will raise the full $4,000,000 as reflected
in the following table:
| Use
of Proceeds (at $.10 per share)(1) | |
100% of
Offering | | |
75% of
Offering | | |
50% of
Offering | |
| Production Transformation | |
$ | 120,000 | | |
| 120,000 | | |
| 120,000 | |
| Animal Market Development | |
| 350,000 | | |
| 350,000 | | |
| 350,000 | |
| Pilot Clinical Trials | |
| 2,450,000 | | |
| 1,810,000 | | |
| 1,010,000 | |
| Working capital(2) | |
| 1,080,000 | | |
| 720,000 | | |
| 520,000 | |
| TOTAL | |
$ | 4,000,000 | | |
$ | 3,000,000 | | |
$ | 2,000,000 | |
| |
(1) |
As
of the date of this Offering Circular, we have not entered into any agreements with selling agents or broker dealers for the sale
of the Offered Shares, and currently do not intend to retain a selling agent or broker dealer to assist in the Offering. As a result,
no proceeds are currently allocated to pay any sales commissions. However, we reserve the right to engage FINRA-member broker-dealers
to aid in the sale of the shares of our common stock being offered hereby. In the event we engage FINRA-member broker-dealers, we
expect to pay sales commissions of up to 7.0% of the gross offering proceeds from their sales of shares of our common stock pursuant
to this Offering Circular, although we may pay sales commissions greater than 7.0%. |
DILUTION
The
term “dilution” means the reduction of any one share as a percentage of the aggregate shares outstanding. Assuming that we
sell the maximum number of shares of common stock being offered pursuant to this Offering Circular, the shares of common stock being
offered hereby will constitute approximately 13% of the total issued and outstanding shares of common stock of the Company immediately
after the offering, assuming that we do not issue any additional shares of our common stock in the interim. We currently anticipate that
subsequent to this offering we may require additional capital and such capital may take the form of other stock or securities or debt
convertible into stock. The issuance of such additional securities will result in additional dilution to our stockholders.
Immediate
Dilution
An
early-stage company typically sells its shares (or grants options over its shares) to its founders and early employees at a very low
cash cost, because they are, in effect, putting their “sweat equity” into the company. When the company seeks cash investments
from outside investors, like you, the new investors typically pay a much larger sum for their shares than the founders or earlier investors,
which means that the cash value of your stake is diluted because all the shares are worth the same amount, and you paid more than earlier
investors for your shares.
If
100% of the Shares Are Sold for Cash:
As
of June 30, 2023, the net tangible book value of our shares of common stock was $0.005.
Upon
completion of this offering, in the event that 100% of the shares are sold for cash for an aggregate amount of $4,000,000, the net tangible
book value of the 397,541,528 shares to be outstanding will be $3,949,650 or approximately $0.01 per share. As a
result, the net tangible book value of the shares held by our existing shareholders will be increased by $0.005 per share without
any additional investment on their part. Investors in the offering will incur an immediate dilution of $0.07 per share, or 87.5%.
After
completion of this offering, assuming 50,000,000 shares are sold (of which 23,000,000 have already been sold), investors in the
offering will own 13% of the total number of shares then outstanding for which they will have made a cash investment of $4,000,000
at an offering price of $0.08 per share. Our existing shareholders will own 87.5% of the total number of shares then outstanding,
for which they have invested $893,020 or $0.002 per share.
If
75% of the Shares Are Sold:
Upon
completion of this offering, in the event that 75% of the shares are sold for cash for an aggregate amount of $3,000,000, the net tangible
book value of the 385,041,528 shares to be outstanding will be $2,949,650 or approximately $0.008 per share. As
a result, the net tangible book value of the shares held by our existing shareholders will be increased by $0.003 per share without
any additional investment on their part. Investors in the offering will incur an immediate dilution of $0.072 per share, or 90%.
After
completion of this offering, assuming 50,000,000 shares are sold (of which 23,000,000 have already been sold), investors in the
offering will own 9.7% of the total number of shares then outstanding for which they will have made a cash investment of $3,000,000
at an offering price of $0.08 per share. Our existing shareholders will own 93.5% of the total number of shares then outstanding,
for which they have invested $893,020 or $0.002 per share.
If
50% of the Shares Are Sold:
Upon
completion of this offering, in the event that 50% of the shares are sold for cash for an aggregate amount of $2,000,000, the net tangible
book value of the 372,541,528 shares to be outstanding will be $1,949,650 or approximately $0.005 per share. As
a result, the net tangible book value of the shares held by our existing shareholders will be increased by $0.00 per share without
any additional investment on their part. Investors in the offering will incur an immediate dilution of $0.075 per share, or 93.75%.
After
completion of this offering, assuming 50,000,000 shares are sold (of which 23,000,000 have already been sold), investors in the
offering will own 6.7% of the total number of shares then outstanding for which they will have made a cash investment of $2,000,000
at an offering price of $0.08 per share. Our existing shareholders will own 94% of the total number of shares then outstanding,
for which they have $893,020 or $0.002 per share.
As of the date of this
Offering Circular, 23,000,000 share have been sold in this Offering at a price of $0.08 per share, for aggregate gross
proceeds of $1,840,000, before offering fees and expenses. This represents 46% of the Offering.
In the event all shares are not
sold upon completion of this offering, the following table details the range of possible outcomes from the offering assuming the sale
of 100%, 75%, and 50% of the shares for cash. The information in this table would be affected in the event that future investments
were made at a different valuation.
| Funding Level | |
100% of
Shares Sold | | |
75% of
Shares Sold | | |
50% of
Shares Sold | |
| | |
| | |
| | |
| |
| Offering price per share of common stock | |
$ | 0.08 | | |
$ | 0.08 | | |
$ | 0.08 | |
| Net tangible book value per common share before the offering (based on 370,541,528 shares outstanding
as of June 30, 2023) | |
$ | 0.01 | | |
$ | 0.008 | | |
$ | 0.005 | |
| Increase in net tangible book value per share attributable to shares offered in this offering (based on 50,000,000 shares) | |
$ | 0.005 | | |
$ | 0.003 | | |
$ | 0.000 | |
| Pro forma net tangible book value per common share after the offering (based on 370,541,528 shares) | |
$ | | | |
$ | | | |
$ | | |
| Dilution of net tangible book value per share to investors in this offering | |
$ | 0.07 | | |
$ | 0.072 | | |
$ | 0.075 | |
| Dilution as a percentage of offering price | |
| 87.5 | % | |
| 90 | % | |
| 93.75 | % |
Based
on 370,541,528 shares of common stock outstanding as of September 18, 2023, which includes 23,000,000 shares issued
in this Offering. Total stockholder’s equity was $1,676,840 as of June 30, 2023.
Since
inception, the officers, directors, promoters and affiliated persons have paid an aggregate average price of $0.005 per share of common
stock in comparison to the anticipated offering price of $0.08 per common share.
To
the extent that any of the outstanding options or warrants to purchase shares of our common stock are exercised, new investors may experience
further dilution. In addition, we may issue additional shares of common stock, other equity securities or convertible debt securities
in the future, which may cause further dilution to new investors in this offering.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
The
following discussion and analysis is intended as a review of significant factors affecting the Company’s financial condition and
results of operations for the periods indicated. The discussion should be read in conjunction with the Company’s financial statements
and the notes included elsewhere in this Offering Circular. In addition to historical information, the following Management’s Discussion
and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties.
The Company’s actual results could differ significantly from those anticipated in these forward-looking statements as a result
of the risk factors set forth above and other factors discussed in this Offering Circular.
Vivos
Inc. is a 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.
Results
of Operations
Comparison
of the Six Months Ended June 30, 2023 and 2022
The
following table sets forth information from our statements of operations for the six months ended June 30, 2023 and 2022:
| | |
Six
Months Ended
June 30, 2023 | | |
Six
Months Ended
June 30, 2022 | |
| Revenues | |
$ | 12,500 | | |
$ | 23,500 | |
| Cost
of goods sold | |
| (16,536 | ) | |
| (5,018 | ) |
| Gross
(loss) profit | |
| (4,036 | ) | |
| 18,482 | |
| Operating
expenses | |
| (1,158,687 | ) | |
| (1,553,513 | ) |
| Operating
loss | |
| (1,162,723 | ) | |
| (1,535,031 | ) |
| Non-operating
income (expense) | |
| 11,879 | | |
| 47,588 | |
| Net
loss | |
$ | (1,150,844 | ) | |
$ | (1,487,443 | ) |
Revenues
and Cost of Goods Sold
Revenue
was $12,500 and $23,500 for the six months ended June 30, 2023 and 2022, respectively. All revenue recognized in
the six months ended June 30, 2023 and 2022 relate to consulting income with respect to the IsoPet® therapies.
Management
does not anticipate that the Company will generate sufficient revenue to sustain operations until such time as the Company secures multiple
revenue-generating arrangements with respect to RadioGel™ and/or any of our other brachytherapy technologies.
Operating
Expenses
Operating
expenses for the six months ended June 30, 2023 and 2022, respectively consists of the following:
| | |
Six
months ended
June 30, 2023 | | |
Six
months ended
June 30, 2022 | |
| Professional
fees, including stock-based compensation | |
$ | 692,963 | | |
$ | 1,098,507 | |
| Payroll
expenses | |
| 144,521 | | |
| 140,656 | |
| Research
and development | |
| 219,728 | | |
| 241,301 | |
| General
and administrative expenses | |
| 101,475 | | |
| 73,049 | |
| Total
operating expenses | |
$ | 1,158,687 | | |
$ | 1,553,513 | |
Operating
expenses for the six months ended June 30, 2023 and 2022 was $1,158,687 and $1,553,513, respectively. The decrease in operating
expenses from 2022 to 2023 can be attributed to the decrease in professional fees ($1,098,507 for the six months ended
June 30, 2022 versus $692,963 for the six months ended June 30, 2023) related to the patent and trademark protection the Company
undertook in mid 2022 offset by the reduction in stock based compensation related to the RSUs in 2022 versus 2023; the increase
in general and administrative expense ($73,049 for the six months ended June 30, 2022 versus $101,475 for the six months ended
June 30, 2023); the decrease in research and development ($241,301 for the six months ended June 30, 2022 versus $219,728 for
the six months ended June 30, 2023) as the Company ramped up the development of their products in 2022 versus 2023 to include
studies that are required to continue to have their products accepted by the FDA, and an increase in payroll expenses ($140,656 for the
six months ended June 30, 2022 versus $144,521 for the six months ended June 30, 2023) related to the CEOs employment contract
and bonus.
Non-Operating Income (Expense)
Non-operating income (expense)
for the six months ended June 30, 2023
and 2022 consists of the following:
| | |
Six months ended
June 30, 2023 | | |
Six months ended
June 30, 2022 | |
| Gain on debt extinguishment | |
$ | - | | |
$ | 47,588 | |
| Interest income | |
| 11,879 | | |
| - | |
| | |
| | | |
| | |
| Non-operating income (expense) | |
$ | 11,879 | | |
$ | 47,588 | |
Non-operating
income (expense) for the six months ended June 30, 2022 related to the settlement of debt on old payables as they satisfied agreements with vendors to pay a portion of the
payable with the remaining amount forgiven, versus 2023 which represents interest earned on the Company’s cash accounts.
Net
Loss
Our
net loss for the six months ended June 30, 2023 and 2022 was $(1,150,844) and $(1,487,443), respectively.
Comparison
of the Three Months Ended June 30, 2023 and 2022
The
following table sets forth information from our statements of operations for the three months ended June 30, 2023 and 2022:
| | |
Three Months Ended
June 30, 2023 | | |
Three Months Ended
June 30, 2022 | |
| Revenues | |
$ | 6,500 | | |
$ | 10,500 | |
| Cost of goods sold | |
| (9,000 | ) | |
| (2,018 | ) |
| Gross (loss) profit | |
| (2,500 | ) | |
| 8,482 | |
| Operating expenses | |
| (911,905 | ) | |
| (796,020 | ) |
| Operating loss | |
| (914,405 | ) | |
| (787,538 | ) |
| Non-operating income (expense) | |
| 11,879 | | |
| - | |
| Net loss | |
$ | (902,526 | ) | |
$ | (787,538 | ) |
Revenues
and Cost of Goods Sold
Revenue
was $6,500 and $10,500 for the three months ended June 30, 2023 and 2022, respectively. All revenue recognized in the three months ended
June 30, 2023 and 2022 relate to consulting income with respect to the IsoPet® therapies.
Management
does not anticipate that the Company will generate sufficient revenue to sustain operations until such time as the Company secures multiple
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, 2023 and 2022, respectively consists of the following:
| | |
Three months ended
June 30, 2023 | | |
Three months ended
June 30, 2022 | |
| Professional fees, including stock-based compensation | |
$ | 608,747 | | |
$ | 521,470 | |
| Payroll expenses | |
| 72,013 | | |
| 69,869 | |
| Research and development | |
| 173,353 | | |
| 169,732 | |
| General and administrative expenses | |
| 57,792 | | |
| 34,949 | |
| Total operating expenses | |
$ | 911,905 | | |
$ | 796,020 | |
Operating
expenses for the three months ended June 30, 2023 and 2022 was $911,905 and $796,020, respectively. The increase in operating expenses
from 2022 to 2023 can be attributed to the increase in professional fees ($521,470 for the three months ended June 30, 2022 versus $608,747
for the three months ended June 30, 2023) related to the stock based compensation related to the RSUs in 2023 versus 2022; the increase
in general and administrative expense ($34,949 for the three months ended June 30, 2022 versus $57,792 for the three months ended June
30, 2023); the increase in research and development ($169,732 for the three months ended June 30, 2022 versus $173,353 for the three
months ended June 30, 2023) as the Company continued to ramp up the development of their products in 2023 to include studies that are
required to continue to have their products accepted by the FDA, and an increase in payroll expenses ($69,869 for the three months ended
June 30, 2022 versus $72,013 for the three months ended June 30, 2023) related to the CEOs employment contract and bonus.
Non-Operating
Income (Expense)
Non-operating
income (expense) for the three months ended June 30, 2023 and 2022 consists of the following:
| | |
Three months ended
June 30, 2023 | | |
Three months ended
June 30, 2022 | |
| Interest income | |
$ | 11,879 | | |
$ | - | |
| | |
| | | |
| | |
| Non-operating income (expense) | |
$ | 11,879 | | |
$ | - | |
Non-operating
income (expense) for the three months ended June 30, 2023 related to interest earned on the Company’s cash accounts.
Net
Loss
Our
net loss for the three months ended June 30, 2023 and 2022 was $(902,526) and $(787,538), respectively.
Comparison
for the Year Ended December 31, 2022 and December 31, 2021
The
following table sets forth information from our statements of operations for the years ended December 31, 2022 and 2021:
| | |
Year Ended
December 31, 2022 | | |
Year Ended
December 31, 2021 | |
| Revenues | |
$ | 36,499 | | |
$ | 14,887 | |
| Cost of goods sold | |
| (28,779 | ) | |
| (12,000 | ) |
| Gross profit | |
| 7,720 | | |
| 2,887 | |
| Operating expenses | |
| (2,525,469 | ) | |
| (2,504,685 | ) |
| Operating loss | |
| (2,517,749 | ) | |
| (2,501,798 | ) |
| Non-operating income (expense) | |
| 47,588 | | |
| (25,968 | ) |
| Net loss | |
$ | (2,470,161 | ) | |
$ | (2,527,766 | ) |
Revenues
and Cost of Goods Sold
Revenue
was $36,499 and $14,887 for the year ended December 31, 2022 and 2021, respectively. All revenue recognized in the years ended December
31, 2022 and 2021 relate to consulting income with respect to the IsoPet® therapies.
Management
does not anticipate that the Company will generate sufficient revenue to sustain operations until such time as the Company secures multiple
revenue-generating arrangements with respect to RadioGel™ and/or any of our other brachytherapy technologies.
Operating
Expenses
Operating
expenses for the years ended December 31, 2022 and 2021, respectively consists of the following:
| | |
Year Ended
December 31, 2022 | | |
Year Ended
December 31, 2021 | |
| Professional fees, including stock-based compensation | |
$ | 1,755,316 | | |
$ | 1,838,323 | |
| Payroll expenses | |
| 275,240 | | |
| 267,477 | |
| Research and development | |
| 343,802 | | |
| 286,848 | |
| General and administrative expenses | |
| 151,111 | | |
| 112,037 | |
| Total operating expenses | |
$ | 2,525,469 | | |
$ | 2,504,685 | |
Operating
expenses for the years ended December 31, 2022 and 2021 was $2,525,469 and $2,504,685, respectively. The increase in operating expenses
from 2021 to 2022 can be attributed to the decrease in professional fees ($1,755,316 for the year ended December 31, 2022 versus $1,838,323
for the year ended December 31, 2021) as the Company utilized more services due to amending their Regulation A+ and the fees incurred
for the consultants engaged in 2021 including stock-based compensation; the increase in general and administrative expense ($151,111
for the year ended December 31, 2022 versus $112,037 for the year ended December 31, 2021); the increase in research and development
($343,802 for the year ended December 31, 2022 versus $286,848 for the year ended December 31, 2021) as the Company ramped up the development
of their products with the recent raising of capital, and an increase in payroll expenses ($275,240 for the year ended December 31, 2022
versus $267,477 for the year ended December 31, 2021) related to the CEOs employment contract taking effect.
Non-Operating
Income (Expense)
Non-operating
income (expense) for the years ended December 31, 2022 and 2021, respectively consists of the following:
| | |
Years Ended
December 31, 2022 | | |
Years Ended
December 31, 2021 | |
| Interest expense | |
$ | - | | |
$ | (25,375 | ) |
| Forgiveness of debt | |
| 47,588 | | |
| 136,445 | |
| Loss on debt extinguishment | |
| - | | |
| (137,038 | ) |
| Non-operating income (expense) | |
$ | 47,588 | | |
$ | (25,968 | ) |
Non-operating
income (expense) for the year ended December 31, 2022 varied
from the year ended December 31, 2021 primarily due to a decrease in interest expense from $25,375 for the year
ended December 31, 2021 to $0 for the year ended December 31, 2022 as a result of conversions and repayments of
notes payable. In addition, the Company converted a note in January 2021 which resulted in a loss on conversion and recognized a gain
on forgiveness of debt on old payables as they satisfied agreements with vendors to pay a portion of the payable with the remaining amount
forgiven in both 2021 and 2022.
Net
Loss
Our
net loss for the years ended December 31, 2022 and 2021 was $(2,470,161) and $(2,527,766), respectively.
Liquidity
and Capital Resources
At
June 30, 2023, the Company had working capital of $1,676,840, as compared to working capital of $1,661,044 at December
31, 2022 and $1,467,383 at December 31, 2021. During the six months ended June 30, 2023 and 2022, the Company experienced
negative cash flow from operations of $607,963 and $555,417 and had no cash from investing activities. During the year ended
December 31, 2022, the Company experienced negative cash flow from operations of $1,120,058 and realized $1,220,000 of cash
flows from financing activities.
In
2023, the Company raised $650,665 in the sale of common stock and warrants under the Regulation A+ offering as part of its
financing activities, comprised of $640,000 raised in the issuance of 8,000,000 common shares, 2,665,000 Series A warrants and
8,000,000 Series B warrants, and $10,665 in the sale of warrants. In the year ended December 31, 2022, the Company raise $1,220,000
from sales of common stock and warrants. As of
June 30, 2023, the Company did not have any commitments for capital expenditures.
Cash
used in operating activities increased from $555,417 for the six months ended June 30, 2022 to $607,963 for the six months ended June
30, 2023. Cash used in operating activities for the six months ended June 30, 2023 was primarily a result of the Company’s
non-cash items, such as loss from operations, stock based compensation, loss conversion of debt as well as forgiveness of debt as well
as the changes in prepaid expenses and accounts payable in 2022 compared to only having net changes from current assets and liabilities
and stock based compensation in 2023.
Cash used in operating activities increased from $963,819 for the year ended December 31, 2021 to $1,120,058 for
the year ended December 31, 2022. Cash used in operating activities for the year ended December 31, 2022 was primarily a result of the
Company’s non-cash items, such as loss from operations, loss on conversion of debt and share based compensation offset by forgiveness
of debt.
The
Company has generated material operating losses since inception. The Company had a net loss of $1,150,844 for the six months ended
June 30, 2023, a net loss of $2,470,161 for the year ended December 31, 2022, and a net loss of $2,527,766 for the year
ended December 31, 2021. The Company expects to continue to experience net operating losses for the foreseeable future. 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 for working capital as well as business expansion, although the Company can
provide no assurance that additional capital will be available on terms acceptable to the Company, if at all. If the Company is unable
to obtain additional financing to meet its working capital requirements, it may have to curtail its business or cease all operations.
The
Company requires funding of at least $5 million per year to maintain current operating activities.
Over the next 24 months, the Company believes it will cost approximately $9 million to fund: (1) fund the FDA approval process to conduct
human clinical trials, (2) conduct Phase I, pilot, clinical trials, (3) activate several regional clinics to administer IsoPet®
across the county, (4) create an independent production center within the current production site to create a template for future
international manufacturing, and (5) initiate regulatory approval processes outside of the United States.
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 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 to raise additional capital and has engaged in numerous discussions with investment bankers and investors, to
date, 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 associated with such funding will result in material dilution to existing shareholders.
Recent
geopolitical 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.
Our
Chief Executive Officer currently works from his home office in virtual communication with key personnel. Cadwell Laboratories, which
is controlled by Carl Cadwell, a director of the Company, provides office space to management on an as-needed basis until such time as
the Company leases permanent office space.
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.
Accounting
Policies
Use
of Estimates
The
preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates
and assumptions that affect 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. Estimates the Company
considers include criteria for stock-based compensation expense, and valuation allowances on deferred tax assets. Actual results could
differ from those estimates.
Fixed
Assets
Fixed
assets are carried at the lower of cost or net realizable value. Production equipment with a cost of $2,500 or greater and other fixed
assets with a cost of $1,500 or greater are capitalized. Major betterments that extend the useful lives of assets are also capitalized.
Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is recognized in operations.
Depreciation
is computed using the straight-line method over the following estimated useful lives:
| Production
equipment: |
|
3
to 7 years |
| Office
equipment: |
|
2
to 5 years |
| Furniture
and fixtures: |
|
2
to 5 years |
Leasehold
improvements and capital lease assets are amortized over the shorter of the life of the lease or the estimated life of the asset.
Management
of the Company reviews the net carrying value of all of its equipment on an asset by asset basis whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. These reviews consider the net realizable value of each asset, as measured
in accordance with the preceding paragraph, to determine whether impairment in value has occurred, and the need for any asset impairment
write-down.
License
Fees
License
fees are stated at cost, less accumulated amortization. Amortization of license fees is computed using the straight-line method over
the estimated economic useful life of the asset.
Patents
and Intellectual Property
While
patents are being developed or pending, they are not being amortized. Management has determined that the economic life of the patents
to be ten years and amortization, over such ten-year period and on a straight-line basis will begin once the patents have been issued
and the Company begins utilization of the patents through production and sales, resulting in revenues.
The
Company evaluates the recoverability of intangible assets, including patents and intellectual property on a continual basis. Several
factors are used to evaluate intangibles, including, but not limited to, management’s plans for future operations, recent operating
results and projected and expected undiscounted future cash flows.
Revenue
Recognition
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single set of guidelines for revenue recognition
to be used across all industries and requires additional disclosures. The updated guidance introduces a five-step model to achieve its
core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the updated
guidance effective January 1, 2018 using the full retrospective method.
Under
ASC 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to preform respective
obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods
transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable.
The adoption of ASC 606 did not have an impact on the Company’s operations or cash flows.
The
Company recognized revenue as they (i) identified the contracts with each customer; (ii) identified the performance obligation in each
contract; (iii) determined the transaction price in each contract; (iv) were able to allocate the transaction price to the performance
obligations in the contract; and (v) recognized revenue upon the satisfaction of the performance obligation. Upon the sales of the product
to complete the procedures on the animals, the Company recognized revenue as that was considered the performance obligation.
Net
Loss Per Share
The
Company accounts for its loss per common share by replacing primary and fully diluted earnings per share with basic and diluted earnings
per share. Basic loss per share is computed by dividing loss available to common stockholders (the numerator) by the weighted-average
number of common shares outstanding (the denominator) for the period and does not include the impact of any potentially dilutive common
stock equivalents. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator
is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares
had been issued. When the Company incurs a loss, the denominator is not increased by the potentially dilutive common shares as the effect
would be anti-dilutive.
Research
and Development Costs
Research
and developments costs, including salaries, research materials, administrative expenses and contractor fees, are charged to operations
as incurred. The cost of equipment used in research and development activities which has alternative uses is capitalized as part of fixed
assets and not treated as an expense in the period acquired. Depreciation of capitalized equipment used to perform research and development
is classified as research and development expense in the year computed.
Income
Taxes
The
Company accounts for income taxes under FASB ASC Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled.
Under
ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
The
Company files income tax returns in the U.S. federal jurisdiction.
Interest
costs and penalties related to income taxes, if any, will be classified as interest expense and general and administrative costs, respectively,
in the Company’s financial statements. For the years ended December 31, 2022 and 2021, the Company did not recognize
any interest or penalty expense related to income taxes. The Company believes that it is not reasonably possible for the amounts of unrecognized
tax benefits to significantly increase or decrease within the next 12 months.
Fair
Value of Financial Instruments
The
Company adopted ASC Topic 820 (“Fair Value Measurements”) as of January 1, 2008 for financial instruments measured
as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance
with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.
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. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes 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. |
Stock-Based
Compensation
The
Company recognizes compensation costs under FASB ASC Topic 718, Compensation – Stock Compensation and ASU 2018-07. Companies are
required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize
the costs in the financial statements over the period during which employees are required to provide services. Share based compensation
arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase
plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized
over the respective vesting periods of the option grant.
OUR
BUSINESS
Vivos
Inc. is a radiation oncology medical device company engaged in the development of its yttrium-90 (“Y-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.
In
2013 the FDA issued the determination that RadioGel™ is a device for human therapy for non-resectable cancers in humans. This should
result in a faster path than a drug for final approval.
In
January 2018, the Center for Veterinary Medicine Product Classification Group ruled that RadioGel ™ should be
classified as a device for animal therapy of feline sarcomas and canine soft tissue sarcomas. Additionally, after a legal review, the
Company believes that the device classification obtained from the Food and Drug Administration (“FDA”) Center for
Veterinary Medicine is not limited to canine and feline sarcomas, but rather may be extended to a much broader population of veterinary
cancers, including all or most solid tumors in animals. We expect the result of such classification and label review will be that no
additional regulatory approvals are necessary for the use of IsoPet® for the treatment of solid tumors in animals. The
FDA does not have premarket authority over devices with a veterinary classification, and the manufacturers are responsible for assuring
that the product is safe, effective, properly labeled, and otherwise in compliance with all applicable laws and regulations.
Based
on the FDA’s recommendation, RadioGel ™ will be marketed as “IsoPet®” for use
by veterinarians to avoid any confusion between animal and human therapy. The Company already has trademark protection for the “IsoPet®”
name. IsoPet® and RadioGel ™ are used synonymously throughout this document. The only distinction
between IsoPet® and RadioGel ™ is the FDA’s recommendation that we use “IsoPet®”
for veterinarian usage, and reserve “RadioGel ™” for human therapy. Based on these developments,
the Company has shifted its primary focus to the development and marketing of Isopet® for animal therapy, through the
Company’s IsoPet® Solutions division.
IsoPet Solutions
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 worked with three different university veterinarian hospitals on IsoPet® testing and
therapy. Washington State University treated five cats for feline sarcoma and served to develop the procedures which are incorporated
in our label. They concluded that the product was safe and effective in killing cancer cells. Colorado State University demonstrated
the CT and PET-CT imaging of IsoPet®. A contract was signed with University of Missouri to treat canine sarcomas and equine
sarcoids starting in November 2017.
The
dogs were treated for canine soft tissue sarcoma. Response evaluation criteria in solid tumors (“RECIST”) is a set
of published rules that define when tumors in cancer patients improve (respond), stay the same (stabilize), or worsen (progress) during
treatment. The criteria were published by an international collaboration including the European Organisation for Research and Treatment
of Cancer (“EORTC”), National Cancer Institute of the United States, and the National Cancer Institute of Canada Clinical
Trials Group.
The
testing at the University of Missouri met its objective to demonstrate the safety of IsoPet®. Using its advanced CT and PET equipment
it was able to demonstrate that the dose calculations were accurate and that the injections perfused into the cell interstices and did
not stay concentrated in a bolus. This results in a more homogeneous dose distribution. There was insignificant spread of Y-90 outside
the points of injection demonstrating the effectiveness of the particles and the gel to localize the radiation with no spreading to the
blood or other organs nor to urine or fecal material. This confirms that IsoPet® is safe for same day therapy.
The
effectiveness of IsoPet® for life extension was not the prime objective, but it resulted in valuable insights. Of the cases one is
still cancer-free but the others eventually recurred since there was not a strong focus on treating the margins. The
University of Missouri has agreed to become a regional center to administer IsoPet® therapy and will incorporate the improvements
suggested by the testing program.
The
Company anticipates that future profits, if any, will be derived from direct sales of RadioGel™ (under the name IsoPet®)
and related services, and from licensing to private medical and veterinary clinics in the U.S. and internationally. The Company intends
to report the results from the IsoPet® Solutions division as a separate operating segment in accordance with GAAP.
Commencing
in July 2019, the Company recognized its first commercial sale of IsoPet®. A veterinarian from Alaska brought his cat with a re-occurrent
spindle cell sarcoma tumor on his face. The cat had previously received external beam therapy, but now the tumor was growing
rapidly. He was given a high dose of 400Gy with heavy therapy at the margins. This sale met the revenue recognition requirements
under ASC 606 as the performance obligation was satisfied. The Company completed sales for an additional four animals that received the
IsoPet® during 2019.
Our
plan is to incorporate the data assembled from our work with Isopet® in animal therapy to support the Company’s
efforts in the development of our RadioGel™ device candidate, including obtaining approval from the FDA to market and sell
RadioGel™ as a Class II medical 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, less than two microns, 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 radioactivity drops to 5% of its original value after ten days.
The
Company modified its Indication for Use from skin
cancel to cancerous tissue or solid tumors pathologically associated with locoregional papillary thyroid carcinoma and recurrent papillary
thyroid carcinoma having discernable tumors associated with metastatic lymph nodes or extranodal disease in patients who are not surgical
candidates or who have declined surgery, or patients who require post-surgical remnant ablation (for example, after prior incomplete
radioiodine therapy). Papillary thyroid carcinoma belongs to the general class of head and neck tumors for which tumors are accessible
by intraoperative direct needle injection. The Company’s Medical Advisory Board felt that demonstrating efficacy in clinical trials
was much easier with this new indication.
Intellectual
Property
Our
original license with Battelle National Laboratory is reached its end of life in 2022. During the past several years, in
anticipation of this we have expanded our proprietary knowledge, our trademark and patent protection.
Our
RadioGel trademark protection is in 17 countries.
We have expanded our trademark protection from RadioGel to now include IsoPet. We obtained the International Certificate of Registration
for ISOPET, which is the first step to file in several countries.
The
Company received the Patent Cooperation Treaty (“PCT”) International Search Report on our patent application (No.1811.191).
Seven of our claims were immediately ruled as having novelty, inventive step and industrial applicability. This gives us the basis to
extend for many years the patent protection for our proprietary Yttrium-90 phosphate particles utilized in Isopet®
and Radiogel™.
Our
patent team filed our particle patent in more than ten patent offices that collectively cover 63 countries throughout the world. We filed
a continuation-in-part applications number 1774054 in the USA to expand
the claims on our particle patent. The US Patent office recently gave us the Notice of Allowance for our patent to produce our yttrium
phosphate microparticles, US Patent Application Serial No: 16-459,466. We also filed an amendment to correct the wording on our claims
at make them consistent with the USE claims. Ref: 4207-0005; European Patent Application NO. 20 834 229.5; VIVOS INC; Our Ref: FS/53791.
We
filed a hydrogel utility patent in the USA (16309:17/943,311) and internationally (16389:PCT/US22/4374) based on the last eighteen months
of development work to optimize our hydrogel component.
These include reducing the polymer production time and increasing the output by a factor of three. We have also further reduced the level
of trace contaminants to be well below the FDA guidelines.
We
filed a provisional patent (Serial Number 63436562) to protect our innovative improvements in our shipping container, our vial shield,
our syringe shield, and our Peltier chiller. Our objectives were to reduce shipping costs, decrease radiation exposure, and enhance sterility.
These devices will be preferentially used at Mayo Clinics for human clinical studies at and our IsoPet regional treatment centers.
We
anticipate that Precison Radionuclide Therapy will become increasingly important in the future and expand to other isotope and other
indications for use. Therefore, we filed an alternate particle utility patent (Serial number 18/152,137). Vivos Inc will focus its near-term
effort on the Yttrium-90 therapy, which we believe is the best beta emitter; however, we leveraged our hydrogel utility patent to incorporate
other promising isotopes and compounds for a range of future applications. This includes gamma and alpha particle emitters.
IsoPet
Regional Clinics
We
currently have four regional therapy clinics:
| |
● |
Vista
Veterinary Hospital – Kennewick, WA |
| |
● |
University
of Missouri – Columbia, MO |
| |
● |
Johns
Hopkins University – Baltimore, MD |
| |
● |
New
England Equine Practice – Patterson, NY |
Vista
Veterinary Hospital (“Vista”) was selected as the pilot private clinic to initiate commercial sales of IsoPet®.
It is good management practice to implement and learn from a pilot program before spreading to regional clinics across the country. Vista
is located in the Tri-Cities Washington area which is convenient for interactions with key personnel of the Company. The pilot is being
used to
| |
● |
Refine
the Memorandum of Understanding to define all the germane interfaces, roles and liabilities between Vista Inc and the private clinics,
including the pilot responsivity to document and share the key aspects of all therapies with the Company; |
| |
● |
Create
and implement proprietary certification training packages; |
| |
● |
Amend
the production center radioactive material license at IsoTherapeutics, the Company’s IsoPet® production center,
to allow distribution for commercial applications; |
| |
● |
Work
with the pilot program to obtain a radioactive material licensing in an NRC agreement state; |
| |
● |
Create
equipment and supplies list; |
| |
● |
Create
and post regulatory signage; |
| |
● |
Explore
different IsoPet® pricing options; |
| |
● |
Evaluate
different approaches to obtain patients; |
| |
● |
Optimize
patient scheduling practices to reduce cost to the pet owners; |
| |
● |
Develop
communication material and a liability document for the pet owners; and |
| |
● |
Further
refine the therapy techniques for advanced cancers. |
Vista
Veterinary Hospital has done well on two audits by the Washington State Department of Health. The Company is working closely with the
Washington State Department of Health to refine and improve the radioactive material license. The Company has added several detailed
procedures, which will benefit future regional clinics. In addition, a second veterinarian has completed all the preliminary requirements
to become certified. All that remains is to demonstrate proficiency in three therapies.
The
testing at the universities and at Vista Veterinary Hospital have demonstrated that IsoPet® is effective on killing cancer
tissue near the injections. It is most effective in early cases before the cancer has begun to spread. Later stage cancers are
more difficult to treat since the tendrils from the primary cancer site are not well defined and therefore can lead to recurrence.
There
have been 115 expressions of interest in IsoPet® therapy from across the United States, but only about 10% of these
were treated and they were very advanced cases. The reasons are instructive. Most of the cases were for so advanced that the pet parents
found out about IsoPet® on the Internet as a last hope. Several others were internal cancers that could not be reached,
for example deep in the throat. Several cases were treatable, but the pets weighed more than 20 pounds and the pet parents were not willing
to fly them in the “Safe Cargo” holds. Those patients would have been treated by regional clinics once we implement that
strategy. Several cases were mast cell cancers. The Company is confident that those tumors could have been treated, but once killed they
release mast cells in a process called granulation. This could cause a shock to the animal’s system. The Company will focus one
of our clinical studies on the optimum approach for those therapies.
Vista
Veterinary Hospital accepted advanced cancer cases and has gained experience to extend the animal’s lives. The first cat was terminally
ill and had previously had external beam, surgery and chemotherapy. The facial tumor was treated with 400 Gy and the biopsy confirmed
that the cancer was killed. In about seven months the cancer returned in the throat and could not be treated so the cat had to
be put down. Dr. Bauder, the veterinarian pet parent, was still elated about the life extension and is asking us to use him as a reference.
The other cases were also very advanced with multiple tumors and they recurred since they had already spread before therapy.
One animal, Yukon had a large tumor on his leg that was recommended for amputation. The tumor size decreased 50% after the first treatment,
but then stopped decreasing. For the first time a second therapy was administered and the tumor has continued to decrease in size.
Yukon’s life was extended for more than a year until she finally succumbed to metastatic cancer in another location.
Since
IsoPet® has shown to be effective in killing cancer at the site of injection the current focus is in optimizing the techniques
to help the pet resorb the necrotic tissue rapidly. In addition, IsoPet® was used to treat a mast cell tumor. When these
cancers are destroyed, they release their mast cell. The animal was treated with a steroid to counter this effect and to date is doing
well.
The
Company’s efforts are now to obtain more early-stage cancer patients. The biggest obstacle is to convince the veterinarians of
the pet parents to agree with IsoPet® therapy rather than using a more traditional method such as surgery. This is a slow
process due to the conservative nature of the veterinarian professions. This is the prime motivation to continue with additional clinical
trials and to publish the results.
The
Company worked closely with FX Masse to develop nine certification training modules for use in potential regional clinics. These modules
are necessary to satisfy the radioactive material handling licenses. This approach is very cost effective.
Johns
Hopkins University VCTN, Veterinary Clinical Trials Network, is now an Isopet® regional clinic. Additionally, Johns Hopkins
will also perform new Isopet® animal studies on various specific cancers. They have the required radioactive material license and
have completed their training certification for Isopet®. This important relationship will also help meet our objective of obtaining
high quality data on a range of cancers that can be published in leading journals. These publications are the optimal way to increase
awareness of Isopet® and to gain broader acceptance from the veterinarian/oncology community.
Our
objective is to open several regional clinics by the end of 2023 and to participate in a minimum of four conferences to
spread the word about IsoPet in the veterinarian community for treating tumors in small animals and horses. We created a Marketing
Steering Board to provide advice on obtaining new pet patients.
Regulatory
History
Human
Therapy
RadioGel™
has a long regulatory history with the Food and Drug Administration (“FDA”). Initially, the Company submitted a presubmission
(Q130140) to obtain FDA feedback about the proposed product. The FDA requested that the Company file a request for designation with the
Office of Combination Products (RFD130051), which led to the determination that RadioGel™ is a device for human therapy for non-resectable
cancers, which must be reviewed and ultimately regulated by the Center for Devices and Radiological Health (“CDRH”).
The Company then submitted a 510(k) notice for RadioGel™ (K133368), which was found Not Substantially Equivalent due to the lack
of a suitable predicate, and RadioGel™ was assigned to the Class III product code NAW (microspheres). Class III products or devices
are generally the highest risk devices and are therefore subject to the highest level of regulatory review, control and oversight. Class
III products or devices must typically be approved by FDA before they are marketed. Class II devices represent lower risk products or
devices than Class III and require fewer regulatory controls to provide reasonable assurance of the product’s or device’s
safety and effectiveness. In contrast, Class I products and devices are deemed to be lower risk than Class I or II, and are therefore
subject to the least regulatory controls.
A
pre-submission meeting (Q140496) was held with the FDA on June 17, 2014, during which the FDA maintained that RadioGel™ should
be considered a Class III device and therefore subject to pre-market approval. On December 29, 2014, the Company submitted a de novo
petition for RadioGel™ (DEN140043). The de novo petition was denied by the FDA on June 1, 2015, with the FDA providing
numerous comments and questions. On September 29, 2015, the Company submitted a follow-up pre-submission informational meeting request
with the FDA (Q151569). This meeting took place on November 9, 2015, at which time the FDA indicated acceptance of the Company’s
applied dosimetry methods and clarified the FDA’s outstanding questions regarding RadioGel™. Following the November 2015
pre-submission meeting, the Company prepared a new pre-submission package to obtain FDA feedback on the proposed testing methods, intended
to address the concerns raised by the FDA staff and to address the suitability of RadioGel™ for de novo reclassification.
This pre-submission package was presented to the FDA in a meeting on August 29, 2017. During the August 2017 meeting, the FDA clarified
their position on the remaining pre-clinical testing needed for RadioGel™. Specifically, the FDA addressed proposed dosimetry calculating
techniques, dosimetry distribution between injections, hydrogel viscoelastic properties, and the details of the Company’s proposed
animal testing.
The
Company believes that its submissions to the FDA to date have addressed all the FDA staff’s feedback over the past four years.
Of particular importance, the Company has provided corresponding supporting data for proposed future testing of RadioGel™ to address
any remaining questions raised by the FDA. We believe, although no assurances can be given, that the clinical testing modifications presented
to the FDA in August 2017 will result in a de novo reclassification for RadioGel™ by the FDA. In addition, 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 requested that the Company reduce its Indications for Use. To comply with that request, the Company 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.
In
November 2020 the Company submitted a request for a Breakthrough Device Designation. Ultimately, this was denied, but the FDA acknowledged,
“The FDA does believe that RadioGel™ meets criterion #2a: Device represents breakthrough technology. Your device does
meet this criterion because it is a novel application of a brachytherapy device outside of the liver.” More importantly the
process resulted in a rapid review of our existing data and approach. It led to a redirection of our efforts on writing the IDE and saved
the Company much time in the review of that future application.
Based
on advice from the FDA the Company scheduled a Pre-Submission meeting on November 30, 2021 to discuss a draft of an Investigational
Device Exemptions (IDEs) for Early Feasibility Medical Device Clinical Studies, Including Certain First in Human (FIH) Studies.
Using this process results in more rapid feedback to prepare the final IDE.
The
FDA was very supportive and had suggested this Q-Submission path for rapid turnaround and dialog. The Mayo Clinic physicians did an excellent
job presenting the need for Radiogel™ to treat recurrent thyroid cancer and to answer a range of questions from the
new FDA review team. The FDA provided many helpful suggestions on a range of subjects from labeling to dosimetry to the Mayo protocol
for clinical testing, and the need for some additional specific testing. They suggested having another Q-Sub Review and conference call
dedicated to the details of the dosimetry calculations.
In
May of 2022 the Company held another Pre-Sub meeting with the FDA. They concurred with our dosimetry techniques and requested one more
animal test to confirm that the Y-90 stays at the injection site. We will be proposed a Pre-Sub meeting to discuss this new animal test
of VX-2 tumors in rabbits at Johns Hopkins University. We have a meeting scheduled with the FDA in October to obtain their feedback
on our new animal test plan. In the meantime, the Company is working to complete all the other required pre-clinical testing, such
as biocompatibility since they are required for the submittal of the IDE.
We
held another Pre-Sub meeting with the FDA on October 17, 2022 to obtain detailed feedback on the proposed VX-2/Rabbit Animal Test Plan
and to submit the Risk Management Report. The RMR analyzed all hypothetical scenarios and concluded that RadioGel is inherently safe.
In
parallel the Company is working with the Mayo Clinic’s principal investigators to improve the clinical trial protocol for
their Institutional Review Board.
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’s application establishes a single
Indication for Use - treatment of cancerous tissue or solid tumors pathologically associated with locoregional papillary thyroid carcinoma
and recurrent papillary thyroid carcinoma.
We
anticipate that this initial application will facilitate each subsequent application for additional s Indications for Use.
After the second indication for use we intend to applied for a broad indication for use, which would target to obtain
approval to treat all solid tumors.
Financing
and Strategy
The
Company’s stock offering under Regulation A+ was qualified by the Securities and Exchange Commission
(“SEC”) on June 3, 2020. A second Regulation A+ was qualified by the SEC on September 15, 2021 to raise capital
for 50,000,000 shares at a price of $0.10 for a maximum of $5,000,000. The Company amended this and was able to raise $1,200,000 in
July 2022 at $0.08 per share (15,000,000 shares) and sold 20,000,000 warrants for $20,000. An amended Regulation A+
Offering Circular was filed in October 2022 to raise the remaining $3,800,000 of the $5,000,000. In April 2023, $640,000 was raised
in the issuance of 8,000,000 common shares, 2,665,000 Series A warrants and 8,000,000 Series B warrants along with $10,665 in the
sale of the warrants.
The
Company’s Regulation A+’ offerings have resulted in gross proceeds of approximately $5,200,000 from the sale of shares. Proceeds from the offerings have been allocated as follows:
For
the animal therapy market:
| |
● |
Fund
the effort to communicate the benefits of IsoPet® to the veterinary community and the pet parents. |
| |
● |
Conduct
additional clinical studies to generate more data for the veterinary community |
| |
● |
Subsidize
some IsoPet® therapies, if necessary, to ensure that all viable candidates are treated. |
| |
● |
Assist
a new regional clinic with their license and certification training. |
For
the human market:
| |
● |
Enhance
the pedigree of the Quality Management System. |
| |
● |
Complete
the previously defined pre-clinical testing and additional testing on an animal model closely aligned with our revised indication
for use. Report the results to the FDA in a pre-submission meeting. |
| |
● |
Use
the feedback from that meeting to write the IDE (Investigational Device Exemption), which is required to initiate clinical trials. |
Research
and development of the Company’s brachytherapy product line has been funded with proceeds from the sale of equity and debt securities.
The Company may require additional funding of approximately $2.5 million annually to maintain current operating activities. Over the
next 12 to 48 months, the Company believes it will cost approximately $9 million to: (1) fund the FDA approval process to conduct human
clinical trials, (2) conduct Phase I, pilot, clinical trials, (3) activate several regional clinics to administer IsoPet®
across the county, (4) create an independent production center within the current production site to create a template for future international
manufacturing, and (5) initiate regulatory approval processes outside of the United States. The proceeds to be raised from the recently
qualified Regulation A+ Offering Circular will be used to continue to fund this development.
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 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
from proceeds to be raised from the recent qualified Regulation A+ Offering Circular.
Following
receipt of required regulatory approvals and financing, in the U.S., the Company intends to outsource material aspects of manufacturing,
distribution, sales and marketing. Outside of the U.S., the Company intends to pursue licensing arrangements and/or partnerships to facilitate
its global commercialization strategy.
In
the longer-term, subject to the Company receiving adequate funding, regulatory approval for RadioGel™ and other brachytherapy
products, and thereafter being able to successfully commercialize its brachytherapy products, the Company intends to consider resuming
research efforts with respect to other products and technologies intended to help improve the diagnosis and treatment of cancer and other
illnesses.
Based
on the Company’s financial history since inception, the Company’s independent registered public accounting firm 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 may not be able to continue operations.
The
Company has been impacted from the effects of COVID-19. The Company’s headquarters are in Northeast Washington; however, its
focus on the animal therapy market has been in the Northwestern sector of the United States. The Company continues its marketing
to the animal therapy market and attempt to increase the exposure to its product and generate revenue accordingly.
As
of June 30, 2023, the Company has $1,748,767 cash on hand. There are currently commitments to vendors for products and
services purchased. To continue the development of the Company’s products, the current level of cash may not be enough to cover
the fixed and variable obligations of the Company.
There
is no guarantee that the Company will be able to raise additional funds or to do so at an advantageous price.
Product
Features
The
Company’s RadioGel™ device has the following product features:
| |
● |
Beta
particles only travel a short distance so the device can deliver high radiation to the tumor with minimal dose to the nearby normal
tissues. In medical terms Y-90 beta emitter has a high efficacy rate; |
| |
|
|
| |
● |
Benefitting
from the short penetration distance, the patient can go home immediately with no fear of exposure to family members, and there is
a greatly reduced radiation risk to the doctor. A simple plastic tube around the syringe, gloves and safety glasses are all that
is required. Other gamma emitting products require much more protection; |
| |
|
|
| |
● |
A
2.7-day half-life means that only 5% of the radiation remains after ten days. This is in contrast to the industry-standard gamma
irradiation product, which has a half-life of 17 days; |
| |
● |
The
short half-life also means that any medical waste can be stored for thirty days then disposed as normal hospital waste; |
| |
|
|
| |
● |
RadioGel™
can be administered with small diameter needles (27-gauge) so there is minimal damage to the normal tissue. This is in contrast to
the injection of metal seeds, which does considerable damage; and |
| |
|
|
| |
● |
After
about 120 days the gel resorbs by a normal biological cycle, called the Krebs Cycle. The only remaining evidence of the treatment
are phosphate particles so small in diameter that it requires a high-resolution microscope to find them. This is in contrast to permanent
presence of metal seeds. |
Steps
from Production to Therapy
Device
Production
During
the next two years, the Company intends to outsource material aspects of manufacturing and distribution. As future product volume increases,
the Company will reassess its make-buy decision on manufacturing and will analyze the cost/benefit of a centrally located facility.
Production
of the Hydrogel
RadioGel™
is manufactured with a proprietary process under ventilated sterile hood by following strict Good Laboratory Practices (“GLP”)
procedures. It is made in large batches that are frozen for up to three months. When the product is ready to ship, a small quantity of
the gel is dissolved in a sterile saline solution. It is then passed through an ultra-fine filter to ensure sterility.
Production
of the Yttrium-90 Phosphate Particles
The
Y-90 particles are produced with simple ingredients via a proprietary process, again following strict GLP procedures. They are then mixed
into a phosphate-buffered saline solution. They can be produced in large batches for several shipments. The number of particles per shipment
is determined by the dose prescribed by the doctor.
Pre-Mixing – RTU, Ready to Use
The Company now pre-mixes
the particle solution and the hydrogel and places the RTU IsoPet in standard size vials. This innovation is cost effective
and reduces the probability of any accidental spills or biological contamination at the therapy sites. It also simplified the certification
training for new regional clinics.
Shipment
The vials are shipped
via FedEx or UPS by following the proper protocols.
At
the User
The quantities and activities
are in the information on the product label.
The
specific injection technique depends on the Indication for Use. For small tumors, one centimeter in diameter or less, the cancer is treated
with a single injection. For larger tumors, the cancer is treated with a series of small injections from the same syringe or multiple
syringes.
Principal
Markets
The
Company is currently pursuing two synergistic business sectors, medical and veterinary, each of which are summarized below.
Medical
Sector
RadioGel™
is currently fully developed, requiring only FDA approval before commercialization.
Building
on the FDA’s ruling of RadioGel™ as a device, the Company incorporated the FDA suggestions and has invested in
the pre-clinical testing required for IDE submittal. This included two years of effort on biocompatibility testing. The last remaining
animal test has been designed and has begun the initial scoping phase.
RadioGel™
is currently fully developed, requiring only FDA approval before commercialization.
The Company has been seeking FDA approval of RadioGel™ for almost five years. Recent progress has been delayed due to a lack of
adequate funding. The principal issue preventing approval is that the Company attempted to obtain regulatory approval for a broad range
of Indications for Use, including all non-resectable cancers, without sufficient supporting data.
Veterinary
Sector
There
are approximately 150 million pet dogs and cats in the United States. Nearly one-half of dogs and one-third of cats are diagnosed with
cancer at some point in their lifetime. The Veterinary Oncology & Hematology Center in Norwalk, Connecticut, reports that cancer
is the number one natural cause of death in older cats and dogs, accounting for nearly 50 percent of pet deaths each year. The American
Veterinary Medical Association reports that half of the dogs ten years or older will die because of cancer. The National Cancer Institute
reports that about six million dogs are diagnosed with cancer each year, translating to more than 16,000 a day.
The
Company’s IsoPet® operating division focuses on the veterinary oncology market. Dr. Alice Villalobos, a founding
member of the Veterinary Cancer Society and the Chair of our Veterinary Medicine Advisory Board, has been providing guidance to management
regarding this market. The Veterinary Medicine Advisory Board gives us recommendations regarding the overall strategy for our animal
business sector. Specially, they recommended the university veterinary hospitals for demonstration therapies, the specific cancers to
be treated, and have provided business contact information to the private clinics.
Development
of the product and application techniques and animal testing is allowed under FDA regulation. Commercial sales of RadioGelTM for
animals requires confirmation by the FDA Center for Veterinary Medicine (“CVM”). In January 2018, the Center for Veterinary
Medicine Product Classification Group, the entity within the CVM that is responsible for determining the classification of a product,
ruled that RadioGelTM should be classified as a device for animal therapy of feline sarcomas and canine soft tissue sarcomas.
Additionally,
after a legal review, the Company believes that the device classification obtained from the FDA Center for Veterinary Medicine is not
limited to canine and feline sarcomas, but rather may be extended to a much broader population of veterinary cancers, including all or
most all solid tumors in animals. We expect the result of such classification and label approval will be that no additional regulatory
approvals are necessary for the use of RadioGelTM for the treatment of solid tumors in animals. The FDA does not have premarket
authority over devices with a veterinary classification, and the manufacturers are responsible for assuring that the product is safe,
effective, properly labeled, and otherwise in compliance with all applicable laws and regulations.
The
Company currently intends to utilize university veterinary hospitals for therapy development, given that veterinary hospitals offer superior
and plentiful veterinarians and students, a large number of animal patients, radioactive material handling licenses, and are respected
by private veterinary centers and hospitals.
Competitors
The
Company competes in a market characterized by technological innovation, extensive research efforts, and significant competition.
The
pharmaceutical and biotechnology industries are intensely competitive and subject to rapid and significant technological changes. A number
of companies are pursuing the development of pharmaceuticals and products that target the same diseases and conditions that our products
target. We cannot predict with accuracy the timing or impact of the introduction of potentially competitive products or their possible
effect on our sales. Certain potentially competitive products to our products may be in various stages of development. Also, there may
be many ongoing studies with currently marketed products and other developmental products, which may yield new data that could adversely
impact the use of our products in their current and potential future Indications for Use. The introduction of competitive products could
significantly reduce our sales, which, in turn would adversely impact our financial and operating results.
There
are a wide variety of cancer treatments approved and marketed in the U.S. and globally. General categories of treatment include surgery,
chemotherapy, radiation therapy and immunotherapy. These products have a diverse set of success rates and side effects. The Company’s
products, including RadioGel™, fall into the brachytherapy treatment category. There are a number of brachytherapy devices
currently marketed in the U.S. and globally. The traditional iodine-125 (I-125) and palladium-103 (Pd-103) technologies for brachytherapy
are well entrenched with powerful market players controlling the market. The industry-standard I-125-based therapy was developed by Oncura,
which is a unit of General Electric Company. Additionally, C.R. Bard, a major industry player competes in the I-125 brachytherapy marketplace.
These market competitors are also involved in the distribution of Pd-103 based products. Cs-131 brachytherapy products are sold by IsoRay.
Several Y-90 therapies have been FDA approved including SIR-Spheres by Sirtex, TheraSphere by Biocompatibles UK and Zevalin by Spectrum
Pharmaceuticals.
Raw
Materials
The
Company currently subcontracts the manufacturing of RadioGelTM at IsoTherapeutics. Prior to 2021, Eckert and Ziegler
was the only supplier of Y-90 in the United States, and was the sole supplier of the Y-90 used by IsoTherapeutics to manufacture
the Company’s RadioGel™. The Company obtains supplies, hardware, handling equipment and packaging from several
different U.S. suppliers.
During
2021, the Company engaged Akina, Inc. as an alternate supplier of its hydrogel polymer component. We have now expanded to include
SciPoly as another alternate polymer supplier.
In
the future we will be looking to qualify an alternative particle supplier.
Customers
The
Company anticipates that potential customers for our potential brachytherapy products likely would include those institutions and individuals
that currently purchase brachytherapy products or other oncology treatment products.
Government
Regulation
The
Company’s present and future intended activities in the development, manufacturing and sale of cancer therapy products, including
RadioGel™, are subject to extensive laws, regulations, regulatory approvals and guidelines. Within the United States,
the Company’s therapeutic radiological devices must comply with the U.S. Federal Food, Drug and Cosmetic Act, which is enforced
by FDA. The Company is also required to adhere to applicable FDA Quality System Regulations, also known as the Good Manufacturing Practices,
which include extensive record keeping and periodic inspections of manufacturing facilities.
In
the United States, the FDA regulates, among other things, new product clearances and approvals to establish the safety and efficacy of
these products. We are also subject to other federal and state laws and regulations, including the Occupational Safety and Health Act
and the Environmental Protection Act.
The
Federal Food, Drug, and Cosmetic Act and other federal statutes and regulations govern or influence the research, testing, manufacture,
safety, labeling, storage, record keeping, approval, distribution, use, reporting, advertising and promotion of such products. Noncompliance
with applicable requirements can result in civil penalties, recall, injunction or seizure of products, refusal of the government to approve
or clear product approval applications, disqualification from sponsoring or conducting clinical investigations, preventing us from entering
into government supply contracts, withdrawal of previously approved applications, and criminal prosecution.
In
the United States, medical devices are classified into three different categories over which the FDA applies increasing levels of regulation:
Class I, Class II, and Class III. Most Class I devices are exempt from premarket notification 510(k); most Class II devices require premarket
notification 510(k); and most Class III devices require premarket approval. RadioGel™ is currently classified as a Class
III device.
Approval
of new Class III medical devices is a lengthy procedure and can take a number of years and require the expenditure of significant resources.
There is a shorter FDA review and clearance process for Class II medical devices, the premarket notification or 510(k) process, whereby
a company can market certain Class II medical devices that can be shown to be substantially equivalent to other legally marketed devices.
The
Company intends to apply for a de novo with an anticipated expenditure of $10.0 million over the next four years. This expenditure
estimate includes anticipated costs associated with in vitro and in vivo pre-clinical testing, our application for an Investigational
Device Exemption, Phase I and Phase II clinical trials and our application for a de novo.
As
a registered medical device manufacturer with the FDA, we are subject to inspection to ensure compliance with FDA’s current Good
Manufacturing Practices, or cGMP. These regulations require that we and any of our contract manufacturers design, manufacture and service
products, and maintain documents in a prescribed manner with respect to manufacturing, testing, distribution, storage, design control,
and service activities. Modifications or enhancements that could significantly affect the safety or effectiveness of a device or that
constitute a major change to the intended use of the device require a new 510(k) premarket notification for any significant product modification.
The
Medical Device Reporting regulation requires that we provide information to the FDA on deaths or serious injuries alleged to be associated
with the use of our devices, as well as product malfunctions that are likely to cause or contribute to death or serious injury if the
malfunction were to recur. Labeling and promotional activities are regulated by the FDA and, in some circumstances, by the Federal Trade
Commission.
As
a medical device manufacturer, we are also subject to laws and regulations administered by governmental entities at the federal, state
and local levels. For example, our facility is licensed as a medical device manufacturing facility in the State of Washington and is
subject to periodic state regulatory inspections. Our customers are also subject to a wide variety of laws and regulations that could
affect the nature and scope of their relationships with us.
In
the United States, as a manufacturer of medical devices and devices utilizing radioactive byproduct material, we are subject to extensive
regulation by not only federal governmental authorities, such as the FDA and FAA, but also by state and local governmental authorities,
such as the Washington State Department of Health, to ensure such devices are safe and effective. In Washington State, the Department
of Health, by agreement with the federal Nuclear Regulatory Commission (“NRC”), regulates the possession, use, and
disposal of radioactive byproduct material as well as the manufacture of radioactive sealed sources to ensure compliance with state and
federal laws and regulations. RadioGel™ constitutes both medical devices and radioactive sealed sources and are subject
to these regulations.
Moreover,
our use, management, and disposal of certain radioactive substances and wastes are subject to regulation by several federal and state
agencies depending on the nature of the substance or waste material. We believe that we are in compliance with all federal and state
regulations for this purpose.
Environmental
Regulation
Our
business does not require us to comply with any extraordinary environmental regulations. Our RadioGel™ product is manufactured
in an independently owned and operated facility. Any environmental effects or contamination event that could result would be from the
shipping company during shipment and misuse by the treatment facility upon arrival.
Human
Capital
As
of June 30, 2023, the Company had one full-time personnel. The Company utilizes several independent contractors to assist with
its operations. The Company does not have a collective bargaining agreement with any of its personnel and believes its relations with
its personnel are good.
Available
Information
The
Company prepares and files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and certain other
information with the United States Securities and Exchange Commission (the “SEC”). The SEC maintains an Internet site
that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC
at http://www.sec.gov. Moreover, the Company maintains a website at http://www.RadioGel.com that contains important information about
the Company, including biographies of key management personnel, as well as information about the Company’s business. This information
is publicly available and is updated regularly. The content on any website referred to in this Annual Report is not incorporated
by reference into this Annual Report, unless (and only to the extent) expressly so stated herein.
DIRECTORS,
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The
Company’s current directors and executive officers are as follows:
| NAME |
|
AGE |
|
POSITION |
| Michael
K. Korenko |
|
76 |
|
President,
Chief Executive Officer, and Director |
| Michael
Pollack |
|
57 |
|
Interim
Chief Financial Officer |
| Carlton
M. Cadwell |
|
78 |
|
Chairman
of the Board and Secretary |
Term
of Office
All
the Company’s directors hold office until the next annual meeting of the stockholders or until their successors is elected and
qualified. The Company’s executive officers are appointed by the Company’s board of directors and hold office until their
resignation, removal, death or retirement.
Background
and Business Experience
The
business experience during the past five years of each of the Company’s directors and executive officers is as follows:
Dr.
Michael K. Korenko, President and Chief Executive Officer of the Company since December 2016, and a member of the Board of
Directors since August 2017, joined the Company as an Advisor to the Board of the Company during 2009 and served as member of the Board
from May 2009 to March 2010. Dr. Korenko has also served on the Hanford Advisory Board since 2009. Dr. Korenko served as Business Development
Manager for Curtiss-Wright from 2006 to 2009, as Chief Operating Officer for Curtiss-Wright from 2000 to 2005 and was Executive Vice
President of Closure for Safe Sites of Colorado at Rocky Flats from 1994 to 2000. Dr. Korenko served as Vice President of Westinghouse
from 1987 to 1994 and was responsible for the 300 and 400 areas, including the Fast Flux Testing Facility (“FFTF”)
and all engineering, safety analysis, and projects for the Hanford site.
Dr.
Korenko is the author of 28 patents and has received
many awards, including the National Energy Resources Organization Research and Development Award, the U.S. Steelworkers Award for Excellence
in Promoting Safety, and the Westinghouse Total Quality Award for Performance Manager of the Year. Dr. Korenko has a Doctor of Science
from MIT, was a NATO Postdoctoral Fellow at Oxford University, and was selected as a White House Fellow for the Department of Defense,
reporting to Secretary Cap Weinberger.
Dr.
Korenko brings to the Board over seven years’ experience working with and advising various small businesses, including companies
involved in turnarounds. Dr. Korenko has also been involved as an advisor to the Company since 2009 in the development of medical isotopes.
Carlton
M. Cadwell, Chairman of the Board and Secretary since December 2016, joined the Company as a director in 2006. Dr. Cadwell
brings over 30 years of experience in business management, strategic planning, and implementation. He co-founded Cadwell Laboratories,
Inc. in 1979 and has served as its President since its inception. Cadwell Laboratories, Inc. is a major international provider of neurodiagnostic
medical devices. After receiving his bachelor’s degree from the University of Oregon in 1966 and a doctoral degree from the University
of Washington in 1970, he began his career serving in the United States Army as a dentist for three years. From 1973 to 1980, Dr. Cadwell
practiced dentistry in private practice and since has started several businesses.
Mr.
Cadwell brings to the Board over ten years of service on the Board and over forty-five years of experience as a successful entrepreneur,
as well as medical expertise.
Michael
Pollack CPA, the Interim Chief Financial Officer, joined the Company as interim Chief Financial Officer in December 2018. Mr.
Pollack has been a partner in a certified public accounting firm for the past fifteen years and specializes in accounting and auditing
for small public companies. Mr. Pollack has approximately 30 years of experience in public accounting and consulting to over 100 publicly
traded and 250 private companies. Mr. Pollack has also held CFO and Controller positions in an array of industries. Mr. Pollack graduated
from the University of Maryland with a Bachelor of Arts in Economics. Mr. Pollack is a member of the American Institute of Certified
Public Accountants, as well as licensed to practice in New Jersey, and New York.
Identification
of Significant Consultants
David
J. Swanberg, M.S., P.E. Mr. Swanberg has over 30 years’ experience in radiochemical processing, medical isotope production,
nuclear waste management, materials science, regulatory affairs, and project management. Mr. Swanberg has worked in diverse organizations
ranging from small start-up businesses to corporations with multi-billion dollar annual revenues. From 2005 to 2008, he served as Executive
Vice President of Operations and as a member of the Board of Directors for IsoRay Medical Inc. from 2005 to 2008 managing day-to-day
operations, R&D, and New Product Development. Mr. Swanberg was a co-founder of IsoRay and led the initial Cs-131 brachytherapy seed
product development, FDA 510(k) submission/clearance, and NRC Sealed Source review and registration. Mr. Swanberg led the radiation dosimetry
evaluations to meet American Association of Physicists in Medicine guidelines and is a current member of the AAPM. Mr. Swanberg and participated
in several capital financing rounds totaling over $30.0 million. Mr. Swanberg also served as Assistant General Manager of IsoRay LLC
from 2000 to 2003, and in additionally in key management roles as IsoRay transitioned from IsoRay LLC to IsoRay Medical, Inc. Mr. Swanberg
holds a BA in Chemistry from Bethel University (MN) and an MS in Chemical Engineering from Montana State University. Mr. Swanberg has
numerous technical publications and holds several patents.
Medical
and Veterinarian Advisory Boards
Dr.
Barry D. Pressman MD, FACR - Chairman Medical Advisory Board. Dr. Pressman is Professor and Chairman of the S. Mark Taper Foundation
Imaging Centre and Department, and Chief of the Section of Neuroradiology and Head and Neck Radiology at Cedars-Sinai Medical Center,
located in Los Angeles, California.
Dr.
Pressman is a past President of The American College of Radiology, the Western Neuroradiological Society, as well as past President of
the California Radiological Society. Currently he is a member of the American Society of Neuroradiology and the American Society of Pediatric
Neuroradiology.
Dr.
Pressman earned his medical degree Cum Laude from Harvard Medical School after graduating Summa Cum Laude from Dartmouth College. After
a surgical internship at Harvard’s Peter Bent Brigham Hospital in Boston, he completed a diagnostic radiology residency at Columbia-Presbyterian
Medical Center in New York and a Neuroradiology fellowship at George Washington University Hospital. During this period, he wrote many
original papers for Computer Tomography (CT).
Dr.
Albert S. DeNittis MD, MS, FCPP - Medical Advisory Board. Dr. Albert S. DeNittis is currently is the Chief of Radiation
Oncology at Lankenau Medical Center and Clinical Professor at Lankenau Institute for Medical Research in Wynnewood, Pennsylvania and
the Director of Radiation Oncology at Brodesseur Cancer Center in New Jersey. He is also the Principal Investigator and in charge of
a grant awarded by the NIH for its National Cancer Oncology Research Program (NCORP) at Main Line Health. Dr. DeNittis’ practice
experience includes image-guided radiosurgery, stereotactic body radiation therapy (SBRT), intensity modulated radiation therapy (IMRT),
image guided radiation therapy (IGRT), high-dose rate (HDR) brachytherapy, cranial and extracranial stereotactic radiosurgery, respiratory
gating, and Cyberknife.
Dr.
DeNittis has served on numerous regional, national and government committees related to key issues in Dr. DeNittis earned a BA and a
MS at Rutgers University and a MD from the Robert Wood Johnson Medical School at the University of Medicine and Dentistry of New Jersey.
He completed postdoctoral training internships and residency at the Department of Radiation Oncology at the Hospital of the University
of Pennsylvania. Dr. DeNittis is board certified by the American Board of Radiology and Licensed in New Jersey and Pennsylvania.
Dr.
Alice Villalobos, DVM, FNAP - Chair of the Veterinary Medicine Advisory Board. Dr. Alice Villalobos is a well-known pioneer in
the field of cancer care for companion animals and a founding member of the Veterinary Cancer Society. A 1972 graduate of UC Davis, she
completed Dr. Gordon Theilen’s first mock residency program in oncology and has served the profession by consulting, writing and
lecturing in the rapidly growing field of veterinary oncology and end of life care.
Dr.
Alice Villalobos is President Emeritus of the Society for Veterinary Medical Ethics, Past President of the American Association of Human
Animal Bond Veterinarians and Chair of the Veterinary Academy for the National Academies of Practice. She operated Coast Pet Clinic/Animal
Cancer Center for 25 years, which is now VCA Coast Animal Hospital. She is the author of numerous articles, papers, and including her
classic veterinarian textbook, Canine and Feline Geriatric Oncology: Honoring the Human-Animal Bond. She has lectured worldwide on oncology,
quality of life, the human-animal bond and end of life care and bioethics. She founded Pawspice, an end of life care program that embraces
kinder, gentler palliative cancer medicine and integrative care for pets with cancer and terminal illness (www.Pawspice.com). Dr. Alice
is Director of Animal Oncology Consultation Service in Woodland Hill, California and Pawspice at VCA Coast Animal Hospital in Hermosa
Beach, California. Dr. Alice was elected 2016 Hermosa Beach Woman of the Year.
Dr.
Villalobos’ role with the Company is to support the commercialization of the Company’s yttrium-90 brachytherapy products
for use in companion animals.
Dr.
Richard Weller, DVM, DACVIM (Internal Medicine; Oncology) DipMS - Veterinary Medicine Advisory Board Member. Prior to his retirement
in 2014, Dr. Weller was a Senior Program Manager in the Radiation Biology Group of the Biological Sciences Division at Pacific Northwest
National Laboratory (PNNL), where he was involved in the development of RadioGel. A 1973 graduate of Washington State University. Dr.
Weller has extensive experience in designing and executing clinical studies, treatment planning, mechanisms of carcinogenesis, radiation
biology, targeted delivery systems for chemotherapeutic and radio-therapeutic agents, bio-markers of disease, and comparative oncology;
as well as over 30 years of experience developing and using animal models, including the use of spontaneous tumors in companion animals,
for bio-medical applications.
Dr.
Weller is board-certified by the American College of Veterinary Internal Medicine in Internal Medicine (1980) and Oncology (1987), Past
Chairperson of the Organizing Committee for the Specialty of Veterinary Medical Oncology, Past Chairperson of the Board of Regents of
the American College of Veterinary Internal Medicine, Past President of the Board of Regents of the American College of Veterinary Internal
Medicine, Past President of the Specialty of Oncology, and a Charter Member of the Veterinary Cancer Society which he served as Treasurer
for 16 years. He is an Honorary Professor of the Institute of Veterinary Medicine in Kyiv, Ukraine. Dr. Weller has lectured and trained
veterinarians worldwide and has authored or co-authored over 250 articles, technical reports, book chapters, and presentations in his
fields of expertise.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers, directors and persons who own more than
10% of the Company’s common stock to file with the SEC initial reports of beneficial ownership on Form 3, changes in beneficial
ownership on Form 4, and an annual statement of beneficial ownership on Form 5. Such executive officers, directors and greater than 10%
stockholders are required by SEC rules to furnish the Company with copies of all such forms that they have filed.
Based
solely on its review of such forms filed with the SEC and received by the Company and representations from certain reporting persons,
the Company believes that all reports required to be filed by each of each of its executive officers, directors and 10% stockholders
were filed during the year ended December 31, 2022 and that such reports were timely.
Code
of Ethics
The
Company’s Board of Directors has not adopted a code of ethics that applies to the principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing similar functions, because of the Company’s limited
number of executive officers and employees that would be covered by such a code and the Company’s limited financial resources.
The Company anticipates that it will adopt a code of ethics after it increases the number of executive officers and employees and obtain
additional financial resources.
Audit
Committee and Audit Committee Financial Expert
As
of the date of this report, the Company has not established an audit committee, and therefore, the Company’s full board of directors
performs the functions that customarily would be undertaken by an audit committee. The Company’s board of directors during 2022
and 2021 was comprised of two directors, one of whom the Company had determined satisfied the general independence standards
of the NASDAQ listing requirements.
The
Company’s Board of Directors has determined that none of its current members qualifies as an “audit committee financial expert,”
as defined by the rules of the SEC. In the future, the Company intends to establish board committees and to appoint such persons to those
committees as are necessary to meet the corporate governance requirements imposed by a national securities exchange, although it is not
required to comply with such requirements until the Company elects to seek listing on a national securities exchange.
Board
of Directors; Attendance at Meetings
The
Board held no meetings and acted by unanimous written consent two times during the year ended December 31, 2022. In 2021,
we conducted no board of director meetings and acted by unanimous written consent two times. We have no formal policy with respect
to the attendance of Board members at annual meetings of shareholders but encourage all incumbent directors and director nominees to
attend each annual meeting of shareholders.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth the compensation paid to the Company’s Chief Executive Officer and those executive officers that earned
in excess of $100,000 during the year ended December 31, 2022 (collectively, the “Named Executive Officers”):
| Name
and Principal Position (1) | |
Year | | |
Salary
($) | | |
Bonus
($) | | |
Stock
Awards ($) | | |
Option Awards
($)(2) | | |
Total
($) | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Dr.
Michael K. Korenko | |
| 2022 | | |
$ | 230,625 | | |
$ | 30,000 | | |
$ | - | | |
$ | - | | |
$ | 260,625 | |
| CEO,
President and Director | |
| 2021 | | |
$ | 225,000 | | |
$ | 30,000 | | |
$ | - | | |
$ | - | | |
$ | 255,000 | |
| |
(1) |
Michael
Pollack began serving as the Company’s Interim Chief Financial Officer in December 2018 and was paid no compensation directly
in 2021 or 2022. Accordingly, he has not been included in this table. |
| |
|
|
| |
(2) |
The
amounts in this column represent the grant date fair value of stock option awards, computed in accordance with FASB ASC Topic 718. |
Narrative
Disclosure to Summary Compensation Table
Dr.
Michael K. Korenko. On October 24, 2018, Mr. Korenko entered into an employment agreement with the Company (the “Old Employment
Agreement”), which was scheduled to terminate on December 31, 2019. On June 4, 2019, Mr. Korenko and the Company entered into
a new employment agreement, effective June 11, 2019, which shall terminate on December 31, 2020 and December 31 of subsequent years (the
“Termination Date”) if the agreement is extended pursuant to its terms. Under the terms of his employment agreement,
the Company may terminate Dr. Korenko’s employment either with or without cause prior to the Termination Date, but in the event
of a termination without cause, Dr. Korenko shall be entitled to receive monthly payments of his base salary for a period of six months
thereafter, all of Dr. Korenko’s outstanding options, if any, shall vest, and Dr. Korenko shall be entitled to receive all past
due compensation within three weeks of the date of termination.
The
Company shall pay to Dr. Korenko an annual base compensation of $180,000, which is payable in equal monthly intervals. Of the $180,000
in annual base salary, $60,000 of annual pay shall be deferred and accrued until the Company’s cash balance exceeds $1,000,000,
which occurred in December 2020. Dr. Korenko’s employment agreement provides that he shall receive a stock option grant issued
under the Company’s 2015 Omnibus Securities and Incentive Plan in an amount equal to 21 million options ten days after the Company’s
1-for-8 reverse split, which was consummated in late June 2019. The options shall have a seven-year term, shall be exercisable
at a price of $0.024 per share, and shall vest as follows: 50% shall vest in equal amounts at the end of each quarter for the two quarters
after grant date, 25% shall vest upon the Company filing for a patent, and the remaining 25% shall vest upon the first commercial sale
of IsoPet. In December 2020, Mr. Korenko exercised 2,500,000 of these options for $60,000.
The
Company paid bonuses to certain employees based on their performance, the Company’s need to retain such employees, and funds available.
All bonus payments were approved by the Company’s Board of Directors.
On
June 4, 2019, the Company entered into an Executive Employment Agreement (“Employment Agreement”) with Dr. Michael
K. Korenko, the Company’s Chief Executive Officer.
The term under the Employment Agreement commenced with an effective date of June 11, 2019 and expires on December 31, 2020, and
December 31 of each successive year if the Employment Agreement is extended, unless terminated earlier as set forth in the Employment
Agreement. The Company on December 31, 2020 extended the Employment Agreement through December 31, 2021 while renegotiating terms of a new Employment
Agreement. On May 3, 2021, the Company and Mr. Korenko agreed to the terms of a new Employment Agreement with an effective
date of January 1, 2021 that has a term of three years and expires December 31, 2023.
Under
the terms of the Employment Agreement, the Company shall pay to Dr. Korenko a base compensation of $225,000. In addition, there is a
discretionary bonus to be earned in the amount of $7,500 per quarter upon the satisfaction of conditions to be determined by the Board
of Directors of the Company.
Outstanding
Equity Awards at Fiscal Year-End Table
The
following table sets forth all outstanding equity awards held by the Company’s Named Executive Officers as of the end of last fiscal
year.
| | |
Option
Awards | |
| Name | |
Number
of
Securities
Underlying
Unexercised
Options(#)
Exercisable | | |
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | |
Option
Exercise
Price ($) | | |
Option
Exercise Date | |
| NONE | |
| | | |
| | | |
| | | |
| | |
Compensation
of Directors
During
the year ended December 31, 2022, the Company’s non-employee directors were not paid any compensation.
The
following table sets forth, for each of the Company’s non-employee directors who served during 2022, the aggregate number
of stock awards and the aggregate number of stock option awards that were outstanding as of December 31, 2022:
| | |
| Outstanding | | |
| Outstanding | |
| | |
| Stock | | |
| Stock | |
| Name | |
| Awards
(#) | | |
| Options
(#) | |
| Carlton
M. Cadwell | |
| - | | |
| - | |
During
June 2016, the Company granted to Mr. Cadwell options to purchase 12,500 shares of common stock at an exercise price of $8.00 per share,
which options expired June 21, 2019. These options had a grant date fair value of $34,771, which amounts were calculated in accordance
with ASC Topic 718.
Additionally,
the Company granted warrants to purchase 6,425,503 shares of Company common stock to Carlton Cadwell in 2018 as a result of the Path
Forward Agreements and conversion of his advances to the Company. These warrants expired in October 2020.
There
are no employment contracts or compensatory plans or arrangements with respect to any director that would result in payments by the Company
to such person because of his or her resignation as a director or any change in control of the Company.
Compensation
Committee Interlocks and Insider Participation
None
of our officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors
of any other entity that has one or more officers serving as a member of our board of directors.
RELATED
PERSON TRANSACTIONS
Indebtedness
from Related Parties
On
January 24, 2019, the Company entered into a note payable with a trust related to Mr. Cadwell in the amount of $60,000. The note is for
a one-year period maturing January 24, 2020 and bears interest at an annual rate of 8.0%. This note was converted into shares of common
stock in December 2021.
On
March 27, 2019 the Company entered into a note payable with a trust related to Mr. Cadwell in the amount of $48,000. The note is for
a one-year period maturing March 27, 2020 and bears interest at an annual rate of 8.0%. This note was repaid in December 2021.
On
April 29, 2019, the Company entered into a note payable with a trust related to Mr. Cadwell in the amount of $29,000. The note is for
a one-year period maturing April 29, 2020 and bears interest at an annual rate of 8.0%. This note was repaid in December 2021.
On
May 20, 2019 and May 23, 2019, Mr. Korenko advanced $20,000 collectively to the Company. Mr. Korenko is not charging interest on these
amounts advanced and they are short-term advances, due on demand. Of this amount $5,000 was repaid and the balance of $15,000 was converted
into a convertible note payable at an annual interest rate of 8% due January 15, 2020. This note was converted in April 2020.
On
July 5, 2019, the Company entered into a note payable with a trust related to Mr. Cadwell in the amount of $50,000. The note is for a
one-year period maturing July 5, 2020 and bears interest at an annual rate of 8.0%. Of this amount, $23,000 was paid in December 2021,
and the balance was converted into shares of common stock in December 2021.
On
November 25, 2019, the Company entered into a note payable with a trust related to Mr. Cadwell in the amount of $50,000. The note is
for a one-year period maturing November 25, 2020 and bears interest at an annual rate of 8.0%. This note was converted into shares
of common stock in December 2021.
The
Company borrowed $107,000 in the year ended December 31, 2020 from its CEO and repaid these amounts in full.
Independent
Directors
The
Company’s common stock is traded on the OTCQB Marketplace, which does not impose any independence requirements on the Board of
Directors or the board committees of the companies whose stock is traded on that market. The Company has decided to adopt the independence
standards of the Nasdaq listing rules in determining whether the Company’s directors are independent. Generally, under those rules
a director does not qualify as an independent director if the director or a member of the director’s immediate family has had in
the past three years certain relationships or affiliations with the Company, the Company’s auditors, or other companies that do
business with the Company. The Company’s Board of Directors has determined that Mr. Cadwell is qualified as an independent director
under those Nasdaq rules, and accordingly, would have been qualified under those rules to serve on a compensation committee or a nominating
committee, if the Company had established such committees of the Company’s Board of Directors. Dr. Korenko is not an independent
director due to his employment by the Company as an executive officer.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial
Ownership of the Company’s Common Stock
The
following table sets forth, as of September 18, 2023, the number of shares of common stock beneficially owned by the following
persons: (i) all persons the Company knows to be beneficial owners of at least 5% of the Company’s common stock, (ii) the Company’s
current directors, (iii) the Company’s current executive officers, and (iv) all current directors and executive officers as a group.
As
of September 18, 2023, there were 370,541,528 shares of common stock outstanding and up to 40,002,379 shares issuable
upon exercise of common stock equivalents, assuming exercise and conversion occurred as of that date, for a total of 410,543,907
shares.
| Name
and Address of Beneficial Owner(1) | |
Amount
and
Nature of
Beneficial Ownership(2) | | |
Percent
of Class | |
| Cadwell
Family Irrevocable Trust | |
| 26,912 | | |
| * | % |
| | |
| | | |
| | |
| Carlton
M. Cadwell (3) | |
| 15,406,979 | | |
| 4.16 | % |
| | |
| | | |
| | |
| Michael
K. Korenko | |
| 9,885,090 | | |
| 2.67 | % |
| | |
| | | |
| | |
| Michael
Pollack | |
| - | | |
| - | |
| | |
| | | |
| | |
| All
Current Directors and Executive Officers as a group (3 individuals) | |
| 25,318,981 | | |
| 6.83 | % |
*Less
than 1%
| (1) |
The
address of each of the beneficial owners above is c/o Vivos Inc, 719 Jadwin Avenue, Richland, WA 99336, except that the address of
the Cadwell Family Irrevocable Trust (the “Cadwell Trust”) is 909 North Kellogg Street, Kennewick, WA 99336. |
| |
|
| (2) |
In
determining beneficial ownership of the Company’s common stock as of a given date, the number of shares shown includes shares
of common stock which may be acquired upon exercise of the common stock equivalents within 60 days of that date. In determining the
percent of common stock owned by a person or entity on September 18, 2023, (a) the numerator is the number of shares of the
class beneficially owned by such person or entity, including shares which may be acquired within 60 days on exercise of the common
stock equivalents, and (b) the denominator is the sum of (i) the total shares of common stock outstanding on September 18, 2023,
and (ii) the total number of shares that the beneficial owner may acquire upon conversion of the common stock equivalents. Subject
to community property laws where applicable, the Company believes that each beneficial owner has sole power to vote and dispose of
its shares, except that under the terms of the Cadwell Trust, Dr. Cadwell does not have or share voting or investment power over
the shares beneficially owned by the Cadwell Trust. |
| |
|
| (3) |
Includes
1,136,137 shares issuable upon conversion of Series A Preferred; and 4,816,275 shares issuable upon conversion of Series C Preferred,
and 2,316,830 shares of common stock issued to AMIC Gift, LLC, an LLC controlled by Carlton and his wife. |
Beneficial
Ownership of the Company’s Series A Convertible Preferred Stock
As
of September 18, 2023, there were 2,071,007 shares of Series A Preferred issued and outstanding, convertible into 2,588,758 shares
of the Company’s common stock.
The
following table sets forth, as of September 18, 2023, the number of shares of Series A Preferred beneficially owned by the following
persons: (i) all persons the Company known to be beneficial owners of at least 5% of the Company’s Series A Preferred, (ii) the
Company’s current directors, (iii) the Company’s current executive officers, and (iv) all current directors and executive
officers as a group.
| Name
and Address of Beneficial Owner (1) | |
Amount
and
Nature of
Beneficial Ownership
(2) | | |
Percent
of Class | |
| Cadwell
Family Irrevocable Trust | |
| 148,309 | | |
| 7.16 | % |
| | |
| | | |
| | |
| Carlton
M. Cadwell | |
| 908,910 | | |
| 43.89 | % |
| | |
| | | |
| | |
| Michael
K. Korenko | |
| - | | |
| - | % |
| | |
| | | |
| | |
| All
Current Directors and Executive Officers as a group (2 individuals)(3) | |
| 1,057,219 | | |
| 51.05 | % |
| | |
| | | |
| | |
| Major
Shareholder(s): | |
| | | |
| | |
| | |
| | | |
| | |
| L.
Bruce Jolliff | |
| 197,979 | | |
| 9.56 | % |
| | |
| | | |
| | |
| Stoel
Rives | |
| 133,333 | | |
| 6.44 | % |
| (1) |
The
address of each of the beneficial owners above is c/o Vivos Inc, 719 Jadwin Avenue, Richland, WA 99336, except that the address of
(i) the Cadwell Family Irrevocable Trust (the “Cadwell Trust”) is 909 North Kellogg Street, Kennewick,
WA 99336; (ii) L. Bruce Jolliff is 206 N 41st St. Unit 1, Yakima, WA 98901; and (iii) Stoel Rives is One Union Square,
600 University Street, Suite 3600, Seattle, WA 98101. |
| |
|
| (2) |
Subject
to community property laws where applicable, the Company believes that each beneficial owner has sole power to vote and dispose of
its shares, except that Dr. Cadwell under the terms of the Cadwell Trust does not have or share voting or investment power over the
Series A Convertible Preferred beneficially owned by the Cadwell Trust. |
| |
|
| (3) |
Michael
Pollack, the Company’s Interim Chief Financial Officer, does not hold any Company Series A Convertible Preferred, and has therefore
been omitted from this table. |
Beneficial
Ownership of the Company’s Series B Convertible Preferred Stock
As
of September 18, 2023, there were 200,363 shares of Series B Preferred issued and outstanding, convertible into 2,504.538 shares
of the Company’s common stock.
The
following table sets forth, as of September 18, 2023, the number of shares of Series B Preferred beneficially owned by the following
persons: (i) all persons the Company known to be beneficial owners of at least 5% of the Company’s Series B Preferred, (ii) the
Company’s current directors, (iii) the Company’s current executive officers, and (iv) all current directors and executive
officers as a group.
| Name
and Address of Beneficial Owner (1) | |
Amount
and
Nature of Beneficial Ownership (2) | | |
Percent
of Class | |
| All
Current Directors and Executive Officers as a group (3 individuals) | |
| - | | |
| * | % |
| | |
| | | |
| | |
| Major
Shareholder(s): | |
| | | |
| | |
| | |
| | | |
| | |
| Jason
Adelman(3) | |
| 200,000 | | |
| 99 | % |
*Less
than 1%
| (1) |
None
of the Company’s directors and executive officers hold any shares of the Company’s Series B Convertible Preferred, and
they have therefore been omitted from this table. The address of the beneficial owners is as follows: (i) Jason Adelman
(JTA Resources LLC. is 40 East 66th St., New York, NY 10065. |
| (2) |
Subject
to community property laws where applicable, the Company believes that each beneficial owner has sole power to vote and dispose of
its shares. |
| |
|
| (3) |
Represents
200,000 shares of Series B Preferred held by
JTA Resources LLC. |
Beneficial
Ownership of the Company’s Series C Convertible Preferred Stock
As
of September 18, 2023, there were 385,302 shares of Series C Preferred issued and outstanding, convertible into 4,816,275 shares
of the Company’s common stock.
The
following table sets forth, as of September 18, 2023, the number of shares of Series C Preferred beneficially owned by the following
persons: (i) all persons the Company known to be beneficial owners of at least 5% of the Company’s Series C Preferred, (ii) the
Company’s current directors, (iii) the Company’s current executive officers, and (iv) all current directors and executive
officers as a group.
| Name
and Address of Beneficial Owner (1) | |
Amount
and Nature of
Beneficial Ownership
(2) | | |
Percent
of Class | |
| Carlton
M. Cadwell | |
| 385,302 | | |
| 100 | % |
| All
Current Directors and Executive Officers as a group (3 individuals) (3) | |
| 385,302 | | |
| 100 | % |
| (1) |
The
address of each of the beneficial owners above is c/o Vivos Inc, 719 Jadwin Avenue, Richland, WA 99336., |
| |
|
| (2) |
Subject
to community property laws where applicable, the Company believes that each beneficial owner has sole power to vote and dispose of
its shares, except that Dr. Cadwell under the terms of the Cadwell Trust does not have or share voting or investment power over the
Series C Preferred beneficially owned by the Cadwell Trust. |
| |
|
| (3) |
Neither
Michael Korenko, the Company’s Chief Executive Officer, nor Michael Pollack, the Company’s Interim Chief Financial Officer,
hold any shares of the Company’s Series C Preferred, and they have therefore been omitted from this table. |
Changes
in Control
The
Company does not know of any arrangements, including any pledges of the Company’s securities that may result in a change in control
of the Company.
DESCRIPTION
OF CAPITAL STOCK
Authorized
Capital Stock
Our
authorized capital stock currently consists of 950 million shares of common stock and 20.0 million shares of preferred stock, par value
$0.001 per share (the “Preferred Stock”), of which 5.0 million shares of Preferred Stock have been designated as Series
A Convertible Preferred Stock (“Series A Preferred”), 5.0 million shares have been designated as Series B Convertible
Preferred Stock (“Series B Preferred”), and 5.0 million shares have been designated as Series C Convertible Preferred
Stock (“Series C Preferred”). As of September 18, 2023, there were: (i) 370,541,528 shares of common
stock outstanding; (ii) 2,071,007 shares of Series A Preferred, convertible into approximately 2,588,759 shares of common stock; (iii)
436,653 shares of Series B Preferred, convertible into approximately 5,458,163 shares of common stock, and (iv) 385,302 shares of Series
C Preferred, convertible into approximately 4,816,275 shares of common stock.
Common
Stock
As
of September 18, 2023, there were 370,541,528 shares of our common stock issued and outstanding. Holders of our common
stock are entitled to one vote for each share held on all matters submitted to a vote of the Company’s shareholders. Holders of
common stock are entitled to receive ratably any dividends that may be declared by our Board out of legally available funds, subject
to any preferential dividend rights of any outstanding Preferred Stock. Upon the Company’s liquidation, dissolution or winding
up, the holders of common stock are entitled to receive ratably the Company’s net assets available after the payment of all debts
and other liabilities and subject to the prior rights of any outstanding Preferred Stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of common stock are fully paid and nonassessable. The rights, preferences
and privileges of holders of common stock are also subject to, and may be adversely affected by, the rights of holders of shares of any
series of Preferred Stock which the Company may designate and issue in the future without further shareholder approval.
Preferred
Stock
Our
Board of Directors is currently authorized, without further shareholder approval, to issue from time to time up to an aggregate of 20.0
million shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights, qualifications, limitations
or restrictions of the shares of each series, including the dividend rights, dividend rates, conversion rights, voting rights, term of
redemption, including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting
any series or designations of such series without further vote or action by the shareholders. The issuance of preferred stock may have
the effect of delaying, deferring or preventing a change in control of management without further action by the shareholders and may
adversely affect the voting and other rights of the holders of common stock. The issuance of preferred stock with voting and conversion
rights may adversely affect the voting power of the holders of common stock, including the loss of voting control to others.
We
currently have three series of preferred stock designated, our Series A Preferred, Series B Preferred and Series C Preferred. The following
is a summary of the rights and preferences of such series of Preferred Stock, which summary is not meant to be a complete description
of those terms. For a complete description of the rights and preferences attributable to our Series A Preferred, Series B Preferred and
Series C Preferred, please see the Certificate of Designations, Preferences and Rights (the “Certificate of Designation”)
of each, each available as an exhibit to our filings with the Securities and Exchange Commission.
Series
A Convertible Preferred Stock
Liquidation
Preference. The Series A Preferred has a liquidation preference of $5.00 per share.
Dividends.
Shares of Series A Preferred do not have any separate dividend rights.
Conversion.
Subject to certain limitations set forth in the Series A Preferred Certificate of Designation, each share of Series A Preferred is convertible,
at the option of the holder, into that number of shares of common stock (the “Series A Conversion Shares”) equal to
the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series A Preferred Certificate of Designation),
currently $4.00.
In
the event the Company completes an equity or equity-based public offering, registered with the SEC, resulting in gross proceeds to the
Company totaling at least $5.0 million, all issued and outstanding shares of Series A Preferred at that time will automatically convert
into Series A Conversion Shares.
Redemption.
Subject to certain conditions set forth in the Series A Preferred Certificate of Designation, in the event of a Change of Control (defined
in the Series A Preferred Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders
of the Series A Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing
more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to
redeem all or a portion of the outstanding Series A Preferred in cash at a price per share of Series A Preferred equal to 100% of the
Liquidation Preference.
Voting
Rights. Holders of Series A Preferred are entitled to vote on all matters, together with the holders of common stock, and have the
equivalent of five (5) votes for every Series A Conversion Share issuable upon conversion of such holder’s outstanding shares of
Series A Convertible Preferred. However, the Series A Conversion Shares, when issued, will have all the same voting rights as other issued
and outstanding common stock of the Company, and none of the rights of the Series A Preferred.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series A Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount
equal to the liquidation preference of the Series A Preferred before any distribution or payment shall be made to the holders of any
junior securities, and if the assets of the Company are insufficient to pay such amounts in full, then the entire assets to be distributed
to the holders of the Series A Preferred shall be ratably distributed among the holders in accordance with the respective amounts that
would be payable on such shares if all amounts payable thereon were paid in full.
Certain
Price and Share Adjustments.
a)
Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions
payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares
of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common
stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of
capital stock of the Company, then the conversion price shall be adjusted accordingly.
b)
Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation
or merger in which the common stock is converted into or exchanged for securities, cash or other property than each share of Series A
Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number of shares of
common stock issuable upon conversion of one share of Series A Preferred prior to any such merger or reorganization would have been entitled
to receive pursuant to such transaction.
Series
B Convertible Preferred Stock
In
October 2018, the Series B Preferred Certificate of Designation was filed with the Delaware Secretary of State to designate 5.0 million
shares of our Preferred Stock as Series B Preferred. The following summarizes the current rights and preferences of the Series B Preferred:
Liquidation
Preference. The Series B Preferred has a liquidation preference of $1.00 per share.
Dividends.
Shares of Series B Preferred do not have any separate dividend rights.
Conversion.
Subject to certain limitations set forth in the Series B Preferred Certificate of Designation, each share of Series B Preferred is convertible,
at the option of the holder, into that number of shares of common stock (the “Series B Conversion Shares”) equal to
the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series B Preferred Certificate of Designation),
currently $0.08.
Redemption.
Subject to certain conditions set forth in the Series B Preferred Certificate of Designation, in the event of a Change of Control (defined
in the Series B Preferred Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders
of the Series B Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing
more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to
redeem all or a portion of the outstanding Series B Preferred in cash at a price per share of Series B Preferred equal to 100% of the
Liquidation Preference.
Voting
Rights. Holders of Series B Preferred are entitled to vote on all matters, together with the holders of common stock, and have the
equivalent of two (2) votes for every Series B Conversion Share issuable upon conversion of such holder’s outstanding shares of
Series B Preferred. However, the Series B Conversion Shares, when issued, will have all the same voting rights as other issued and outstanding
common stock of the Company, and none of the rights of the Series B Preferred.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series B Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount
equal to the liquidation preference of the Series B Preferred before any distribution or payment shall be made to the holders of any
junior securities, and if the assets of the Company are insufficient to pay in full such amounts, then the entire assets to be distributed
to the holders of the Series B Preferred shall be ratably distributed among the holders in accordance with the respective amounts that
would be payable on such shares if all amounts payable thereon were paid in full.
Certain
Price and Share Adjustments.
a)
Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions
payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares
of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common
stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of
capital stock of the Company, then the conversion price shall be adjusted accordingly.
b)
Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation
or merger in which the common stock is converted into or exchanged for securities, cash or other property than each share of Series B
Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number of shares of
common stock issuable upon conversion of one share of Series B Preferred prior to any such merger or reorganization would have been entitled
to receive pursuant to such transaction.
Series
C Convertible Preferred Stock
In
March 2019, the Series C Preferred Certificate of Designation was filed with the Delaware Secretary of State to designate 5.0 million
shares of our preferred stock as Series C Preferred. The following summarizes the current rights and preferences of the Series C Preferred:
Liquidation
Preference. The Series C Preferred has a liquidation preference of $1.00 per share.
Dividends.
Shares of Series C Preferred do not have any separate dividend rights.
Conversion.
Subject to certain limitations set forth in the Series C Preferred Certificate of Designation, each share of Series C Preferred is convertible,
at the option of the holder, into that number of shares of common stock (the “Series C Conversion Shares”) equal to
the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series C Preferred Certificate of Designation),
currently $0.08.
Redemption.
Subject to certain conditions set forth in the Series C Preferred Certificate of Designation, in the event of a Change of Control (defined
in the Series C Preferred Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders
of the Series C Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing
more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to
redeem all or a portion of the outstanding Series C Preferred in cash at a price per share of Series C Preferred equal to 100% of the
Liquidation Preference.
Voting
Rights. Holders of Series C Preferred are entitled to vote on all matters, together with the holders of common stock, and have the
equivalent of thirty-two (32) votes for every Series C Conversion Share issuable upon conversion of such holder’s outstanding shares
of Series C Preferred. However, the Series C Conversion Shares, when issued, will have all the same voting rights as other issued and
outstanding common stock of the Company, and none of the rights of the Series C Preferred.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series C Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount
equal to the liquidation preference of the Series C Preferred before any distribution or payment shall be made to the holders of any
junior securities, and if the assets of the Company are insufficient to pay in full such amounts, then the entire assets to be distributed
to the holders of the Series C Convertible Preferred shall be ratably distributed among the holders in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Certain
Price and Share Adjustments.
a)
Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions
payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares
of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common
stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of
capital stock of the Company, then the conversion price shall be adjusted accordingly.
b)
Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation
or merger in which the common stock is converted into or exchanged for securities, cash or other property than each share of Series C
Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number of shares of
common stock issuable upon conversion of one share of Series C Preferred prior to any such merger or reorganization would have been entitled
to receive pursuant to such transaction.
Options
As
of September 18, 2023, options exercisable into 2,252,809 shares of our common stock outstanding, with a weighted average exercise
price of $0.04 per share.
Warrants
As
of September 18, 2023, 25,665,000 warrants exercisable into shares of our common stock were outstanding, with a weighted average
exercise price of $0.079 per share.
Restricted
Stock Units
As
of September 18, 2023, there are 2,175,000 RSUs outstanding exercisable into shares of our common stock with a value of
$0.091 per share.
DIVIDEND
POLICY
Since
our inception, we have not paid any dividends on our common stock, and we currently expect that, for the foreseeable future, all earnings
(if any) will be retained for the development of our business and no dividends will be declared or paid. In the future, our Board of
Directors may decide, at their discretion, whether dividends may be declared and paid, taking into consideration, among other things,
our earnings (if any), operating results, financial condition and capital requirements, general business conditions and other pertinent
facts.
SHARES
ELIGIBLE FOR FUTURE SALE
Future
sales of substantial amounts of common stock in the public market could adversely affect market prices prevailing from time to time.
Furthermore, since only a limited number of shares will be available for sale shortly after this offering because of certain restrictions
on resale, sales of substantial amounts of our common stock in the public market after the restrictions lapse could adversely affect
the prevailing market price and our ability to raise equity capital in the future.
Upon
completion of this offering, assuming the maximum number of shares of common stock offered in this offering are sold, there will be 422,812,898
shares of our common stock outstanding. This number excludes any issuance of additional shares of common stock that could occur in
connection with any exercise of stock options and/or warrants outstanding as of the date of this Offering Circular. These shares of our
common stock will be freely tradable in the public market, except to the extent they are acquired by an “affiliate” of ours,
as such term is defined in Rule 405 under the Securities Act. Under Rule 405, an affiliate of a specified person is a person that directly,
or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified person.
Any affiliate of ours that acquires our shares can only further transact in such shares in compliance with Rule 144 under the Securities
Act, which imposes sales volume limitations and other restrictions on such further transactions. See “Rule 144,” below.
In
addition to the foregoing, shares of our common stock not sold in this offering will be restricted securities written the meaning of
Rule 144, and would be tradable only if they are sold pursuant to a registration statement under the Securities Act or if they qualify
for an exemption from registration, including under Rule 144. See “Rule 144,” below.
Rule
144
In
general, a person who has beneficially owned restricted shares of our common stock for at least one year, in the event we are a company
that files reports under Regulation A, or at least six months, in the event we have been a company that files reports under the Exchange
Act for at least 90 days, would be entitled to sell such securities, provided that such person is not deemed to be an affiliate of ours
at the time of sale or to have been an affiliate of ours at any time during the three months preceding the sale. A person who is an affiliate
of ours at such time would be subject to additional restrictions, by which such person would be entitled to sell within any three -month
period only a number of shares that does not exceed the greater of the following:
| ● |
1%
of the number of shares of our common stock then outstanding; or |
| |
|
| ● |
the
average weekly trading volume of our common stock during the four calendar weeks preceding the filing by such person with the SEC
of a notice on Form 144 with respect to the sale;
provided that, in each case, we have been subject to the periodic reporting
requirements of the Exchange Act for at least 90 days before the sale. Persons replying on Rule 144 to transact in our common stock
must also comply with the manner of sale, notice and other provisions of Rule 144, to the extent applicable. In general, Rule 701
allows a stockholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract and who is not
deemed to have been an affiliate of ours during the immediately preceding 90 days to sell those shares in reliance upon Rule 144,
but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule
144. Persons relying on Rule 701 to transact in our common stock, however, are required to wait until 90 days after the date of this
Offering Circular before selling shares pursuant to Rule 701. |
Lock
Up -Agreements
There
are currently no lock-up agreements with our officers, directors, and current stockholders.
PLAN
OF DISTRIBUTION
General
The
Company is offering up to 50,000,000 shares of common stock on a “best efforts basis,” at an offering price of $0.08
per share (the “Offered Shares”), as further described in this Offering Circular. Any funds derived from the sale
of the shares of common stock offered hereby will be immediately available to us for use. There will be no refunds.
There
is no minimum number of shares of common stock that we are required to sell in this offering. All funds derived by us from this offering
will be immediately available for use by us, in accordance with the uses set forth in the section of this Offering Circular entitled
“Use of Proceeds.” No funds will be placed in an escrow account during the offering period and no funds will be returned,
once an investor’s subscription agreement has been accepted by us.
We
currently intend to sell the shares of common stock offered hereby through the efforts of members of our management team, including our
Chief Executive Officer, Michael Korenko, among others. Members of our management team will not receive any compensation for offering
or selling the shares of common stock offered pursuant to this Offering Circular. We believe that Mr. Korenko and the other members of
our management team are exempt from registration as broker-dealers under the provisions of Rule 3a4-1 promulgated under the Exchange
Act. In particular, such individuals:
| |
● |
are
not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Securities Act; |
| |
|
|
| |
● |
are
not to be compensated in connection with their participation by the payment of commissions or other remuneration based either directly
or indirectly on transactions in securities; |
| |
|
|
| |
● |
are
not an associated person of a broker or dealer; and |
| |
|
|
| |
● |
meet
the conditions of the following: |
| |
|
|
| |
● |
primarily
performs, and will perform at the end of this offering, substantial duties for us or on our behalf otherwise than in connection with
transactions in securities; |
| |
|
|
| |
● |
were
not a broker or dealer, or an associated person of a broker or dealer, within the preceding 12 months; and |
| |
|
|
| |
● |
did
not participate in selling an offering of securities for any issuer more than once every 12 months other than in reliance on paragraphs
(a)(4)(i) or (iii) of Rule 3a4-1 under the Exchange Act. |
As
of the date of this Offering Circular, we have not entered into any agreements with selling agents or broker dealers for the sale of
the Offered Shares. However, we reserve the right to engage FINRA-member broker-dealers to aid in the sale of the shares of our common
stock being offered hereby. In the event we engage FINRA-member broker-dealers, we expect to pay sales commissions of up to 7.0% of the
gross offering proceeds from their sales of shares of our common stock pursuant to this Offering Circular, although we may pay sales
commissions greater than 7.0%. In the event that we choose to utilize the services of a selling broker-dealer to aid in the sale of shares
of our common stock, we expect that we will enter into a standard selling agent agreement with such broker-dealer, pursuant to which
the broker-dealer would act as our non-exclusive sales agent in consideration of our payment of commissions on the sale of shares of
common stock effected by the broker-dealer.
Termination
of Offering
This
offering will terminate at the earlier of (i) the date at which the maximum offering amount has been sold, (ii) the date that is twelve
months from the date of this Offering Statement being qualified by the SEC, or (iii) the date at which the offering is earlier terminated
by the Company in its sole discretion, which may happen at any time (the “Offering Termination Date ”).
Investors’
Tender of Funds
After
the Offering Statement has been qualified by the SEC, the Company will accept tenders of funds to purchase shares of our common stock
offered hereby. In addition, the Company currently has outstanding 8% Promissory Notes that may be exchanged for shares of common stock
offered in connection with the offering, The Company may close on investments on a “rolling” basis (so not all investors
will receive their shares on the same date). There are no conditions that the Company must meet in order to hold a closing. A closing
will occur each time the Company determines to accept funds. Tendered funds will only be returned to investors upon termination of the
offering as set out above, in which case any money tendered by potential investors and not accepted by the Company will be promptly returned
by the Company. Upon a closing, funds tendered by investors will be made immediately available to the company for its use.
Offering
Expenses
We
are responsible for all offering fees and expenses, including the following: (i) fees and disbursements of our legal counsel, accountants,
and other professionals we engage; (ii) fees and expenses incurred in the production of offering documents, including design, printing,
photograph, and written material procurement costs; (iii) all filing fees, including FINRA and blue sky notice filing fees; (iv) all
of the legal fees related to the filing of notice filings under state securities laws and FINRA clearance; and (v) our transportation,
accommodation, and other roadshow expenses.
Investment
Limitations
Generally,
no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income
or net worth (please see below on how to calculate your net worth). Different rules apply to accredited investors and non-natural persons.
Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C)
of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.
Because
this is a Tier 2 Regulation A offering, most investors must comply with the 10% limitation on investment in the offering. The only investor
in this offering exempt from this limitation is an “accredited investor” as defined under Rule 501 of Regulation D under
the Securities Act (an “Accredited Investor”). If you meet one of the following tests you should qualify as an Accredited
Investor:
| i. |
You
are a natural person who has had individual income in excess of $200,000 in each of the two most recent years, or joint income with
your spouse in excess of $300,000 in each of these years, and have a reasonable expectation of reaching the same income level in
the current year; |
| |
|
| ii. |
You
are a natural person and your individual net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time you purchase
Offered Shares (please see below on how to calculate your net worth); |
| |
|
| iii. |
You
are an executive officer or general partner of the issuer or a manager or executive officer of the general partner of the issuer; |
| |
|
| iv. |
You
are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”),
a corporation, a Massachusetts or similar business trust or a partnership, not formed for the specific purpose of acquiring the Offered
Shares, with total assets in excess of $5,000,000; |
| |
|
| v. |
You
are a bank or a savings and loan association or other institution as defined in the Securities Act, a broker or dealer registered
pursuant to Section 15 of the Exchange Act, an insurance company as defined by the Securities Act, an investment company registered
under the Investment Company Act of 1940 (the “Investment Company Act”), or a business development company as
defined in that act, any Small Business Investment Company licensed by the Small Business Investment Act of 1958 or a private business
development company as defined in the Investment Advisers Act of 1940; |
| vi. |
You
are an entity (including an Individual Retirement Account trust) in which each equity owner is an accredited investor; |
| |
|
| vii. |
You
are a trust with total assets in excess of $5,000,000, your purchase of Offered Shares is directed by a person who either alone or
with his purchaser representative(s) (as defined in Regulation D promulgated under the Securities Act) has such knowledge and experience
in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, and you were
not formed for the specific purpose of investing in the Offered Shares; or |
| |
|
| viii. |
You
are a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has assets in excess of $5,000,000. |
Procedures
for Subscribing
If
you are interested in subscribing for shares of common stock in this offering, please go to www.radiogel.com to electronically receive
and review the information set forth on such website.
If
you decide to subscribe for share of common stock being offered pursuant to this Offering Circular, you should:
Go
to www. radiogel.com, click on the “Invest Now: button and follow the procedures as described therein, which are:
| 1. |
Electronically
receive, review, execute and deliver to us a subscription agreement; and |
| |
|
| 2. |
Deliver
funds directly by wire or electronic funds transfer via ACH to the specified account maintained by Vivos Inc. |
Any
potential investor will have ample time to review the subscription agreement, along with their counsel, prior to making any final investment
decision. We shall only deliver such subscription agreement upon request after a potential investor has had ample opportunity to review
this Offering Circular.
Right
to Reject Subscriptions
After
we receive your complete, executed subscription agreement and the funds required under the subscription agreement have been transferred
to our account, we have the right to review and accept or reject your subscription in whole or in part, for any reason or for no reason.
We will return all monies from rejected subscriptions immediately to you, without interest or deduction.
Acceptance
of Subscriptions
Upon
our acceptance of a subscription agreement, we will countersign the subscription agreement and issue the shares subscribed. Once you
submit the subscription agreement and it is accepted, you may not revoke or change your subscription or request your subscription funds.
All accepted subscription agreements are irrevocable.
Under
Rule 251 of Regulation A, non-accredited, non-natural investors are subject to the investment limitation and may only invest funds which
do not exceed 10% of the greater of the purchaser’s revenue or net assets (as of the purchaser’s most recent fiscal year
end). A non-accredited, natural person may only invest funds which do not exceed 10% of the greater of the purchaser’s annual income
or net worth (please see below on how to calculate your net worth).
For
the purposes of calculating your net worth, it is defined as the difference between total assets and total liabilities. This calculation
must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount
equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may
be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase
of shares of our common stock.
In
order to purchase shares of our common stock in this offering, and prior to the acceptance of any funds from an investor, an investor
will be required to represent, to the Company’s satisfaction, that he is either an accredited investor or is in compliance with
the 10% of net worth or annual income limitation on investment in this offering.
Registrar
and Transfer Agent, Book-Entry Only
All
shares of common stock sold in this offering will be issued by our Transfer Agent to investors in book-entry only format and will be
represented by a stock transfer ledger, maintained by our Transfer Agent.
Investors
in the shares of our common stock will not be entitled to have the stock certificates registered in their names and will not receive
or be entitled to receive physical delivery of the shares in definitive form. Transfers of investors, common stock will be facilitated
through the Transfer Agent. As a result, you will not be entitled to receive a stock certificate representing your interest in the shares
of common stock you purchase. Your ability to pledge shares of common stock that you purchase, and to take other actions, may be limited
because you will not possess a physical certificate that represents your shares. Investors will receive written confirmation from the
Transfer Agent upon closing of their purchases. Transfers of the shares of common stock will be recorded on the stock transfer ledger
maintained by the Transfer Agent. We have no responsibility for any aspect of the actions of the Transfer Agent. In addition, we have
no responsibility or liability for any aspect of the records kept by the Transfer Agent relating to, or payments made on account of investors
in, the shares, or for maintaining, supervising or reviewing any records relating to ownership of shares. We also do not supervise the
systems of the Transfer Agent.
EXPERTS
The
financial statements of the company appearing elsewhere in this Offering Circular have been included herein in reliance upon the report,
which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, of Fruci & Associates II,
PLLC (“Fruci”), an independent registered public accounting firm, appearing elsewhere herein, and upon the authority
of Fruci as experts in accounting and auditing.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
have filed with the SEC a Regulation A Offering Statement on Form 1-A under the Securities Act with respect to the shares of common stock
offered hereby. This Offering Circular, which constitutes a part of the Offering Statement, does not contain all of the information set
forth in the Offering Statement or the exhibits and schedules filed therewith. For further information about us and the shares of common
stock offered hereby, we refer you to the Offering Statement and the exhibits and schedules filed therewith. Statements contained in
this Offering Circular regarding the contents of any contract or other document that is filed as an exhibit to the Offering Statement
are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or
other document filed as an exhibit to the Offering Statement. The SEC also maintains an Internet website that contains reports, proxy
statements and other information about issuers, including us, that file electronically with the SEC. The address of this site is www.sec.gov.
Vivos
Inc.
Index
to Financial Statements
| |
Pages |
| |
|
| For the Six Months Ended
June 30, 2023 |
|
| |
|
| Condensed Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022 |
F-2 |
| Condensed Statements of Operations for the Six and Three Months ended June 30, 2023 and 2022 (unaudited) |
F-3 |
| Condensed Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2023 and 2022 (unaudited) |
F-4 |
| Condensed Statements of Cash Flow for the Six Months ended June 30, 2023 and 2022 (unaudited) |
F-5 |
| Notes to Condensed Financial Statements (unaudited) |
F-6 |
| |
|
| Fiscal Year Ended December
31, 2022 |
|
| |
|
| Report of Independent Registered Public Accounting Firm |
F-22 |
| Balance Sheets as of December 31, 2022 and 2021 |
F-24 |
| Statements of Operations for the years ended December 31, 2022 and 2021 |
F-25 |
| Statement of Changes in Stockholders’ Equity for the years ended December 31, 2022 and 2021 |
F-26 |
| Statements of Cash Flow for the years ended December 31, 2022 and 2021 |
F-27 |
| Notes to Financial Statements |
F-28 |
VIVOS
INC
CONDENSED
BALANCE SHEETS
JUNE
30, 2023 (UNAUDITED) AND DECEMBER 31, 2022
| | |
JUNE 30, | | |
DECEMBER 31, | |
| | |
2023 | | |
2022 | |
| | |
(UNAUDITED) | | |
| |
| ASSETS | |
| | | |
| | |
| Current Assets: | |
| | | |
| | |
| Cash | |
$ | 1,748,767 | | |
$ | 1,706,065 | |
| Accounts receivable | |
| 6,000 | | |
| 11,000 | |
| Prepaid expenses | |
| 34,883 | | |
| 25,671 | |
| | |
| | | |
| | |
| Total Current Assets | |
| 1,789,650 | | |
| 1,742,736 | |
| | |
| | | |
| | |
| TOTAL ASSETS | |
$ | 1,789,650 | | |
$ | 1,742,736 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| | |
| | | |
| | |
| LIABILITIES | |
| | | |
| | |
| Current Liabilities: | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | 112,810 | | |
$ | 81,692 | |
| | |
| | | |
| | |
| Total Current Liabilities | |
| 112,810 | | |
| 81,692 | |
| | |
| | | |
| | |
| Total Liabilities | |
| 112,810 | | |
| 81,692 | |
| | |
| | | |
| | |
| Commitments and contingencies | |
| - | | |
| - | |
| | |
| | | |
| | |
| STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| Preferred stock, par value, $0.001, 20,000,000 shares authorized, Series A Convertible Preferred,
5,000,000 shares authorized, 2,071,007 shares issued and outstanding, respectively | |
| 2,071 | | |
| 2,071 | |
| Additional paid in capital - Series A Convertible preferred stock | |
| 8,842,458 | | |
| 8,842,458 | |
| Series B Convertible Preferred, 5,000,000 shares authorized, 200,363 shares issued and
outstanding, respectively | |
| 200 | | |
| 200 | |
| Additional paid in capital - Series B Convertible preferred stock | |
| 290,956 | | |
| 290,956 | |
| Series C Convertible Preferred, 5,000,000 shares authorized, 385,302 shares issued and
outstanding, respectively | |
| 385 | | |
| 385 | |
| Preferred
stock value | |
| 385 | | |
| 385 | |
| Additional paid in capital - Series C Convertible preferred stock | |
| 500,507 | | |
| 500,507 | |
| Additional paid in capital - Convertible preferred stock | |
| 500,507 | | |
| 500,507 | |
| Common stock, par value, $0.001, 950,000,000 shares authorized, 370,541,528 and 362,541,528
issued and outstanding, respectively | |
| 370,541 | | |
| 362,541 | |
| Additional paid in capital - common stock | |
| 72,376,594 | | |
| 71,217,954 | |
| Accumulated deficit | |
| (80,706,872 | ) | |
| (79,556,028 | ) |
| | |
| | | |
| | |
| Total Stockholders’ Equity | |
| 1,676,840 | | |
| 1,661,044 | |
| | |
| | | |
| | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 1,789,650 | | |
$ | 1,742,736 | |
VIVOS
INC
CONDENSED
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR
THE SIX AND THREE MONTHS ENDED JUNE 30, 2023 AND 2022
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| | |
SIX MONTHS ENDED | | |
THREE MONTHS ENDED | |
| | |
JUNE 30, | | |
JUNE 30, | | |
JUNE 30, | | |
JUNE 30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| Revenues, net | |
$ | 12,500 | | |
$ | 23,500 | | |
$ | 6,500 | | |
$ | 10,500 | |
| Cost of Goods Sold | |
| (16,536 | ) | |
| (5,018 | ) | |
| (9,000 | ) | |
| (2,018 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Gross (loss) profit | |
| (4,036 | ) | |
| 18,482 | | |
| (2,500 | ) | |
| 8,482 | |
| | |
| | | |
| | | |
| | | |
| | |
| OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | |
| Professional fees, including stock-based compensation | |
| 692,963 | | |
| 1,098,507 | | |
| 608,747 | | |
| 521,470 | |
| Payroll expenses | |
| 144,521 | | |
| 140,656 | | |
| 72,013 | | |
| 69,869 | |
| Research and development | |
| 219,728 | | |
| 241,301 | | |
| 173,353 | | |
| 169,732 | |
| General and administrative expenses | |
| 101,475 | | |
| 73,049 | | |
| 57,792 | | |
| 34,949 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total Operating Expenses | |
| 1,158,687 | | |
| 1,553,513 | | |
| 911,905 | | |
| 796,020 | |
| | |
| | | |
| | | |
| | | |
| | |
| OPERATING LOSS | |
| (1,162,723 | ) | |
| (1,535,031 | ) | |
| (914,405 | ) | |
| (787,538 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| NON-OPERATING INCOME (EXPENSE) | |
| | | |
| | | |
| | | |
| | |
| Interest income | |
| 11,879 | | |
| - | | |
| 11,879 | | |
| - | |
| Gain on debt extinguishment | |
| - | | |
| 47,588 | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | |
| Total Non-Operating Income (Expenses) | |
| 11,879 | | |
| 47,588 | | |
| 11,879 | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Provision for income taxes | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | |
| NET LOSS | |
$ | (1,150,844 | ) | |
$ | (1,487,443 | ) | |
$ | (902,526 | ) | |
$ | (787,538 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Net loss per share - basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average common shares outstanding | |
| 365,370,257 | | |
| 343,761,071 | | |
| 368,167,902 | | |
| 343,906,505 | |
VIVOS
INC
CONDENSED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR
THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022
| | |
Shares | | |
Amount | | |
Series A Preferred | | |
Shares | | |
Amount | | |
Series B Preferred | | |
Shares | | |
Amount | | |
Series C Preferred | | |
Shares | | |
Amount | | |
Common | | |
Deficit | | |
Total | |
| | |
Series A Preferred | | |
Additional
Paid-In
Capital
- | | |
Series B Preferred | | |
Additional
Paid-In
Capital
- | | |
Series C Preferred | | |
Additional
Paid-In
Capital
- | | |
Common Stock | | |
Additional
Paid-In
Capital
- | | |
Accumulated | | |
| |
| | |
Shares | | |
Amount | | |
Series A Preferred | | |
Shares | | |
Amount | | |
Series B Preferred | | |
Shares | | |
Amount | | |
Series C Preferred | | |
Shares | | |
Amount | | |
Common | | |
Deficit | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance - December 31, 2021 | |
| 2,071,007 | | |
$ | 2,071 | | |
$ | 8,842,458 | | |
| 200,363 | | |
$ | 200 | | |
$ | 290,956 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
| 343,530,678 | | |
$ | 343,531 | | |
$ | 68,573,142 | | |
$ | (77,085,867 | ) | |
$ | 1,467,383 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Stock issued for: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 76,250 | | |
| 76 | | |
| 4,804 | | |
| - | | |
| 4,880 | |
| Warrant exercises | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 299,577 | | |
| 300 | | |
| (300 | ) | |
| - | | |
| - | |
| RSUs granted to consultants that have vested | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 450,000 | | |
| - | | |
| 450,000 | |
| Net loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (699,905 | ) | |
| (699,905 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance - March 31, 2022 | |
| 2,071,007 | | |
| 2,071 | | |
| 8,842,458 | | |
| 200,363 | | |
| 200 | | |
| 290,956 | | |
| 385,302 | | |
| 385 | | |
| 500,507 | | |
| 343,906,505 | | |
| 343,907 | | |
| 69,027,646 | | |
| (77,785,772 | ) | |
| 1,222,358 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| RSUs granted to consultants that have vested | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 458,200 | | |
| - | | |
| 458,200 | |
| Net loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (787,538 | ) | |
| (787,538 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance - June 30, 2022 | |
| 2,071,007 | | |
$ | 2,071 | | |
$ | 8,842,458 | | |
| 200,363 | | |
$ | 200 | | |
$ | 290,956 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
| 343,906,505 | | |
$ | 343,907 | | |
$ | 69,485,846 | | |
$ | (78,573,310 | ) | |
$ | 893,020 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance - December 31, 2022 | |
| 2,071,007 | | |
$ | 2,071 | | |
$ | 8,842,458 | | |
| 200,363 | | |
$ | 200 | | |
$ | 290,956 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
| 362,541,528 | | |
$ | 362,541 | | |
$ | 71,217,954 | | |
$ | (79,556,028 | ) | |
$ | 1,661,044 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (248,318 | ) | |
| (248,318 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance - March 31, 2023 | |
| 2,071,007 | | |
| 2,071 | | |
| 8,842,458 | | |
| 200,363 | | |
| 200 | | |
| 290,956 | | |
| 385,302 | | |
| 385 | | |
| 500,507 | | |
| 362,541,528 | | |
| 362,541 | | |
| 71,217,954 | | |
| (79,804,346 | ) | |
| 1,412,726 | |
| Beginning balance, value | |
| 2,071,007 | | |
| 2,071 | | |
| 8,842,458 | | |
| 200,363 | | |
| 200 | | |
| 290,956 | | |
| 385,302 | | |
| 385 | | |
| 500,507 | | |
| 362,541,528 | | |
| 362,541 | | |
| 71,217,954 | | |
| (79,804,346 | ) | |
| 1,412,726 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Stock issued for: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 8,000,000 | | |
| 8,000 | | |
| 632,000 | | |
| - | | |
| 640,000 | |
| Warrants purchased for cash | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 10,665 | | |
| - | | |
| 10,665 | |
| RSUs granted to consultants that have vested | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 515,975 | | |
| - | | |
| 515,975 | |
| Net loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (902,526 | ) | |
| (902,526 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance - June 30, 2023 | |
| 2,071,007 | | |
$ | 2,071 | | |
$ | 8,842,458 | | |
| 200,363 | | |
$ | 200 | | |
$ | 290,956 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
| 370,541,528 | | |
$ | 370,541 | | |
$ | 72,376,594 | | |
$ | (80,706,872 | ) | |
$ | 1,676,840 | |
| Ending balance, value | |
| 2,071,007 | | |
$ | 2,071 | | |
$ | 8,842,458 | | |
| 200,363 | | |
$ | 200 | | |
$ | 290,956 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
| 370,541,528 | | |
$ | 370,541 | | |
$ | 72,376,594 | | |
$ | (80,706,872 | ) | |
$ | 1,676,840 | |
The
accompanying notes are an integral part of these unaudited condensed financial statements.
VIVOS
INC
CONDENSED
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR
THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022
| | |
2023 | | |
2022 | |
| CASH FLOW FROM OPERATING ACTIVITIES | |
| | | |
| | |
| Net loss | |
$ | (1,150,844 | ) | |
$ | (1,487,443 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities | |
| | | |
| | |
| Common stock, stock options and warrants for services | |
| - | | |
| 4,880 | |
| RSUs issued for services | |
| 515,975 | | |
| 908,200 | |
| (Gain) on conversion of debt | |
| - | | |
| (47,588 | ) |
| Changes in assets and liabilities | |
| | | |
| | |
| Accounts receivable | |
| 5,000 | | |
| (6,500 | ) |
| Prepaid expenses and other assets | |
| (9,212 | ) | |
| (22,732 | ) |
| Accounts payable and accrued expenses | |
| 31,118 | | |
| 95,766 | |
| Total adjustments | |
| 542,881 | | |
| 932,026 | |
| | |
| | | |
| | |
| Net cash used in operating activities | |
| (607,963 | ) | |
| (555,417 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
| Proceeds from common stock and warrants | |
| 650,665 | | |
| - | |
| Net cash provided by financing activities | |
| 650,665 | | |
| - | |
| | |
| | | |
| | |
| NET DECREASE IN CASH | |
| 42,702 | | |
| (555,417 | ) |
| | |
| | | |
| | |
| CASH - BEGINNING OF PERIOD | |
| 1,706,065 | | |
| 1,606,123 | |
| | |
| | | |
| | |
| CASH - END OF PERIOD | |
$ | 1,748,767 | | |
$ | 1,050,706 | |
| | |
| | | |
| | |
| CASH PAID DURING THE PERIOD FOR: | |
| | | |
| | |
| Interest expense | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| Income taxes | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| SUPPLEMENTAL INFORMATION - NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| | | |
| | |
| | |
| | | |
| | |
| Common stock issued in cashless exercise of warrants | |
$ | - | | |
$ | 300 | |
Vivos
Inc.
Notes
to Condensed Financial Statements
(Unaudited)
NOTE
1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The
accompanying condensed financial statements of Vivos Inc. (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 and three months ended June 30, 2023, are not necessarily indicative
of the results that may be expected for any future period or the fiscal year ending December 31, 2023 and should be read in conjunction
with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission
on March 1, 2023.
Business
Overview
The
Company 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, and on December 28, 2017, the Company began
operating as Vivos Inc. The Company has authorized capital of 950,000,000 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
principal place of business is located at 719 Jadwin Avenue, Richland, WA 99352. Our telephone number is (509) 736-4000. Our corporate
website address is http://www.radiogel.com. Our common stock is currently quoted on the OTC Pink Marketplace under the symbol “RDGL.”
The
Company is a 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.
In
January 2018, the Center for Veterinary Medicine Product Classification Group ruled that RadioGel ™should be classified
as a device for animal therapy of feline sarcomas and canine soft tissue sarcomas. Additionally, after a legal review, the Company believes
that the device classification obtained from the Food and Drug Administration (“FDA”) Center for Veterinary Medicine
is not limited to canine and feline sarcomas, but rather may be extended to a much broader population of veterinary cancers, including
all or most solid tumors in animals. We expect the result of such classification and label review will be that no additional regulatory
approvals are necessary for the use of IsoPet® for the treatment of solid tumors in animals. The FDA does not have premarket
authority over devices with a veterinary classification, and the manufacturers are responsible for assuring that the product is safe,
effective, properly labeled, and otherwise in compliance with all applicable laws and regulations.
Based
on the FDA’s recommendation, RadioGel™ will be marketed as “IsoPet®” for use by veterinarians
to avoid any confusion between animal and human therapy. The Company already has trademark protection for the “IsoPet®”
name. IsoPet® and RadioGel™ are used synonymously throughout this document. The only distinction between
IsoPet® and RadioGel™ is the FDA’s recommendation that we use “IsoPet®”
for veterinarian usage, and reserve “RadioGel™” for human therapy. Based on these developments, the Company
has shifted its primary focus to the development and marketing of Isopet® for animal therapy, through the Company’s
IsoPet® Solutions division.
IsoPet
Solutions
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 worked with three different university veterinarian hospitals on IsoPet® testing and
therapy. Washington State University treated five cats for feline sarcoma and served to develop the procedures which are incorporated
in our label. They concluded that the product was safe and effective in killing cancer cells. Colorado State University demonstrated
the CT and PET-CT imaging of IsoPet®. A contract was signed with University of Missouri to treat canine sarcomas and equine
sarcoids starting in November 2017.
The
dogs were treated for canine soft tissue sarcoma. Response evaluation criteria in solid tumors (“RECIST”) is a set
of published rules that define when tumors in cancer patients improve (respond), stay the same (stabilize), or worsen (progress) during
treatment. The criteria were published by an international collaboration including the European Organisation for Research and Treatment
of Cancer (“EORTC”), National Cancer Institute of the United States, and the National Cancer Institute of Canada Clinical
Trials Group.
The
testing at the University of Missouri met its objective to demonstrate the safety of IsoPet®. Using its advanced CT and
PET equipment it was able to demonstrate that the dose calculations were accurate and that the injections perfused into the cell interstices
and did not stay concentrated in a bolus. This results in a more homogeneous dose distribution. There was insignificant spread of Y-90
outside the points of injection demonstrating the effectiveness of the particles and the gel to localize the radiation with no spreading
to the blood or other organs nor to urine or fecal material. This confirms that IsoPet® is safe for same day therapy.
The
effectiveness of IsoPet® for life extension was not the prime objective, but it resulted in valuable insights. Of the
cases one is still cancer-free but the others eventually recurred since there was not a strong focus on treating the margins. The University
of Missouri has agreed to become a regional center to administer IsoPet® therapy and will incorporate the improvements
suggested by the testing program.
The
Company anticipates that future profits, if any, will be derived from direct sales of RadioGel™ (under the name IsoPet®)
and related services, and from licensing to private medical and veterinary clinics in the U.S. and internationally. The Company intends
to report the results from the IsoPet® Solutions division as a separate operating segment in accordance with GAAP.
Commencing
in July 2019, the Company recognized its first commercial sale of IsoPet®. A veterinarian from Alaska brought his cat
with a re-occurrent spindle cell sarcoma tumor on his face. The cat had previously received external beam therapy, but now the tumor
was growing rapidly. He was given a high dose of 400Gy with heavy therapy at the margins. This sale met the revenue recognition requirements
under ASC 606 as the performance obligation was satisfied. The Company completed sales for an additional four animals that received the
IsoPet® during 2019.
Our
plan is to incorporate the data assembled from our work with Isopet® in animal therapy to support the Company’s
efforts in the development of our RadioGel™ device candidate, including obtaining approval from the FDA to market
and sell RadioGel™ as a Class II medical 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, less
than two microns, 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 radioactivity drops to 5% of its original value after ten days.
The
Company modified its Indication for Use from skin cancel to cancerous tissue or solid tumors pathologically associated with locoregional
papillary thyroid carcinoma and recurrent papillary thyroid carcinoma having discernable tumors associated with metastatic lymph nodes
or extranodal disease in patients who are not surgical candidates or who have declined surgery, or patients who require post-surgical
remnant ablation (for example, after prior incomplete radioiodine therapy). Papillary thyroid carcinoma belongs to the general class
of head and neck tumors for which tumors are accessible by intraoperative direct needle injection. The Company’s Medical Advisory
Board felt that demonstrating efficacy in clinical trials was much easier with this new indication.
Intellectual
Property
Our
original license with Battelle National Laboratory is reached its end of life in 2022. During the past several years, in anticipation
of this we have expanded our proprietary knowledge, our trademark and patent protection.
Our
RadioGel trademark protection is in 17 countries. We have expanded our trademark protection from RadioGel to now include IsoPet. We obtained
the International Certificate of Registration for ISOPET, which is the first step to file in several countries.
The
Company received the Patent Cooperation Treaty (“PCT”) International Search Report on our patent application (No.1811.191).
Seven of our claims were immediately ruled as having novelty, inventive step and industrial applicability. This gives us the basis to
extend for many years the patent protection for our proprietary Yttrium-90 phosphate particles utilized in Isopet® and
Radiogel™.
Our
patent team filed our particle patent in more than ten patent offices that collectively cover 63 countries throughout the world. We filed
a continuation-in-part applications number 1774054 in the USA to expand the claims on our particle patent. The US Patent office recently
gave us the Notice of Allowance for our patent to produce our yttrium phosphate microparticles, US Patent Application Serial No: 16-459,466.
We also filed an amendment to correct the wording on our claims at make them consistent with the USE claims. Ref: 4207-0005; European
Patent Application NO. 20 834 229.5; VIVOS INC; Our Ref: FS/53791.
We
filed a hydrogel utility patent in the USA (16309:17/943,311) and internationally (16389:PCT/US22/4374) based on the last eighteen months
of development work to optimize our hydrogel component. These include reducing the polymer production time and increasing the output
by a factor of three. We have also further reduced the level of trace contaminants to be well below the FDA guidelines.
We
filed a provisional patent (Serial Number 63436562) to protect our innovative improvements in our shipping container, our vial shield,
our syringe shield, and our Peltier chiller. Our objectives were to reduce shipping costs, decrease radiation exposure, and enhance sterility.
These devices will be preferentially used at Mayo Clinics for human clinical studies at and our IsoPet regional treatment centers.
We
anticipate that Precison Radionuclide Therapy will become increasingly important in the future and expand to other isotope and other
indications for use. Therefore, we filed an alternate particle utility patent (Serial number 18/152,137). Vivos Inc will focus its near-term
effort on the Yttrium-90 therapy, which we believe is the best beta emitter; however, we leveraged our hydrogel utility patent to incorporate
other promising isotopes and compounds for a range of future applications. This includes gamma and alpha particle emitters.
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 used significant cash in support of its operating activities and the Company’s cash position is not sufficient to support
the Company’s operations. Research and development of the Company’s brachytherapy product line has been funded with proceeds
from the sale of equity and debt securities as well as a series of grants. The Company requires funding of approximately $2.5 million
annually to maintain current operating activities.
The
Company completed its reverse stock split which was approved by FINRA and went effective on June 28, 2019.
The
Company’s stock offering under Regulation A+ was qualified by the Securities and Exchange Commission (“SEC”) on June
3, 2020. A second Regulation A+ was qualified by the SEC on September 15, 2021 to raise capital for 50,000,000 shares at a price of $0.10
for a maximum of $5,000,000. The Company amended this and was able to raise $1,200,000 in July 2022 at $0.08 per share (15,000,000 shares)
and sold 20,000,000 warrants for $20,000. An amended Regulation A+ was filed in October 2022 to raise the remaining $3,800,000 of the
$5,000,000. In April 2023, $640,000 was raised in the issuance of 8,000,000 common shares, 2,665,000 Series A warrants and 8,000,000
Series B warrants along with $10,665 in the sale of the warrants.
The
Company’s Regulation A+’s raised approximately $5,200,000 from the sale of shares and is using the proceeds generated as
follows:
For
the animal therapy market:
| |
● |
Fund
the effort to communicate the benefits of IsoPet® to the veterinary community and the pet parents. |
| |
● |
Conduct
additional clinical studies to generate more data for the veterinary community |
| |
● |
Subsidize
some IsoPet® therapies, if necessary, to ensure that all viable candidates are treated. |
| |
● |
Assist
new regional clinics with their license and certification training. |
For
the human market:
| |
● |
Enhance
the pedigree of the Quality Management System. |
| |
● |
Complete
the previously defined pre-clinical testing and additional testing on an animal model closely aligned with our revised indication
for use. Report the results to the FDA in a pre-submission meeting. |
| |
● |
Use
the feedback from that meeting to write the IDE (Investigational Device Exemption), which is required to initiate clinical trials. |
Research
and development of the Company’s brachytherapy product line has been funded with proceeds from the sale of equity and debt securities.
The Company may require additional funding of approximately $2.5
million annually to maintain current operating
activities. Over the next 12 to 48 months, the Company believes
it will cost approximately $9 million to: (1) fund the FDA approval process to conduct human clinical trials, (2) conduct Phase I, pilot,
clinical trials, (3) activate several regional clinics to administer IsoPet® across the county, (4) create an independent
production center within the current production site to create a template for future international manufacturing, and (5) initiate regulatory
approval processes outside of the United States.
The proceeds to be raised from the recent qualified Regulation A+ will be used to continue to fund this development.
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 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
from proceeds to be raised from the recent qualified Regulation A+.
Following
receipt of required regulatory approvals and financing, in the U.S., the Company intends to outsource material aspects of manufacturing,
distribution, sales and marketing. Outside of the U.S., the Company intends to pursue licensing arrangements and/or partnerships to facilitate
its global commercialization strategy.
In
the longer-term, subject to the Company receiving adequate funding, regulatory approval for RadioGel™ and other brachytherapy
products, and thereafter being able to successfully commercialize its brachytherapy products, the Company intends to consider resuming
research efforts with respect to other products and technologies intended to help improve the diagnosis and treatment of cancer and other
illnesses.
Based
on the Company’s financial history since inception, the Company’s independent registered public accounting firm 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 may not be able to continue operations.
The
Company has been impacted from the effects of COVID-19. The Company’s headquarters are in Northeast Washington however there focus
of the animal therapy market has been the Northwestern sector of the United States. The Company continues their marketing to the animal
therapy market and attempt to increase the exposure to their product and generate revenue accordingly.
As
of June 30, 2023, the Company has $1,748,767 cash on hand. There are currently commitments to vendors for products and services purchased.
To continue the development of the Company’s products, the current level of cash may not be enough to cover the fixed and variable
obligations of the Company.
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.
Use
of Estimates
The
preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates
and assumptions that affect 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. Estimates the Company
considers include criteria for stock-based compensation expense, and valuation allowances on deferred tax assets. Actual results could
differ from those estimates.
Financial
Statement Reclassification
Certain
account balances from prior periods have been reclassified in these financial statements so as to conform to current period classifications.
Cash
Equivalents
For
the purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
The
Company occasionally maintains cash balances in excess of the FDIC insured limit. The Company does not consider this risk to be material.
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, 2023 and December 31, 2022, the balances reported for cash, prepaid expenses,
accounts receivable, 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. Accounting Standards Codification (“ASC”) Topic 820 established a three-tier
fair value hierarchy which prioritizes 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 including options and warrants issued during the period at fair value on a recurring basis.
Patents
and Intellectual Property
While
patents are being developed or pending, they are not being amortized. Management has determined that the economic life of the patents
to be ten years and amortization, over such 10-year period and on a straight-line basis will begin once the patents have been issued
and the Company begins utilization of the patents through production and sales, resulting in revenues.
The
Company evaluates the recoverability of intangible assets, including patents and intellectual property on a continual basis. Several
factors are used to evaluate intangibles, including, but not limited to, management’s plans for future operations, recent operating
results and projected and expected undiscounted future cash flows.
There
have been no such capitalized costs in the six months ended June 30, 2023 and 2022, respectively. However, a patent was filed on July
1, 2019 (No. 1811.191) filed by Michael Korenko and David Swanberg and assigned to the Company based on the Company’s proprietary
particle manufacturing process. The timing of this filing was important given the Company’s plans to make IsoPet®
commercially available, which it did on or about July 9, 2019. This additional patent protection will strengthen the Company’s
competitive position. It is the Company’s intention to further extend this patent protection to several key countries within one
year, as permitted under international patent laws and treaties.
Revenue
Recognition
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single set of guidelines for revenue recognition
to be used across all industries and requires additional disclosures. The updated guidance introduces a five-step model to achieve its
core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the updated
guidance effective January 1, 2018 using the full retrospective method.
Under
ASC 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to preform respective
obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods
transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable.
The adoption of ASC 606 did not have an impact on the Company’s operations or cash flows.
The
Company recognized revenue as they (i) identified the contracts with each customer; (ii) identified the performance obligation in each
contract; (iii) determined the transaction price in each contract; (iv) were able to allocate the transaction price to the performance
obligations in the contract; and (v) recognized revenue upon the satisfaction of the performance obligation. Upon the sales of the product
to complete the procedures on the animals, the Company recognized revenue as that was considered the performance obligation.
All
revenue recognized in the six months ended June 30, 2023 and 2022 relate to consulting income with respect to the IsoPet® therapies.
Loss
Per Share
The
Company accounts for its loss per common share by replacing primary and fully diluted earnings per share with basic and diluted earnings
per share. Basic loss per share is computed by dividing loss available to common stockholders (the numerator) by the weighted-average
number of common shares outstanding (the denominator) for the period, and does not include the impact of any potentially dilutive common
stock equivalents since the impact would be anti-dilutive. The computation of diluted earnings per share is similar to basic earnings
per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding
if potentially dilutive common shares had been issued. For the given periods of loss, of the periods ended in the six months ended June
30, 2023 and 2022, the basic earnings per share equals the diluted earnings per share.
The
following represent common stock equivalents that could be dilutive in the future as of June 30, 2023 and December 31, 2022, which include
the following:
SCHEDULE
OF DILUTIVE EARNINGS PER SHARE
| | |
June 30, 2023 | | |
December 31, 2022 | |
| Preferred stock | |
| 9,909,570 | | |
| 9,909,570 | |
| Restricted stock units | |
| 28,262,500 | | |
| 25,362,500 | |
| Common stock options | |
| 2,252,809 | | |
| 2,252,809 | |
| Common stock warrants | |
| 25,665,000 | | |
| 26,737,500 | |
| Total potential dilutive securities | |
| 66,089,879 | | |
| 64,762,379 | |
Research
and Development Costs
Research
and developments costs, including salaries, research materials, administrative expenses and contractor fees, are charged to operations
as incurred. The cost of equipment used in research and development activities which has alternative uses is capitalized as part of fixed
assets and not treated as an expense in the period acquired. Depreciation of capitalized equipment used to perform research and development
is classified as research and development expense in the year computed.
The
Company incurred $219,728 and $241,301 in research and development costs for the six months ended June 30, 2023 and 2022, respectively,
all of which were recorded in the Company’s operating expenses noted on the statements of operations for the periods then ended.
Advertising
and Marketing Costs
Advertising
and marketing costs are expensed as incurred except for the cost of tradeshows which are deferred until the tradeshow occurs. During
the six months ended June 30, 2023 and 2022, the Company incurred nominal advertising and marketing costs.
Contingencies
In
the ordinary course of business, the Company is involved in legal proceedings involving contractual and employment relationships, product
liability claims, patent rights, and a variety of other matters. The Company records contingent liabilities resulting from asserted and
unasserted claims against it, when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable.
The Company discloses contingent liabilities when there is a reasonable possibility that the ultimate loss will exceed the recorded liability.
Estimated probable losses require analysis of multiple factors, in some cases including judgments about the potential actions of third-party
claimants and courts. Therefore, actual losses in any future period are inherently uncertain. The Company has entered into various agreements
that require them to pay certain fees to consultants and/or employees that have been fully accrued for as of June 30, 2023 and December
31, 2022.
Income
Taxes
To
address accounting for uncertainty in tax positions, the Company clarifies the accounting for income taxes by prescribing a minimum recognition
threshold that a tax position is required to meet before being recognized in the financial statements. The Company also provides guidance
on de-recognition, measurement, classification, interest, and penalties, accounting in interim periods, disclosure and transition.
The
Company files income tax returns in the U.S. federal jurisdiction. The Company did not have any tax expense for the six months ended
June 30, 2023 and 2022. The Company did not have any deferred tax liability or asset on its balance sheets on June 30, 2023 and December
31, 2022.
Interest
costs and penalties related to income taxes, if any, will be classified as interest expense and general and administrative costs, respectively,
in the Company’s financial statements. For the six months ended June 30, 2023 and 2022, the Company did not recognize any interest
or penalty expense related to income taxes. The Company believes that it is not reasonably possible for the amounts of unrecognized tax
benefits to significantly increase or decrease within the next twelve months.
Stock-Based
Compensation
The
Company recognizes compensation costs under FASB ASC Topic 718, Compensation – Stock Compensation and ASU 2018-07. Companies are
required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize
the costs in the financial statements over the period during which employees are required to provide services. Share based compensation
arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase
plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized
over the respective vesting periods of the option grant.
Recent
Accounting Pronouncements
The
Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition,
results of operations, cash flows or disclosures.
NOTE
2: RELATED PARTY TRANSACTIONS
Preferred
and Common Shares Issued to Officers and Directors
In
March 2022, the Chief Executive Officer exercised 75,000 warrants in a cashless exercise into 22,266 shares of common stock, and was
issued 76,250 shares of common stock valued at $4,880 for services rendered.
NOTE
3: STOCKHOLDERS’ EQUITY
Common
Stock
The
Company has 950,000,000 shares of common stock authorized, with a par value of $0.001, and as of June 30, 2023 and December 31, 2022,
the Company has 370,541,528 and 362,541,528 shares issued and outstanding, respectively.
Preferred
Stock
As
of June 30, 2023 and December 31, 2022, the Company has 20,000,000 shares of Preferred stock authorized with a par value of $0.001. The
Company’s Board of Directors is authorized to provide for the issuance of shares of preferred stock in one or more series, fix
or alter the designations, preferences, rights, qualifications, limitations or restrictions of the shares of each series, including the
dividend rights, dividend rates, conversion rights, voting rights, term of redemption including sinking fund provisions, redemption price
or prices, liquidation preferences and the number of shares constituting any series or designations of such series without further vote
or action by the shareholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control
of management without further action by the shareholders and may adversely affect the voting and other rights of the holders of common
stock. The issuance of preferred stock with voting and conversion rights may adversely affect the voting power of the holders of common
stock, including the loss of voting control to others.
On
October 8, 2018 the Company created out of the shares of Preferred Stock, par value $0.001 per share, of the Company, as authorized in
Article IV of the Company’s Certificate of Incorporation, a series of Preferred Stock of the Company, to be named “Series
B Convertible Preferred Stock,” consisting of Five Million (5,000,000) shares.
On
March 27, 2019 the Company created out of the shares of Preferred Stock, par value $0.001 per share, of the Company, as authorized in
Article IV of the Company’s Certificate of Incorporation, a series of Preferred Stock of the Company, to be named “Series
C Convertible Preferred Stock,” consisting of Five Million (5,000,000) shares.
Series
A Convertible Preferred Stock (“Series A Convertible Preferred”)
In
June 2015, the Series A Certificate of Designation was filed with the Delaware Secretary of State to designate 2.5 million shares of
our preferred stock as Series A Convertible Preferred. Effective March 31, 2016, the Company amended the Certificate of Designations,
Preferences and Rights of Series A Convertible Preferred of the Registrant, increasing the maximum number of shares of Series A Convertible
Preferred from 2,500,000 shares to 5,000,000 shares. The following summarizes the current rights and preferences of the Series A Convertible
Preferred:
Liquidation
Preference. The Series A Convertible Preferred has a liquidation preference of $5.00 per share.
Dividends.
Shares of Series A Convertible Preferred do not have any separate dividend rights.
Conversion.
Subject to certain limitations set forth in the Series A Certificate of Designation, each share of Series A Convertible Preferred is
convertible, at the option of the holder, into that number of shares of common stock (the “Series A Conversion Shares”)
equal to the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series A Certificate of Designation),
currently $4.00.
In
the event the Company completes an equity or equity-based public offering, registered with the SEC, resulting in gross proceeds to the
Company totaling at least $5.0 million, all issued and outstanding shares of Series A Convertible Preferred at that time will automatically
convert into Series A Conversion Shares.
Redemption.
Subject to certain conditions set forth in the Series A Certificate of Designation, in the event of a Change of Control (defined in the
Series A Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
A Convertible Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing
more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to
redeem all or a portion of the outstanding Series A Convertible Preferred in cash at a price per share of Series A Convertible Preferred
equal to 100% of the Liquidation Preference.
Voting
Rights. Holders of Series A Convertible Preferred are entitled to vote on all matters, together with the holders of common stock,
and have the equivalent of five (5) votes for every Series A Conversion Share issuable upon conversion of such holder’s outstanding
shares of Series A Convertible Preferred. However, the Series A Conversion Shares, when issued, will have all the same voting rights
as other issued and outstanding common stock of the Company, and none of the rights of the Series A Convertible Preferred.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series A Convertible Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company
an amount equal to the liquidation preference of the Series A Convertible Preferred before any distribution or payment shall be made
to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders of the Series A Convertible Preferred shall be ratably distributed among the holders in accordance
with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Certain
Price and Share Adjustments.
a)
Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions
payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares
of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common
stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of
capital stock of the Company, then the conversion price shall be adjusted accordingly.
b)
Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation
or merger in which the Common Stock is converted into or exchanged for securities, cash or other property than each share of Series A
Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number of shares of
common stock issuable upon conversion of one share of Series A Convertible Preferred prior to any such merger or reorganization would
have been entitled to receive pursuant to such transaction.
Series
B Convertible Preferred Stock (“Series B Convertible Preferred”)
In
October 2018, the Series B Certificate of Designation was filed with the Delaware Secretary of State to designate 5.0 million shares
of our preferred stock as Series B Convertible Preferred. The following summarizes the current rights and preferences of the Series B
Convertible Preferred:
Liquidation
Preference. The Series B Convertible Preferred has a liquidation preference of $1.00 per share.
Dividends.
Shares of Series B Convertible Preferred do not have any separate dividend rights.
Conversion.
Subject to certain limitations set forth in the Series B Certificate of Designation, each share of Series B Convertible Preferred is
convertible, at the option of the holder, into that number of shares of common stock (the “Series B Conversion Shares”)
equal to the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series B Certificate of Designation),
currently $0.08.
Redemption.
Subject to certain conditions set forth in the Series B Certificate of Designation, in the event of a Change of Control (defined in the
Series B Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
B Convertible Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing
more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to
redeem all or a portion of the outstanding Series B Convertible Preferred in cash at a price per share of Series B Convertible Preferred
equal to 100% of the Liquidation Preference.
Voting
Rights. Holders of Series B Convertible Preferred are entitled to vote on all matters, together with the holders of common stock,
and have the equivalent of two (2) votes for every Series B Conversion Share issuable upon conversion of such holder’s outstanding
shares of Series B Convertible Preferred. However, the Series B Conversion Shares, when issued, will have all the same voting rights
as other issued and outstanding common stock of the Company, and none of the rights of the Series A Convertible Preferred.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series B Convertible Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company
an amount equal to the liquidation preference of the Series B Convertible Preferred before any distribution or payment shall be made
to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders of the Series B Convertible Preferred shall be ratably distributed among the holders in accordance
with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Certain
Price and Share Adjustments.
a)
Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions
payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares
of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common
stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of
capital stock of the Company, then the conversion price shall be adjusted accordingly.
b)
Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation
or merger in which the Common Stock is converted into or exchanged for securities, cash or other property than each share of Series B
Convertible Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number
of shares of common stock issuable upon conversion of one share of Series B Convertible Preferred prior to any such merger or reorganization
would have been entitled to receive pursuant to such transaction.
Series
C Convertible Preferred Stock (“Series C Convertible Preferred”)
In
March 2019, the Series C Certificate of Designation was filed with the Delaware Secretary of State to designate 5.0 million shares of
our preferred stock as Series C Convertible Preferred. The following summarizes the current rights and preferences of the Series C Convertible
Preferred:
Liquidation
Preference. The Series C Convertible Preferred has a liquidation preference of $1.00 per share.
Dividends.
Shares of Series C Convertible Preferred do not have any separate dividend rights.
Conversion.
Subject to certain limitations set forth in the Series C Certificate of Designation, each share of Series C Convertible Preferred is
convertible, at the option of the holder, into that number of shares of common stock (the “Series C Conversion Shares”)
equal to the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series C Certificate of Designation),
currently $0.08.
The
Series C Convertible Preferred will only be convertible at any time after the date that the Company shall have amended its Certificate
of Incorporation to increase the number of shares of common stock authorized for issuance thereunder or effect a reverse stock split
of the outstanding shares of common stock by a sufficient amount to permit the conversion of all Series C Convertible Preferred into
shares of common stock (“Authorized Share Approval”) (such date, the “Initial Convertibility Date”),
each share of Series C Convertible Preferred shall be convertible into validly issued, fully paid and non-assessable shares of Common
Stock on the terms and conditions set forth in the Series C Certificate of Designation under the definition “Conversion Rights”.
Redemption.
Subject to certain conditions set forth in the Series C Certificate of Designation, in the event of a Change of Control (defined in the
Series C Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
C Convertible Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing
more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to
redeem all or a portion of the outstanding Series C Convertible Preferred in cash at a price per share of Series C Convertible Preferred
equal to 100% of the Liquidation Preference.
Voting
Rights. Holders of Series C Convertible Preferred are entitled to vote on all matters, together with the holders of common stock,
and have the equivalent of thirty-two (32) votes for every Series C Conversion Share issuable upon conversion of such holder’s
outstanding shares of Series C Convertible Preferred. However, the Series C Conversion Shares, when issued, will have all the same voting
rights as other issued and outstanding common stock of the Company, and none of the rights of the Series C Convertible Preferred.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series C Convertible Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company
an amount equal to the liquidation preference of the Series C Convertible Preferred before any distribution or payment shall be made
to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders of the Series C Convertible Preferred shall be ratably distributed among the holders in accordance
with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Certain
Price and Share Adjustments.
a)
Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions
payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares
of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common
stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of
capital stock of the Company, then the conversion price shall be adjusted accordingly.
b)
Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation
or merger in which the Common Stock is converted into or exchanged for securities, cash or other property than each share of Series C
Convertible Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number
of shares of common stock issuable upon conversion of one share of Series C Convertible Preferred prior to any such merger or reorganization
would have been entitled to receive pursuant to such transaction.
Common
and Preferred Stock Issuances – 2023
In
April 2023, the Company issued 8,000,000 shares of common stock, 2,665,000 Series A warrants and 8,000,000 Series B warrants in their
Reg A+ for $640,000. The Company sold the warrants for $10,665.
Common
and Preferred Stock Issuances - 2022
In
March 2022, the Company issued 299,577 shares of common stock in the cashless exercise of 825,000 warrants, and issued 76,250 shares
of common stock to its CEO for services rendered valued at $4,880. In June 2022, there was a fractional adjustment recorded for 90 shares.
NOTE
4: COMMON STOCK OPTIONS, WARRANTS AND RESTRICTED STOCK UNITS
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:
SCHEDULE
OF CHANGES IN STOCK OPTION
| | |
| | |
Weighted | | |
| | |
Weighted | |
| | |
Options Outstanding | | |
Average | | |
| | |
Average | |
| | |
Number Of Shares | | |
Exercise
Price Per
Share | | |
Remaining
Contractual
Life | | |
Aggregate
Intrinsic
Value | | |
Exercise
Price Per
Share | |
| Balance at December 31, 2021 | |
| 2,252,809 | | |
$ | 0.024-0.04 | | |
| 7.70 years | | |
$ | 83,992 | | |
$ | 0.04 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Options granted | |
| - | | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| Options exercised | |
| - | | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| Options expired/canceled | |
| - | | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at December 31, 2022 | |
| 2,252,809 | | |
$ | 0.024-0.04 | | |
| 6.70 years | | |
$ | 16,032 | | |
$ | 0.04 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercisable at December 31, 2022 | |
| 2,252,809 | | |
$ | 0.024-0.04 | | |
| 6.70 years | | |
$ | 16,032 | | |
$ | 0.04 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at December 31, 2022 | |
| 2,252,809 | | |
$ | 0.024-0.04 | | |
| 6.70 years | | |
$ | 16,032 | | |
$ | 0.04 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Options granted | |
| - | | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| Options exercised | |
| - | | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| Options expired/canceled | |
| - | | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at June 30, 2023 | |
| 2,252,809 | | |
$ | 0.024-0.04 | | |
| 6.20 years | | |
$ | 39,462 | | |
$ | 0.04 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercisable at June 30, 2023 | |
| 2,252,809 | | |
$ | 0.024-0.04 | | |
| 6.20 years | | |
$ | 39,462 | | |
$ | 0.04 | |
During
the six months ended June 30, 2023 and 2022, the Company recognized $0 and $0, respectively, worth of stock based compensation related
to the vesting of it stock options.
Common
Stock Warrants
The
following schedule summarizes the changes in the Company’s stock warrants:
SCHEDULE
OF CHANGES IN STOCK WARRANTS
| | |
Warrants Outstanding | | |
Weighted Average | | |
| | |
Weighted Average | |
| | |
Number Of Shares | | |
Exercise
Price Per
Share | | |
Remaining
Contractual
Life | | |
Aggregate
Intrinsic
Value | | |
Exercise
Price Per
Share | |
| Balance at December 31, 2021 | |
| 31,862,500 | | |
$ | 0.04-0.10 | | |
| 1.02 years | | |
$ | 538,875 | | |
$ | 0.07 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Warrants granted | |
| 20,000,000 | | |
$ | 0.01 – 0.08 | | |
| 2.50 | | |
| | | |
$ | 0.0725 | |
| Warrants exercised | |
| (4,158,333 | ) | |
$ | - | | |
| - | | |
| | | |
$ | | |
| Warrants expired/cancelled | |
| (20,966,667 | ) | |
$ | - | | |
| - | | |
| | | |
$ | | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at December 31, 2022 | |
| 26,737,500 | | |
$ | 0.08-0.10 | | |
| 1.52 years | | |
$ | - | | |
$ | 0.09 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercisable at December 31, 2022 | |
| 26,737,500 | | |
$ | 0.06-0.10 | | |
| 1.52 years | | |
$ | - | | |
$ | 0.09 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Warrants granted | |
| 10,665,000 | | |
$ | 0.0775 | | |
| - | | |
| - | | |
$ | - | |
| Warrants redeemed | |
| (500,000 | ) | |
$ | - | | |
| - | | |
| - | | |
$ | - | |
| Warrants expired/cancelled | |
| (11,237,500 | ) | |
$ | - | | |
| - | | |
| - | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at June 30, 2023 | |
| 25,665,000 | | |
$ | 0.06-0.10 | | |
| 2.16 years | | |
$ | 119,392 | | |
$ | 0.079 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercisable at June 30, 2023 | |
| 25,665,000 | | |
$ | 0.06-0.10 | | |
| 2.16 years | | |
$ | 119,392 | | |
$ | 0.079 | |
Changes
to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each option/warrant is estimated
using the Black-Scholes valuation model. The following assumptions were used for the periods as follows:
SCHEDULE
OF ASSUMPTIONS USED IN FAIR VALUE MEASUREMENT
| | |
Six
Months Ended | | |
Year
Ended | |
| | |
June
30, 2023 | | |
December
31, 2022 | |
| Expected term | |
| - | | |
| .5 – 3 years | |
| Expected volatility | |
| - | % | |
| 66 | % |
| Expected dividend yield | |
| - | | |
| - | |
| Risk-free interest rate | |
| - | % | |
| 3 | % |
In
March 2022 the Company issued 299,577 shares of common stock in the cashless exercise of 825,000 warrants.
Restricted
Stock Units
The
following schedule summarizes the changes in the Company’s restricted stock units:
SCHEDULE
OF CHANGES IN RESTRICTED STOCK UNITS
| | |
Number | | |
Weighted Average | |
| | |
Of | | |
Grant Date | |
| | |
Shares | | |
Fair Value | |
| | |
| | |
| |
| Balance at December 31, 2021 | |
| 25,262,500 | | |
$ | 0.08 | |
| | |
| | | |
| | |
| RSU’s granted | |
| 100,000 | | |
$ | 0.082 | |
| RSU’s vested | |
| (15,100,000 | ) | |
$ | - | |
| RSU’s forfeited | |
| - | | |
$ | - | |
| | |
| | | |
| | |
| Balance at December 31, 2022 | |
| 10,262,500 | | |
$ | 0.08 | |
| RSUs granted | |
| 2,900,000 | | |
$ | 0.091 | |
| RSUs vested | |
| (5,000,000 | ) | |
$ | - | |
| Balance at June 30, 2023 | |
| 8,162,500 | | |
$ | 0.09 | |
During
the six months ended June 30, 2023 and 2022, the Company recognized $515,975 and $908,200 worth of expense related to the vesting of
its RSU’s. As of June 30, 2023, the Company had $803,325 worth of expense yet to be recognized for RSU’s not yet vested.
On
February 3, 2022 and May 3, 2022, 10,000,000 of the RSUs valued at $900,000 to the CEO vested. On June 1, 2022, 100,000 RSUs were granted
to a consultant valued at $8,200 that were vested immediately.
On
May 1, 2023, the Company granted 2,900,000 RSUs to consultants that vest 25% immediately, 25% December 31, 2023, 25% December 31, 2024
and 25% December 31, 2025. These RSUs are valued at $263,900.
NOTE
5: COMMITMENT
On
June 4, 2019, the Company entered into an Executive Employment Agreement (“Employment Agreement”) with Dr. Michael K. Korenko,
the Company’s Chief Executive Officer. The employment term under the Employment Agreement commenced with an effective date of June
11, 2019 and expires on December 31, 2020, and December 31 of each successive year if the Employment Agreement is extended, unless terminated
earlier as set forth in the Employment Agreement. The Company on December 31, 2020 extended this agreement through December 31, 2021
while renegotiating terms of a new Employment Agreement. On May 3, 2021, the Company and the Chief Executive Officer agreed the terms
of a new Employment Agreement with an effective date of January 1, 2021 that has a term of three years and expires December 31, 2023.
Under
the terms of the Employment Agreement, the Company shall pay to Dr. Korenko a base compensation of $225,000. In addition, there is a
discretionary bonus to be earned in the amount of $7,500 per quarter upon the satisfaction of conditions to be determined by the Board
of Directors of the Company.
Vivos
Inc.
Index
to Financial Statements
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of Vivos, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Vivos, Inc. (“the Company”) as of December 31, 2022 and 2021, and the related
statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December
31, 2022, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021 and the results of its operations
and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally
accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has suffered recurring losses, has utilized significant cash in operations, and its cash position
is not sufficient to support operations. These factors, among others, raise substantial doubt about the Company’s ability to continue
as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical
Audit Matters
The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Equity
Transactions (Notes 4 and 5 to the financial statements)
Description
of the Critical Audit Matter
The
Company’s evaluation of common shares issuances, including in exchange for stock warrants involved complexity and judgement in
applying the relevant accounting standards when auditing management’s conclusions on the classification and recognition of warrants
on issuance and on exercise and equity transactions upon issuance.
How
the Critical Audit Matter Was Addressed in the Audit
Our
principal audit procedures to evaluate management’s calculation and recording of common share issuances included the following:
| ● | We
evaluated the appropriateness and consistency of management’s methods and assumptions
used in the identification, recognition, measurement, and disclosure of considerations of
the underlying warrants and share issuances during the year, including the classification
with respect to the terms and in considering applicable generally accepted accounting standards. |
| ● | We
read the applicable agreements and compared the key terms to management’s analysis
of the transaction. |
| ● | We
read, evaluated, and tested the reasonableness of management’s calculation utilized
in the determination of common shares issued, including exchange for stock warrants. |
| ● | We
evaluated whether management had appropriately considered new information that could significantly
change the measurement or disclosure of common shares issued including exchange for stock
warrants, and evaluated the disclosures related to the financial statement impacts of the
transactions. |
| ● | We
reviewed current and subsequent period accounting records and third-party documentation to
identify unrecorded equity transactions. |
Fruci
& Associates II, PLLC
|
We
have served as the Company’s auditor since 2016.
Spokane,
Washington |
|
| March
1, 2023 |
|
VIVOS
INC
CONDENSED
BALANCE SHEETS
DECEMBER
31, 2022 AND 2021
| | |
DECEMBER 31, | | |
DECEMBER 31, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| ASSETS | |
| | | |
| | |
| | |
| | | |
| | |
| Current Assets: | |
| | | |
| | |
| Cash | |
$ | 1,706,065 | | |
$ | 1,606,123 | |
| Accounts receivable | |
| 11,000 | | |
| - | |
| Prepaid expenses | |
| 25,671 | | |
| 28,175 | |
| | |
| | | |
| | |
| Total Current Assets | |
| 1,742,736 | | |
| 1,634,298 | |
| | |
| | | |
| | |
| | |
| | | |
| | |
| TOTAL ASSETS | |
$ | 1,742,736 | | |
$ | 1,634,298 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| | |
| | | |
| | |
| LIABILITIES | |
| | | |
| | |
| Current Liabilities: | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | 81,692 | | |
$ | 166,915 | |
| | |
| | | |
| | |
| Total Current Liabilities | |
| 81,692 | | |
| 166,915 | |
| | |
| | | |
| | |
| Total Liabilities | |
| 81,692 | | |
| 166,915 | |
| | |
| | | |
| | |
| Commitments and contingencies | |
| - | | |
| - | |
| | |
| | | |
| | |
| STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| Preferred stock, par value, $0.001, 20,000,000 shares authorized, Series A Convertible Preferred, 5,000,000 shares authorized, 2,071,007 shares issued and outstanding, respectively | |
| 2,071 | | |
| 2,071 | |
| Additional paid in capital - Series A Convertible preferred stock | |
| 8,842,458 | | |
| 8,842,458 | |
| Series B Convertible Preferred, 5,000,000 shares authorized, 200,363 shares issued and outstanding, respectively | |
| 200 | | |
| 200 | |
| Additional paid in capital - Series B Convertible preferred stock | |
| 290,956 | | |
| 290,956 | |
| Series C Convertible Preferred, 5,000,000 shares authorized, 385,302 shares issued and outstanding, respectively | |
| 385 | | |
| 385 | |
| Preferred stock value | |
| 385 | | |
| 385 | |
| Additional paid in capital - Series C Convertible preferred stock | |
| 500,507 | | |
| 500,507 | |
| Additional
paid in capital - Convertible preferred stock | |
| 500,507 | | |
| 500,507 | |
| Common stock, par value, $0.001, 950,000,000 shares authorized, 362,541,528 and 343,530,678 issued and outstanding, respectively | |
| 362,541 | | |
| 343,531 | |
| Additional paid in capital - common stock | |
| 71,217,954 | | |
| 68,573,142 | |
| Accumulated deficit | |
| (79,556,028 | ) | |
| (77,085,867 | ) |
| | |
| | | |
| | |
| Total Stockholders’ Equity | |
| 1,661,044 | | |
| 1,467,383 | |
| | |
| | | |
| | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 1,742,736 | | |
$ | 1,634,298 | |
VIVOS
INC
STATEMENTS
OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Revenues, net | |
$ | 36,499 | | |
$ | 14,887 | |
| Cost of Goods Sold | |
| (28,779 | ) | |
| (12,000 | ) |
| | |
| | | |
| | |
| Gross profit | |
| 7,720 | | |
| 2,887 | |
| | |
| | | |
| | |
| OPERATING EXPENSES | |
| | | |
| | |
| Professional fees, including stock-based compensation | |
| 1,755,316 | | |
| 1,838,323 | |
| Payroll expenses | |
| 275,240 | | |
| 267,477 | |
| Research and development | |
| 343,802 | | |
| 286,848 | |
| General and administrative expenses | |
| 151,111 | | |
| 112,037 | |
| | |
| | | |
| | |
| Total Operating Expenses | |
| 2,525,469 | | |
| 2,504,685 | |
| | |
| | | |
| | |
| OPERATING LOSS | |
| (2,517,749 | ) | |
| (2,501,798 | ) |
| | |
| | | |
| | |
| NON-OPERATING INCOME (EXPENSE) | |
| | | |
| | |
| Interest expense | |
| - | | |
| (25,375 | ) |
| Forgiveness of debt | |
| - | | |
| 136,445 | |
| Gain (loss) on debt extinguishment | |
| 47,588 | | |
| (137,038 | ) |
| | |
| | | |
| | |
| Total Non-Operating Income (Expenses) | |
| 47,588 | | |
| (25,968 | ) |
| | |
| | | |
| | |
| | |
| | | |
| | |
| Provision for income taxes | |
| - | | |
| - | |
| | |
| | | |
| | |
| NET LOSS | |
$ | (2,470,161 | ) | |
$ | (2,527,766 | ) |
| | |
| | | |
| | |
| Net loss per share - basic and diluted | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
| | |
| | | |
| | |
| Weighted average common shares outstanding | |
| 351,425,912 | | |
| 325,851,906 | |
VIVOS
INC
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
Additional | | |
| | |
| | |
Additional | | |
| | |
| | |
Additional | | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
Paid-In | | |
| | |
| | |
Paid-In | | |
| | |
| | |
Paid-In | | |
| | |
Additional | | |
| | |
| |
| | |
Series
A Preferred | | |
Capital
- Series A | | |
Series
B Preferred | | |
Capital
- Series B | | |
Series
C Preferred | | |
Capital
- Series C | | |
Common
Stock | | |
Paid-In
Capital - | | |
Accumulated | | |
| |
| | |
Shares | | |
Amount | | |
Preferred | | |
Shares | | |
Amount | | |
Preferred | | |
Shares | | |
Amount | | |
Preferred | | |
Shares | | |
Amount | | |
Common | | |
Deficit | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance
- December 31, 2020 | |
| 2,171,007 | | |
$ | 2,171 | | |
$ | 8,857,358 | | |
| 436,653 | | |
$ | 436 | | |
$ | 385,235 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
| 292,278,591 | | |
$ | 292,279 | | |
$ | 64,551,764 | | |
$ | (74,558,101 | ) | |
$ | 32,034 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Stock
issued for: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 22,500,000 | | |
| 22,500 | | |
| 1,777,500 | | |
| - | | |
| 1,800,000 | |
| Note
conversions/settlements | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,576,080 | | |
| 3,576 | | |
| 408,435 | | |
| - | | |
| 412,011 | |
| Accounts
payable | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,305,298 | | |
| 1,305 | | |
| 120,805 | | |
| - | | |
| 122,110 | |
| Services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 77,768 | | |
| 78 | | |
| 3,678 | | |
| - | | |
| 3,756 | |
| Stock
option exercises | |
| (100,000 | ) | |
| (100 | ) | |
| (14,900 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,125,000 | | |
| 2,125 | | |
| 12,875 | | |
| - | | |
| - | |
| RSUs | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 12,000,000 | | |
| 12,000 | | |
| (12,000 | ) | |
| - | | |
| - | |
| Warrant
exercises | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 6,714,316 | | |
| 6,714 | | |
| (6,714 | ) | |
| - | | |
| - | |
| Conversion
of preferred shares to common shares | |
| - | | |
| - | | |
| - | | |
| (236,290 | ) | |
| (236 | ) | |
| (94,279 | ) | |
| - | | |
| - | | |
| - | | |
| 2,953,625 | | |
| 2,954 | | |
| 91,561 | | |
| - | | |
| - | |
| Warrants
purchased for cash | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 11,238 | | |
| - | | |
| 11,238 | |
| RSUs
granted to consultants that have vested | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,614,000 | | |
| - | | |
| 1,614,000 | |
| Net
loss for the year | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,527,766 | ) | |
| (2,527,766 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance
- December 31, 2021 | |
| 2,071,007 | | |
$ | 2,071 | | |
$ | 8,842,458 | | |
| 200,363 | | |
$ | 200 | | |
$ | 290,956 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
$ | 343,530,678 | | |
$ | 343,531 | | |
$ | 68,573,142 | | |
$ | (77,085,867 | ) | |
$ | 1,467,383 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance
- December 31, 2021 | |
| 2,071,007 | | |
$ | 2,071 | | |
$ | 8,842,458 | | |
| 200,363 | | |
$ | 200 | | |
$ | 290,956 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
| 343,530,678 | | |
$ | 343,531 | | |
$ | 68,573,142 | | |
$ | (77,085,867 | ) | |
$ | 1,467,383 | |
| Balance | |
| 2,071,007 | | |
$ | 2,071 | | |
$ | 8,842,458 | | |
| 200,363 | | |
$ | 200 | | |
$ | 290,956 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
| 343,530,678 | | |
$ | 343,531 | | |
$ | 68,573,142 | | |
$ | (77,085,867 | ) | |
$ | 1,467,383 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Stock
issued for: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 15,000,000 | | |
| 15,000 | | |
| 1,185,000 | | |
| - | | |
| 1,200,000 | |
| Accounts
payable | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 984,840 | | |
| 984 | | |
| 48,258 | | |
| - | | |
| 49,242 | |
| Fractional
adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (90 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 76,250 | | |
| 76 | | |
| 4,804 | | |
| - | | |
| 4,880 | |
| Warrant
exercises | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,949,850 | | |
| 2,950 | | |
| (2,950 | ) | |
| - | | |
| - | |
| Warrants
purchased for cash | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 20,000 | | |
| - | | |
| 20,000 | |
| RSUs
granted to consultants that have vested | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,389,700 | | |
| - | | |
| 1,389,700 | |
| Net
loss for the year | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,470,161 | ) | |
| (2,470,161 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance | |
| 2,071,007 | | |
$ | 2,071 | | |
$ | 8,842,458 | | |
| 200,363 | | |
$ | 200 | | |
$ | 290,956 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
| 362,541,528 | | |
$ | 362,541 | | |
$ | 71,217,954 | | |
$ | (79,556,028 | ) | |
$ | 1,661,044 | |
| Balance
- December 31, 2022 | |
| 2,071,007 | | |
$ | 2,071 | | |
$ | 8,842,458 | | |
| 200,363 | | |
$ | 200 | | |
$ | 290,956 | | |
| 385,302 | | |
$ | 385 | | |
$ | 500,507 | | |
| 362,541,528 | | |
$ | 362,541 | | |
$ | 71,217,954 | | |
$ | (79,556,028 | ) | |
$ | 1,661,044 | |
The
accompanying notes are an integral part of these financial statements.
VIVOS
INC
CONDENSED
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
| | |
2022 | | |
2021 | |
| CASH FLOW FROM OPERATING ACTIVITIES | |
| | | |
| | |
| Net loss | |
$ | (2,470,161 | ) | |
$ | (2,527,766 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities | |
| | | |
| | |
| Common stock, stock options and warrants for services | |
| 4,880 | | |
| 3,756 | |
| RSUs issued for services | |
| 1,389,700 | | |
| 1,614,000 | |
| (Gain) loss on conversion of debt | |
| (47,588 | ) | |
| 137,038 | |
| Forgiveness of debt | |
| - | | |
| (136,445 | ) |
| Changes in assets and liabilities | |
| | | |
| | |
| Accounts receivable | |
| (11,000 | ) | |
| - | |
| Prepaid expenses and other assets | |
| 2,504 | | |
| 5,660 | |
| Accounts payable and accrued expenses | |
| 11,607 | | |
| 31,480 | |
| Payroll liabilities | |
| - | | |
| (66,143 | ) |
| Accrued interest | |
| - | | |
| (25,399 | ) |
| Total adjustments | |
| 1,350,103 | | |
| 1,563,947 | |
| | |
| | | |
| | |
| Net cash used in operating activities | |
| (1,120,058 | ) | |
| (963,819 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
| Payments of convertible debt | |
| - | | |
| (45,000 | ) |
| Payments of related party notes | |
| - | | |
| (100,000 | ) |
| Proceeds from common stock and warrants | |
| 1,220,000 | | |
| 1,811,238 | |
| Net cash provided by financing activities | |
| 1,220,000 | | |
| 1,666,238 | |
| | |
| | | |
| | |
| NET INCREASE IN CASH | |
| 99,942 | | |
| 702,419 | |
| | |
| | | |
| | |
| CASH - BEGINNING OF PERIOD | |
| 1,606,123 | | |
| 903,704 | |
| | |
| | | |
| | |
| CASH - END OF PERIOD | |
$ | 1,706,065 | | |
$ | 1,606,123 | |
| | |
| | | |
| | |
| CASH PAID DURING THE PERIOD FOR: | |
| | | |
| | |
| Interest expense | |
$ | - | | |
$ | 50,773 | |
| | |
| | | |
| | |
| Income taxes | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| SUPPLEMENTAL INFORMATION - NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| | | |
| | |
| | |
| | | |
| | |
| Conversion of preferred stock for common stock | |
$ | - | | |
$ | 94,515 | |
| Conversion of notes payable and accrued interest for common and common
stock | |
$ | - | | |
$ | 185,346 | |
| Conversion of notes payable and accrued interest into common stock | |
$ | - | | |
$ | 50,370 | |
| Common stock issued in cashless exercise of warrants | |
$ | 2,950 | | |
$ | 6,714 | |
| RSUs vested into common stock | |
$ | - | | |
$ | 12,000 | |
| Accounts payable converted into shares of common stock | |
$ | 49,242 | | |
$ | 90,000 | |
| Stock options exercised for recission of common and preferred stock | |
$ | - | | |
$ | 60,000 | |
| Common stock issued in settlement of accounts payable - related parties | |
$ | - | | |
$ | 32,110 | |
| RSUs vested into common stock | |
$ | - | | |
$ | 12,000 | |
Vivos
Inc.
Notes
to Financial Statements
December
31, 2022 and 2021
NOTE
1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business
Overview
The
Company 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, and on December 28, 2017, the Company began
operating as Vivos Inc. The Company has authorized capital of 950,000,000 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
principal place of business is located at 719 Jadwin Avenue, Richland, WA 99352. Our telephone number is (509) 736-4000. Our corporate
website address is http://www.radiogel.com. Our common stock is currently quoted on the OTC Pink Marketplace under the symbol “RDGL.”
The
Company is a 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.
In
January 2018, the Center for Veterinary Medicine Product Classification Group ruled that RadioGel ™should be classified
as a device for animal therapy of feline sarcomas and canine soft tissue sarcomas. Additionally, after a legal review, the Company believes
that the device classification obtained from the Food and Drug Administration (“FDA”) Center for Veterinary Medicine
is not limited to canine and feline sarcomas, but rather may be extended to a much broader population of veterinary cancers, including
all or most solid tumors in animals. We expect the result of such classification and label review will be that no additional regulatory
approvals are necessary for the use of IsoPet® for the treatment of solid tumors in animals. The FDA does not have premarket
authority over devices with a veterinary classification, and the manufacturers are responsible for assuring that the product is safe,
effective, properly labeled, and otherwise in compliance with all applicable laws and regulations.
Based
on the FDA’s recommendation, RadioGel™ will be marketed as “IsoPet®” for use by veterinarians
to avoid any confusion between animal and human therapy. The Company already has trademark protection for the “IsoPet®”
name. IsoPet® and RadioGel™ are used synonymously throughout this document. The only distinction between
IsoPet® and RadioGel™ is the FDA’s recommendation that we use “IsoPet®”
for veterinarian usage, and reserve “RadioGel™” for human therapy. Based on these developments, the Company
has shifted its primary focus to the development and marketing of Isopet® for animal therapy, through the Company’s
IsoPet® Solutions division.
IsoPet
Solutions
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 worked with three different university veterinarian hospitals on IsoPet® testing and
therapy. Washington State University treated five cats for feline sarcoma and served to develop the procedures which are incorporated
in our label. They concluded that the product was safe and effective in killing cancer cells. Colorado State University demonstrated
the CT and PET-CT imaging of IsoPet®. A contract was signed with University of Missouri to treat canine sarcomas and equine
sarcoids starting in November 2017.
The
dogs were treated for canine soft tissue sarcoma. Response evaluation criteria in solid tumors (“RECIST”) is a set
of published rules that define when tumors in cancer patients improve (respond), stay the same (stabilize), or worsen (progress) during
treatment. The criteria were published by an international collaboration including the European Organisation for Research and Treatment
of Cancer (“EORTC”), National Cancer Institute of the United States, and the National Cancer Institute of Canada Clinical
Trials Group.
The
testing at the University of Missouri met its objective to demonstrate the safety of IsoPet®. Using its advanced CT and
PET equipment it was able to demonstrate that the dose calculations were accurate and that the injections perfused into the cell interstices
and did not stay concentrated in a bolus. This results in a more homogeneous dose distribution. There was insignificant spread of Y-90
outside the points of injection demonstrating the effectiveness of the particles and the gel to localize the radiation with no spreading
to the blood or other organs nor to urine or fecal material. This confirms that IsoPet® is safe for same day therapy.
The
effectiveness of IsoPet® for life extension was not the prime objective, but it resulted in valuable insights. Of the
cases one is still cancer-free but the others eventually recurred since there was not a strong focus on treating the margins. The University
of Missouri has agreed to become a regional center to administer IsoPet® therapy and will incorporate the improvements
suggested by the testing program.
The
Company anticipates that future profits, if any, will be derived from direct sales of RadioGel™ (under the name IsoPet®)
and related services, and from licensing to private medical and veterinary clinics in the U.S. and internationally. The Company intends
to report the results from the IsoPet® Solutions division as a separate operating segment in accordance with GAAP.
Commencing
in July 2019, the Company recognized its first commercial sale of IsoPet®. A veterinarian from Alaska brought his cat
with a re-occurrent spindle cell sarcoma tumor on his face. The cat had previously received external beam therapy, but now the tumor
was growing rapidly. He was given a high dose of 400Gy with heavy therapy at the margins. This sale met the revenue recognition requirements
under ASC 606 as the performance obligation was satisfied. The Company completed sales for an additional four animals that received the
IsoPet® during 2019.
Our
plan is to incorporate the data assembled from our work with Isopet® in animal therapy to support the Company’s
efforts in the development of our RadioGel™ device candidate, including obtaining approval from the FDA to market
and sell RadioGel™ as a Class II medical 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, less
than two microns, 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 radioactivity drops to 5% of its original value after ten days.
The
Company modified its Indication for Use from skin cancel to cancerous tissue or solid tumors pathologically associated with locoregional
papillary thyroid carcinoma and recurrent papillary thyroid carcinoma having discernable tumors associated with metastatic lymph nodes
or extranodal disease in patients who are not surgical candidates or who have declined surgery, or patients who require post-surgical
remnant ablation (for example, after prior incomplete radioiodine therapy). Papillary thyroid carcinoma belongs to the general class
of head and neck tumors for which tumors are accessible by intraoperative direct needle injection. The Company’s Medical Advisory
Board felt that demonstrating efficacy in clinical trials was much easier with this new indication.
Intellectual
Property
Our
original license with Battelle National Laboratory is reached its end of life in 2022. During the past several years, in anticipation
of this we have expanded our proprietary knowledge, our trademark and patent protection.
Our
RadioGel trademark protection is in 17 countries. We have expanded our trademark protection from RadioGel to now include IsoPet. We obtained
the International Certificate of Registration for ISOPET, which is the first step to file in several countries.
The
Company received the Patent Cooperation Treaty (“PCT”) International Search Report on our patent application (No.1811.191).
Seven of our claims were immediately ruled as having novelty, inventive step and industrial applicability. This gives us the basis to
extend for many years the patent protection for our proprietary Yttrium-90 phosphate particles utilized in Isopet® and
Radiogel™.
Our
patent team filed our particle patent in more than ten patent offices that collectively cover 63 countries throughout the world. We filed
a continuation-in-part applications number 1774054 in the USA to expand the claims on our
particle patent. The US Patent office recently gave us the Notice of Allowance for our patent
to produce our yttrium phosphate microparticles, US Patent Application Serial No: 16-459,466.
We also filed an amendment to correct the wording on our claims at make them consistent with the
USE claims. Ref: 4207-0005; European Patent Application NO. 20 834 229.5; VIVOS INC; Our Ref: FS/53791.
We
filed a hydrogel utility patent in the USA (16309:17/943,311) and internationally (16389:PCT/US22/4374) based on the last eighteen months
of development work to optimize our hydrogel component. These include reducing the polymer production time and increasing the output
by a factor of three. We have also further reduced the level of trace contaminants to be well below the FDA guidelines.
We
filed a provisional patent (Serial Number 63436562) to protect our innovative improvements in our shipping container, our vial shield,
our syringe shield, and our Peltier chiller. Our objectives were to reduce shipping costs, decrease radiation exposure, and enhance sterility.
These devices will be preferentially used at Mayo Clinics for human clinical studies at and our IsoPet regional treatment centers.
We
anticipate that Precison Radionuclide Therapy will become increasingly important in the future and expand to other isotope and other
indications for use. Therefore, we filed an alternate particle utility patent (Serial number 18/152,137). Vivos Inc will focus its near-term
effort on the Yttrium-90 therapy, which we believe is the best beta emitter; however, we leveraged
our hydrogel utility patent to incorporate other promising isotopes and compounds for a range of future applications. This includes gamma
and alpha particle emitters.
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 used significant cash in support of its operating activities and the Company’s cash position is not sufficient to support
the Company’s operations. Research and development of the Company’s brachytherapy product line has been funded with proceeds
from the sale of equity and debt securities as well as a series of grants. The Company requires funding of approximately $2.5 million
annually to maintain current operating activities.
The
Company completed its reverse stock split which was approved by FINRA and went effective on June 28, 2019.
The
Company’s stock offering under Regulation A+ was qualified by the Securities and Exchange Commission (“SEC”) on June
3, 2020. A second Regulation A+ was qualified by the SEC on September 15, 2021 to raise capital for 50,000,000 shares at a price of $0.10
for a maximum of $5,000,000. The Company amended this and was able to raise $1,200,000 in July 2022 at $0.08 per share (15,000,000 shares)
and sold 20,000,000 warrants for $20,000. An amended Regulation A+ was filed in October 2022 to raise the remaining $3,800,000 of the
$5,000,000.
The
Company’s Regulation A+’s raised approximately $5,200,000 from the sale of shares and is using the proceeds generated as
follows:
For
the animal therapy market:
| |
● |
Fund
the effort to communicate the benefits of IsoPet® to the veterinary community and the pet parents. |
| |
● |
Conduct
additional clinical studies to generate more data for the veterinary community |
| |
● |
Subsidize
some IsoPet® therapies, if necessary, to ensure that all viable candidates are treated. |
| |
● |
Assist
new regional clinics with their license and certification training. |
For
the human market:
| |
● |
Enhance
the pedigree of the Quality Management System. |
| |
● |
Complete
the previously defined pre-clinical testing and additional testing on an animal model closely aligned with our revised indication
for use. Report the results to the FDA in a pre-submission meeting. |
| |
● |
Use
the feedback from that meeting to write the IDE (Investigational Device Exemption), which is required to initiate clinical trials. |
Research
and development of the Company’s brachytherapy product line has been funded with proceeds from the sale of equity and debt securities.
The Company may require additional funding of approximately $2.5
million annually to maintain current operating
activities. Over the next 12 to 48 months, the Company believes it will
cost approximately $9 million to: (1) fund the FDA approval process to conduct human clinical trials, (2) conduct Phase I, pilot, clinical
trials, (3) activate several regional clinics to administer IsoPet® across the county, (4) create an independent production
center within the current production site to create a template for future international manufacturing, and (5) initiate regulatory approval
processes outside of the United States. The proceeds
to be raised from the recent qualified Regulation A+ will be used to continue to fund this development.
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 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
from proceeds to be raised from the recent qualified Regulation A+.
Following
receipt of required regulatory approvals and financing, in the U.S., the Company intends to outsource material aspects of manufacturing,
distribution, sales and marketing. Outside of the U.S., the Company intends to pursue licensing arrangements and/or partnerships to facilitate
its global commercialization strategy.
In
the longer-term, subject to the Company receiving adequate funding, regulatory approval for RadioGel™ and other brachytherapy
products, and thereafter being able to successfully commercialize its brachytherapy products, the Company intends to consider resuming
research efforts with respect to other products and technologies intended to help improve the diagnosis and treatment of cancer and other
illnesses.
Based
on the Company’s financial history since inception, the Company’s independent registered public accounting firm 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 may not be able to continue operations.
The
Company has been impacted from the effects of COVID-19. The Company’s headquarters are in Northeast Washington however there focus
of the animal therapy market has been the Northwestern sector of the United States. The Company continues their marketing to the animal
therapy market and attempt to increase the exposure to their product and generate revenue accordingly.
As
of December 31, 2022, the Company has $1,706,065 cash on hand. There are currently commitments to vendors for products and services purchased.
To continue the development of the Company’s products, the current level of cash may not be enough to cover the fixed and variable
obligations of the Company.
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.
Use
of Estimates
The
preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates
and assumptions that affect 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. Estimates the Company
considers include criteria for stock-based compensation expense, and valuation allowances on deferred tax assets. Actual results could
differ from those estimates.
Financial
Statement Reclassification
Certain
account balances from prior periods have been reclassified in these financial statements so as to conform to current period classifications.
Cash
Equivalents
For
the purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
The
Company occasionally maintains cash balances in excess of the FDIC insured limit. The Company does not consider this risk to be material.
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 December 31, 2022 and 2021, the balances reported for cash, prepaid expenses,
accounts receivable, 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. Accounting Standards Codification (“ASC”) Topic 820 established a three-tier
fair value hierarchy which prioritizes 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 including options and warrants issued during the period at fair value on a recurring basis.
Fixed
Assets
Fixed
assets are carried at the lower of cost or net realizable value. Production equipment with a cost of $2,500 or greater and other fixed
assets with a cost of $1,500 or greater are capitalized. Major betterments that extend the useful lives of assets are also capitalized.
Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is recognized in operations.
Depreciation
is computed using the straight-line method over the following estimated useful lives:
SCHEDULE OF DEPRECIATION ESTIMATED USEFUL LIFE
| Production
equipment: |
|
3
to 7 years |
| Office
equipment: |
|
2
to 5 years |
| Furniture
and fixtures: |
|
2
to 5 years |
Leasehold
improvements and capital lease assets are amortized over the shorter of the life of the lease or the estimated life of the asset.
Management
of the Company reviews the net carrying value of all of its equipment on an asset by asset basis whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. These reviews consider the net realizable value of each asset, as measured
in accordance with the preceding paragraph, to determine whether impairment in value has occurred, and the need for any asset impairment
write-down.
License
Fees
License
fees are stated at cost, less accumulated amortization. Amortization of license fees is computed using the straight-line method over
the estimated economic useful life of the assets. The Battelle Memorial Institute licensing contract is completed.
Patents
and Intellectual Property
While
patents are being developed or pending, they are not being amortized. Management has determined that the economic life of the patents
to be ten years and amortization, over such 10-year period and on a straight-line basis will begin once the patents have been issued
and the Company begins utilization of the patents through production and sales, resulting in revenues.
The
Company evaluates the recoverability of intangible assets, including patents and intellectual property on a continual basis. Several
factors are used to evaluate intangibles, including, but not limited to, management’s plans for future operations, recent operating
results and projected and expected undiscounted future cash flows.
There
have been no such capitalized costs in the years ended December 31, 2022 and 2021, respectively. However, a patent was filed on
July 1, 2019 (No. 1811.191) filed by Michael Korenko and David Swanberg and assigned to the Company based on the Company’s proprietary
particle manufacturing process. The timing of this filing was important given the Company’s plans to make IsoPet®
commercially available, which it did on or about July 9, 2019. This additional patent protection will strengthen the Company’s
competitive position. It is the Company’s intention to further extend this patent protection to several key countries within one
year, as permitted under international patent laws and treaties.
Revenue
Recognition
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single set of guidelines for revenue recognition
to be used across all industries and requires additional disclosures. The updated guidance introduces a five-step model to achieve its
core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the updated
guidance effective January 1, 2018 using the full retrospective method.
Under
ASC 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to preform respective
obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods
transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable.
The adoption of ASC 606 did not have an impact on the Company’s operations or cash flows.
The
Company recognized revenue as they (i) identified the contracts with each customer; (ii) identified the performance obligation in each
contract; (iii) determined the transaction price in each contract; (iv) were able to allocate the transaction price to the performance
obligations in the contract; and (v) recognized revenue upon the satisfaction of the performance obligation. Upon the sales of the product
to complete the procedures on the animals, the Company recognized revenue as that was considered the performance obligation.
All
revenue recognized in the years ended December 31, 2022 and 2021 relate to consulting income with respect to the IsoPet®
therapies.
Loss
Per Share
The
Company accounts for its loss per common share by replacing primary and fully diluted earnings per share with basic and diluted earnings
per share. Basic loss per share is computed by dividing loss available to common stockholders (the numerator) by the weighted-average
number of common shares outstanding (the denominator) for the period, and does not include the impact of any potentially dilutive common
stock equivalents since the impact would be anti-dilutive. The computation of diluted earnings per share is similar to basic earnings
per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding
if potentially dilutive common shares had been issued. For the given periods of loss, of the periods ended in the years ended December
31, 2022 and 2021, the basic earnings per share equals the diluted earnings per share.
The
following represent common stock equivalents that could be dilutive in the future as of December 31, 2022 and December 31, 2021, which
include the following:
SCHEDULE OF DILUTIVE EARNINGS PER SHARE
| | |
December 31, 2022 | | |
December 31, 2021 | |
| Preferred stock | |
| 9,909,570 | | |
| 9,909,570 | |
| Restricted stock units | |
| 25,862,500 | | |
| 25,262,500 | |
| Common stock options | |
| 2,252,809 | | |
| 2,252,809 | |
| Common stock warrants | |
| 26,737,500 | | |
| 31,862,500 | |
| Total potential dilutive securities | |
| 64,762,379 | | |
| 69,287,379 | |
Research
and Development Costs
Research
and developments costs, including salaries, research materials, administrative expenses and contractor fees, are charged to operations
as incurred. The cost of equipment used in research and development activities which has alternative uses is capitalized as part of fixed
assets and not treated as an expense in the period acquired. Depreciation of capitalized equipment used to perform research and development
is classified as research and development expense in the year computed.
The
Company incurred $343,802 and $286,848 in research and development costs for the years ended December 31, 2022 and 2021, respectively,
all of which were recorded in the Company’s operating expenses noted on the statements of operations for the periods then ended.
Advertising
and Marketing Costs
Advertising
and marketing costs are expensed as incurred except for the cost of tradeshows which are deferred until the tradeshow occurs. During
the years ended December 31, 2022 and 2021, the Company incurred nominal advertising and marketing costs.
Contingencies
In
the ordinary course of business, the Company is involved in legal proceedings involving contractual and employment relationships, product
liability claims, patent rights, and a variety of other matters. The Company records contingent liabilities resulting from asserted and
unasserted claims against it, when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable.
The Company discloses contingent liabilities when there is a reasonable possibility that the ultimate loss will exceed the recorded liability.
Estimated probable losses require analysis of multiple factors, in some cases including judgments about the potential actions of third-party
claimants and courts. Therefore, actual losses in any future period are inherently uncertain. The Company has entered into various agreements
that require them to pay certain fees to consultants and/or employees that have been fully accrued for as of December 31, 2022 and 2021.
Income
Taxes
To
address accounting for uncertainty in tax positions, the Company clarifies the accounting for income taxes by prescribing a minimum recognition
threshold that a tax position is required to meet before being recognized in the financial statements. The Company also provides guidance
on de-recognition, measurement, classification, interest, and penalties, accounting in interim periods, disclosure and transition.
The
Company files income tax returns in the U.S. federal jurisdiction. The Company did not have any tax expense for the years ended December
31, 2022 and 2021. The Company did not have any deferred tax liability or asset on its balance sheets on December 31, 2022 and 2021.
Interest
costs and penalties related to income taxes, if any, will be classified as interest expense and general and administrative costs, respectively,
in the Company’s financial statements. For the years ended December 31, 2022 and 2021, the Company did not recognize any interest
or penalty expense related to income taxes. The Company believes that it is not reasonably possible for the amounts of unrecognized tax
benefits to significantly increase or decrease within the next twelve months.
Stock-Based
Compensation
The
Company recognizes compensation costs under FASB ASC Topic 718, Compensation – Stock Compensation and ASU 2018-07. Companies are
required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize
the costs in the financial statements over the period during which employees are required to provide services. Share based compensation
arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase
plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized
over the respective vesting periods of the option grant.
Recent
Accounting Pronouncements
In
August, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06,
Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic
815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for
convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas. The ASU is effective for
annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December
15, 2020, and interim periods within those fiscal years. The Company has determined that this pronouncement does not have a material
impact on its financial statements.
The
Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition,
results of operations, cash flows or disclosures.
NOTE
2: RELATED PARTY TRANSACTIONS
Related
Party Notes Payable
The
$237,000 in related party notes payable that were outstanding during 2021 were either repaid or converted in December 2021. There are
no outstanding related party notes payable as of December 31, 2022.
Related
Party Payables
In
December 2021, the Company converted the $32,110 in related party payables into 401,373 shares of common stock. There are no remaining
related party payables as of December 31, 2022.
Preferred
and Common Shares Issued to Officers and Directors
In
June 2021, the Company’s Chief Executive Officer exercised 2,500,000 stock options for a value of $60,000 that was paid through
the cancelation of 375,000 common shares and 100,000 Series A Convertible Preferred shares. The Chief Executive Officer in May 2021 rescinded
8,120,152 stock options and in June 2021 rescinded 16,000,000 stock options. In September 2021, the Chief Executive Officer exercised
150,000 warrants in a cashless exercise into 91,304 shares of common stock. In March 2022, the Chief Executive Officer exercised 75,000
warrants in a cashless exercise into 22,266 shares of common stock, and was issued 76,250 shares of common stock valued at $4,880 for
services rendered.
NOTE
3: CONVERTIBLE NOTES PAYABLE
As
of December 31, 2022 and 2021, there remains no outstanding balances in the convertible notes payable. All prior convertible notes had
been either repaid or converted in 2021.
NOTE
4: STOCKHOLDERS’ EQUITY
Common
Stock
The
Company has 950,000,000 shares of common stock authorized, with a par value of $0.001, and as of December 31, 2022 and 2021, the Company
has 362,541,528 and 343,530,678 shares issued and outstanding, respectively.
Preferred
Stock
As
of December 31, 2022 and 2021, the Company has 20,000,000 shares of Preferred stock authorized with a par value of $0.001. The Company’s
Board of Directors is authorized to provide for the issuance of shares of preferred stock in one or more series, fix or alter the designations,
preferences, rights, qualifications, limitations or restrictions of the shares of each series, including the dividend rights, dividend
rates, conversion rights, voting rights, term of redemption including sinking fund provisions, redemption price or prices, liquidation
preferences and the number of shares constituting any series or designations of such series without further vote or action by the shareholders.
The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of management without further
action by the shareholders and may adversely affect the voting and other rights of the holders of common stock. The issuance of preferred
stock with voting and conversion rights may adversely affect the voting power of the holders of common stock, including the loss of voting
control to others.
On
October 8, 2018 the Company created out of the shares of Preferred Stock, par value $0.001 per share, of the Company, as authorized in
Article IV of the Company’s Certificate of Incorporation, a series of Preferred Stock of the Company, to be named “Series
B Convertible Preferred Stock,” consisting of Five Million (5,000,000) shares.
On
March 27, 2019 the Company created out of the shares of Preferred Stock, par value $0.001 per share, of the Company, as authorized in
Article IV of the Company’s Certificate of Incorporation, a series of Preferred Stock of the Company, to be named “Series
C Convertible Preferred Stock,” consisting of Five Million (5,000,000) shares.
Series
A Convertible Preferred Stock (“Series A Convertible Preferred”)
In
June 2015, the Series A Certificate of Designation was filed with the Delaware Secretary of State to designate 2.5 million shares of
our preferred stock as Series A Convertible Preferred. Effective March 31, 2016, the Company amended the Certificate of Designations,
Preferences and Rights of Series A Convertible Preferred of the Registrant, increasing the maximum number of shares of Series A Convertible
Preferred from 2,500,000 shares to 5,000,000 shares. The following summarizes the current rights and preferences of the Series A Convertible
Preferred:
Liquidation
Preference. The Series A Convertible Preferred has a liquidation preference of $5.00 per share.
Dividends.
Shares of Series A Convertible Preferred do not have any separate dividend rights.
Conversion.
Subject to certain limitations set forth in the Series A Certificate of Designation, each share of Series A Convertible Preferred is
convertible, at the option of the holder, into that number of shares of common stock (the “Series A Conversion Shares”)
equal to the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series A Certificate of Designation),
currently $4.00.
In
the event the Company completes an equity or equity-based public offering, registered with the SEC, resulting in gross proceeds to the
Company totaling at least $5.0 million, all issued and outstanding shares of Series A Convertible Preferred at that time will automatically
convert into Series A Conversion Shares.
Redemption.
Subject to certain conditions set forth in the Series A Certificate of Designation, in the event of a Change of Control (defined in the
Series A Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
A Convertible Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing
more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to
redeem all or a portion of the outstanding Series A Convertible Preferred in cash at a price per share of Series A Convertible Preferred
equal to 100% of the Liquidation Preference.
Voting
Rights. Holders of Series A Convertible Preferred are entitled to vote on all matters, together with the holders of common stock,
and have the equivalent of five (5) votes for every Series A Conversion Share issuable upon conversion of such holder’s outstanding
shares of Series A Convertible Preferred. However, the Series A Conversion Shares, when issued, will have all the same voting rights
as other issued and outstanding common stock of the Company, and none of the rights of the Series A Convertible Preferred.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series A Convertible Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company
an amount equal to the liquidation preference of the Series A Convertible Preferred before any distribution or payment shall be made
to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders of the Series A Convertible Preferred shall be ratably distributed among the holders in accordance
with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Certain
Price and Share Adjustments.
a)
Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions
payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares
of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common
stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of
capital stock of the Company, then the conversion price shall be adjusted accordingly.
b)
Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation
or merger in which the Common Stock is converted into or exchanged for securities, cash or other property than each share of Series A
Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number of shares of
common stock issuable upon conversion of one share of Series A Convertible Preferred prior to any such merger or reorganization would
have been entitled to receive pursuant to such transaction.
In
June 2021, 100,000 shares of Series A Convertible Preferred were canceled as partial payment for the exercise of stock options by the
Chief Executive Officer.
Series
B Convertible Preferred Stock (“Series B Convertible Preferred”)
In
October 2018, the Series B Certificate of Designation was filed with the Delaware Secretary of State to designate 5.0 million shares
of our preferred stock as Series B Convertible Preferred. The following summarizes the current rights and preferences of the Series B
Convertible Preferred:
Liquidation
Preference. The Series B Convertible Preferred has a liquidation preference of $1.00 per share.
Dividends.
Shares of Series B Convertible Preferred do not have any separate dividend rights.
Conversion.
Subject to certain limitations set forth in the Series B Certificate of Designation, each share of Series B Convertible Preferred is
convertible, at the option of the holder, into that number of shares of common stock (the “Series B Conversion Shares”)
equal to the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series B Certificate of Designation),
currently $0.08.
Redemption.
Subject to certain conditions set forth in the Series B Certificate of Designation, in the event of a Change of Control (defined in the
Series B Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
B Convertible Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing
more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to
redeem all or a portion of the outstanding Series B Convertible Preferred in cash at a price per share of Series B Convertible Preferred
equal to 100% of the Liquidation Preference.
Voting
Rights. Holders of Series B Convertible Preferred are entitled to vote on all matters, together with the holders of common stock,
and have the equivalent of two (2) votes for every Series B Conversion Share issuable upon conversion of such holder’s outstanding
shares of Series B Convertible Preferred. However, the Series B Conversion Shares, when issued, will have all the same voting rights
as other issued and outstanding common stock of the Company, and none of the rights of the Series A Convertible Preferred.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series B Convertible Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company
an amount equal to the liquidation preference of the Series B Convertible Preferred before any distribution or payment shall be made
to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders of the Series B Convertible Preferred shall be ratably distributed among the holders in accordance
with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Certain
Price and Share Adjustments.
a)
Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions
payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares
of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common
stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of
capital stock of the Company, then the conversion price shall be adjusted accordingly.
b)
Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation
or merger in which the Common Stock is converted into or exchanged for securities, cash or other property than each share of Series B
Convertible Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number
of shares of common stock issuable upon conversion of one share of Series B Convertible Preferred prior to any such merger or reorganization
would have been entitled to receive pursuant to such transaction.
In
December 2021, 236,290 Series B Convertible Preferred shares were converted into 2,953,625 shares of common stock.
Series
C Convertible Preferred Stock (“Series C Convertible Preferred”)
In
March 2019, the Series C Certificate of Designation was filed with the Delaware Secretary of State to designate 5.0 million shares of
our preferred stock as Series C Convertible Preferred. The following summarizes the current rights and preferences of the Series C Convertible
Preferred:
Liquidation
Preference. The Series C Convertible Preferred has a liquidation preference of $1.00 per share.
Dividends.
Shares of Series C Convertible Preferred do not have any separate dividend rights.
Conversion.
Subject to certain limitations set forth in the Series C Certificate of Designation, each share of Series C Convertible Preferred is
convertible, at the option of the holder, into that number of shares of common stock (the “Series C Conversion Shares”)
equal to the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series C Certificate of Designation),
currently $0.08.
The
Series C Convertible Preferred will only be convertible at any time after the date that the Company shall have amended its Certificate
of Incorporation to increase the number of shares of common stock authorized for issuance thereunder or effect a reverse stock split
of the outstanding shares of common stock by a sufficient amount to permit the conversion of all Series C Convertible Preferred into
shares of common stock (“Authorized Share Approval”) (such date, the “Initial Convertibility Date”),
each share of Series C Convertible Preferred shall be convertible into validly issued, fully paid and non-assessable shares of Common
Stock on the terms and conditions set forth in the Series C Certificate of Designation under the definition “Conversion Rights”.
Redemption.
Subject to certain conditions set forth in the Series C Certificate of Designation, in the event of a Change of Control (defined in the
Series C Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
C Convertible Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing
more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to
redeem all or a portion of the outstanding Series C Convertible Preferred in cash at a price per share of Series C Convertible Preferred
equal to 100% of the Liquidation Preference.
Voting
Rights. Holders of Series C Convertible Preferred are entitled to vote on all matters, together with the holders of common stock,
and have the equivalent of thirty-two (32) votes for every Series C Conversion Share issuable upon conversion of such holder’s
outstanding shares of Series C Convertible Preferred. However, the Series C Conversion Shares, when issued, will have all the same voting
rights as other issued and outstanding common stock of the Company, and none of the rights of the Series C Convertible Preferred.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series C Convertible Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company
an amount equal to the liquidation preference of the Series C Convertible Preferred before any distribution or payment shall be made
to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders of the Series C Convertible Preferred shall be ratably distributed among the holders in accordance
with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Certain
Price and Share Adjustments.
a)
Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions
payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares
of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common
stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of
capital stock of the Company, then the conversion price shall be adjusted accordingly.
b)
Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation
or merger in which the Common Stock is converted into or exchanged for securities, cash or other property than each share of Series C
Convertible Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number
of shares of common stock issuable upon conversion of one share of Series C Convertible Preferred prior to any such merger or reorganization
would have been entitled to receive pursuant to such transaction.
Common
and Preferred Stock Issuances - 2022
In
March 2022, the Company issued 299,577 shares of common stock in the cashless exercise of 825,000 warrants, and issued 76,250 shares
of common stock to its CEO for services rendered valued at $4,880. In June 2022, there was a fractional adjustment recorded for 90 shares.
On
July 7, 2022, the Company sold 15,000,000 shares under the Regulation A+ at $0.08 for $1,200,000, and 20,000,000 warrants (15,000,000
at $0.08 expiring June 2025 and 5,000,000 at $0.01 expiring December 2022) for $20,000.
In
September 2022, the Company issued 984,840 shares valued at $49,242 in settlement of accounts payable.
In
December 2022, the Company issued 2,650,273 shares of common stock in the cashless exercise of 3,333,333 warrants.
Common
and Preferred Stock Issuances - 2021
In
January 2021, the Company issued 384,445 shares of common stock in a settlement of accounts payable valued at $50,000. In May 2021, the
Company issued 519,480 shares of common stock in a settlement of accounts payable valued at $40,000.
In
January 2021, the Company issued 1,259,250 shares of common stock in conversion of a note payable and accrued interest totaling $50,370.
The conversion resulted in a loss on conversion of $176,295 that is reflected in the Condensed Statement of Operations for the nine months
ended September 30, 2021.
In
March 2021, the Company issued 22,500,000 shares of common stock along with 11,237,500 warrants under the Regulation A+ for cash proceeds
of $1,800,000 for the common stock and the warrants were purchased for $11,238.
Between
January 8, 2021 and January 29, 2021, the Company issued 3,870,428 shares of common stock in the cashless exercise of 5,430,000 warrants.
On
June 28, 2021, the Company issued 2,500,000 shares of common stock for the exercise of 2,500,000 stock options to the Chief Executive
Officer. In this transaction, the Company canceled 375,000 shares of common stock as partial payment for the exercise of the stock options.
In
June 2021, the Company issued 12,000,000 shares of common stock for vested RSUs with a fair value of $1,080,000.
From
July 9 through September 24, 2021, the Company issued 838,195 shares of common stock in the cashless exercise of 1,800,000 warrants.
In
October 2021, the Company issued 2,005,693 shares of common stock in the cashless exercise of 3,500,000 warrants.
In
November 2021, the Company issued 77,768 shares of common stock for services valued at $3,756.
In
December 2021, the Company issued 401,373 shares of common stock in conversion of accounts payable to a related party in the amount of
$32,110; issued 2,316,830 shares of common stock in conversion of related party note payables and accrued interest valued at $185,346;
and issued 2,953,625 shares of common stock in conversion of 236,290 Series B Convertible Preferred stock.
NOTE
5: COMMON STOCK OPTIONS, WARRANTS AND RESTRICTED STOCK UNITS
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:
SCHEDULE
OF CHANGES IN STOCK OPTION
| | |
| | |
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, 2020 | |
| 28,885,461 | | |
$ | 0.024-0.04 | | |
| 5.57 years | | |
$ | 1,661,429 | | |
$ | 0.05 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Options granted | |
| - | | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| Options exercised | |
| (2,500,000 | ) | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| Options expired | |
| (24,132,652 | ) | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at December 31, 2021 | |
| 2,252,809 | | |
$ | 0.024-0.04 | | |
| 7.70 years | | |
$ | 83,992 | | |
$ | 0.04 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Options granted | |
| - | | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| Options exercised | |
| - | | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| Options expired/canceled | |
| - | | |
$ | - | | |
| - | | |
| | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at December 31, 2022 | |
| 2,252,809 | | |
$ | 0.024-0.04 | | |
| 6.70 years | | |
$ | 16,032 | | |
$ | 0.04 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercisable at December 31, 2022 | |
| 2,252,809 | | |
$ | 0.024-0.04 | | |
| 6.70 years | | |
$ | 16,032 | | |
$ | 0.04 | |
During
the year ended December 31, 2021, the Company’s CEO exercised 2,500,000 stock options, and rescinded 24,120,152, stock options.
In addition, 12,500 options expired.
During
the years ended December 31, 2022 and 2021, the Company recognized no stock based compensation related to the vesting of its stock options.
Common
Stock Warrants
The
following schedule summarizes the changes in the Company’s stock warrants:
SCHEDULE OF CHANGES IN STOCK WARRANTS
| | |
Warrants Outstanding | | |
Weighted
Average | | |
| | |
Weighted
Average | |
| | |
Number Of
Shares | | |
Exercise
Price Per
Share | | |
Remaining Contractual
Life | | |
Aggregate
Intrinsic
Value | | |
Exercise
Price Per
Share | |
| Balance at December 31, 2020 | |
| 32,064,375 | | |
$ | 0.04-80.00 | | |
| 1.65 years | | |
$ | 1,614,567 | | |
$ | 0.06 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Warrants granted | |
| 11,237,500 | | |
$ | 0.10 | | |
| - | | |
| | | |
$ | - | |
| Warrants exercised | |
| (10,730,000 | ) | |
$ | - | | |
| - | | |
| | | |
$ | | |
| Warrants expired/cancelled | |
| (709,375 | ) | |
$ | - | | |
| - | | |
| | | |
$ | | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at December 31, 2021 | |
| 31,862,500 | | |
$ | 0.04-0.10 | | |
| 1.02 years | | |
$ | 538,875 | | |
$ | 0.07 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Warrants granted | |
| 20,000,000 | | |
$ | 0.01 – 0.08 | | |
| 2.50 | | |
| | | |
$ | 0.0725 | |
| Warrants exercised | |
| (4,158,333 | ) | |
$ | - | | |
| - | | |
| | | |
$ | | |
| Warrants expired/cancelled | |
| (20,966,667 | ) | |
$ | - | | |
| - | | |
| | | |
$ | | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at December 31, 2022 | |
| 26,737,500 | | |
$ | 0.08-0.10 | | |
| 1.52 years | | |
$ | - | | |
$ | 0.09 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercisable at December 31, 2022 | |
| 26,737,500 | | |
$ | 0.08-0.10 | | |
| 1.52 years | | |
$ | - | | |
$ | 0.09 | |
Changes
to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each option/warrant is estimated
using the Black-Scholes valuation model. The following assumptions were used for the periods as follows:
SCHEDULE OF ASSUMPTIONS USED IN FAIR VALUE MEASUREMENT
| | |
Year Ended | | |
Year Ended | |
| | |
December 31, 2022 | | |
December 31, 2021 | |
| Expected term | |
| .5 – 3 years | | |
| 2 - 5 years | |
| Expected volatility | |
| 66 | % | |
| 109 - 147 | % |
| Expected dividend yield | |
| - | | |
| - | |
| Risk-free interest rate | |
| 3 | % | |
| 0.20 - 0.58 | % |
Between
January 8, 2021 and January 29, 2021, the Company issued 3,870,428 shares of common stock in the cashless exercise of 5,430,000 warrants.
In
March 2021 the Company sold 11,237,500 warrants for $11,238. These warrants have a two-year term and have an exercise price of $0.10
per share.
From
July 9 through September 24, 2021, the Company issued 838,195 shares of common stock in the cashless exercise of 1,800,000 warrants.
In
October 2021, the Company issued 2,005,693 shares of common stock in the cashless exercise of 3,500,000 warrants.
In
March 2022 the Company issued 299,577 shares of common stock in the cashless exercise of 825,000 warrants. In June 2022, 1,000,000 warrants
expired.
On
July 7, 2022, the Company sold 15,000,000 shares under the Regulation A+ at $0.08 for $1,200,000, and 20,000,000 warrants (15,000,000
at $0.08 expiring June 2025 and 5,000,000 at $0.01 expiring December 2022) for $20,000.
In December 2022, the Company issued 2,650,273 shares of common stock in
the cashless exercise of 3,333,333 warrants.
Restricted
Stock Units
The
following schedule summarizes the changes in the Company’s restricted stock units:
SCHEDULE OF CHANGES IN RESTRICTED STOCK
UNITS
| | |
Number | | |
Weighted
Average | |
| | |
Of | | |
Grant Date | |
| | |
Shares | | |
Fair Value | |
| | |
| | |
| |
| Balance at December 31, 2020 and 2019 | |
| 262,500 | | |
$ | 0.59 | |
| | |
| | | |
| | |
| RSU’s granted | |
| 42,700,000 | | |
$ | 0.08 | |
| RSU’s vested | |
| (17,700,000 | ) | |
$ | - | |
| RSU’s forfeited | |
| - | | |
$ | - | |
| | |
| | | |
| | |
| Balance at December 31, 2021 | |
| 25,262,500 | | |
$ | 0.08 | |
| RSUs granted | |
| 600,000 | | |
$ | 0.066 | |
| RSUs vested | |
| (15,600,000 | ) | |
$ | - | |
| Balance at December 31, 2022 | |
| 10,262,500 | | |
$ | 0.08 | |
During
the years ended December 31, 2022 and 2021, the Company recognized $1,389,700 and $1,614,000 worth of expense related to the vesting
of its RSU’s. As of December 31, 2022, the Company had $1,055,400 worth of expense yet to be recognized for RSU’s not yet
vested.
On
May 3, 2021, the Company has granted 12,000,000 RSUs to a consultant that vest on the grant date, and 700,000 RSUs to consultants that
vest on the grant date. The Company has issued 12,000,000 common shares to the one consultant in June 2021.
On
May 3, 2021, as part of an Employment Agreement with the CEO, the Company granted 30,000,000 RSUs to the CEO. Of the 30,000,000 RSUs,
15,000,000 of them vest as follows: 5,000,000 on the grant date, 5,000,000 on the first anniversary and 5,000,000 on the second anniversary.
The remaining 15,000,000 RSUs vest as performance-based grants, with the Board of Directors determining the criteria of each 5,000,000
RUSs at the nine-month anniversary, eighteen-month anniversary and twenty-seven month anniversary intervals. The Board of Directors has
90 days from May 3, 2021 to determine the performance criteria.
On
February 3, 2022, 5,000,000 of the RSUs valued at $450,000 to the CEO vested.
On
May 3, 2022, 5,000,000 of the RSUs valued at $450,000 to the CEO vested.
On
June 1, 2022, 100,000 RSUs were granted to a consultant valued at $8,200, and on November 1, 2022, 500,000 RSUs were granted to a consultant
valued at $31,500, each that were vested immediately.
NOTE
6: COMMITMENT
On
June 4, 2019, the Company entered into an Executive Employment Agreement (“Employment Agreement”) with Dr. Michael K. Korenko,
the Company’s Chief Executive Officer. The employment term under the Employment Agreement commenced with an effective date of June
11, 2019 and expires on December 31, 2020, and December 31 of each successive year if the Employment Agreement is extended, unless terminated
earlier as set forth in the Employment Agreement. The Company on December 31, 2020 extended this agreement through December 31, 2021
while renegotiating terms of a new Employment Agreement. On May 3, 2021, the Company and the Chief Executive Officer agreed the terms
of a new Employment Agreement with an effective date of January 1, 2021 that has a term of three years and expires December 31, 2023.
Under
the terms of the Employment Agreement, the Company shall pay to Dr. Korenko a base compensation of $225,000. In addition, there is a
discretionary bonus to be earned in the amount of $7,500 per quarter upon the satisfaction of conditions to be determined by the Board
of Directors of the Company.
NOTE
7: INCOME TAXES
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Net
deferred tax assets consist of the following components as of December 31, 2022 and 2021:
SCHEDULE OF NET DEFERRED TAX ASSETS
| | |
| | | |
| | |
| | |
December 31, 2022 | | |
December 31, 2021 | |
| Deferred tax assets: | |
| | | |
| | |
| Net operating loss carryover | |
$ | 6,500,000 | | |
$ | 6,280,000 | |
| Capital Loss Carryover | |
| 3,400 | | |
| 3,400 | |
| Valuation allowance | |
| (6,503,400 | ) | |
| (6,283,400 | ) |
| Net deferred tax asset | |
$ | - | | |
$ | - | |
The
income tax provision differs from the amount of income tax determined by applying the U.S. Federal income tax rate to pretax income from
continuing operations for the years ended December 31, 2022 and 2021 due to the following:
SCHEDULE OF FEDERAL INCOME TAX RATE
| | |
| | | |
| | |
| | |
December 31, 2022 | | |
December 31, 2021 | |
| Book income (loss) | |
$ | (518,700 | ) | |
$ | (530,800 | ) |
| Forgiveness of debt | |
| - | | |
| (28,700 | ) |
| Depreciation | |
| (1,100 | ) | |
| (1,100 | ) |
| Related party accrual | |
| - | | |
| (6,400 | ) |
| Stock for services | |
| 291,800 | | |
| 339,700 | |
| Other non-deductible expenses | |
| 10,500 | | |
| 25,700 | |
| Valuation allowance | |
| 217,500 | | |
| 201,600 | |
| Income tax expense | |
$ | - | | |
$ | - | |
At
December 31, 2022, the Company had net operating loss carryforwards of approximately $30,955,700.
Topic
740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. Topic 740
requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon
the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine
the amount to recognize in the financial statements. At the adoption date of January 1, 2007, the Company had no unrecognized tax benefit,
which would affect the effective tax rate if recognized.
The
Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision
for income taxes. As of December 31, 2022, the Company had no accrued interest or penalties related to uncertain tax positions.
The
Company files income tax returns in the U.S. federal jurisdiction. The Company is located in the state of Washington and Washington state
does not require the filing of income taxes. With few exceptions, the Company is no longer subject to U.S. federal, state and local,
or non-U.S. income tax examinations by tax authorities for years before 2017.
Index
to Exhibits
| 2.1 |
Certificate
of Incorporation of Savage Mountain Sports Corporation, dated January 11, 2000 (incorporated by reference to Exhibit 3.1 to the Company’s
Registration Statement on Form 10-12G (File No. 000-53497) filed on November 12, 2008). |
| 2.2 |
By-Laws
(incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10-12G (File No. 000-53497) filed
on November 12, 2008). |
| 2.3 |
Certificate
of Amendment of Certificate of Incorporation changing the name of the Company to Advanced Medical Isotope Corporation, dated May
23, 2006 (incorporated by reference to Exhibit 3.5 to the Company’s Registration Statement on Form 10-12G (File No. 000-53497)
filed on November 12, 2008). |
| 2.4 |
Certificate
of Amendment of Certificate of Incorporation increasing authorized capital dated September 26, 2006 (incorporated by reference to
Exhibit 3.6 to the Company’s Registration Statement on Form 10-12G (File No. 000-53497) filed on November 12, 2008). |
| 2.5 |
Certificate
of Amendment to the Certificate of Incorporation increasing authorized common stock and authorizing preferred stock, dated May 18,
2011 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 18, 2011). |
| 2.6 |
Certificate
of Amendment to the Certificate of Incorporation authorizing a series of Preferred Stock to be named “Series A Convertible
Preferred Stock”, consisting of 2,500,000 shares, which series shall have specific designations, powers, preferences and relative
and other special rights, qualifications, limitations and restrictions as outlined in the Certificate of Designations, filed June
30, 2015 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 7, 2015). |
| 2.7 |
Certificate
of Amendment to the Certificate of Incorporation increasing the authorized series of “Series A Convertible Preferred Stock”
to 5,000,000 shares, filed March 31, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K filed on April 7, 2016). |
| 2.8 |
Certificate
of Amendment to the Certificate of Incorporation authorizing a series of Preferred Stock to be named “Series B Convertible
Preferred Stock”, consisting of 5,000,000 shares, which series shall have specific designations, powers, preferences and relative
and other special rights, qualifications, limitations and restrictions as outlined in the Certificate of Designations, filed October
10, 2018 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 17, 2018). |
| 3.1 |
Form
of Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 17, 2018). |
| 3.2 |
Form
of Series A Warrant (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 11,
2022). |
| 3.3 |
Form
of Series B Warrant (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 11,
2022). |
| 4.1 |
Subscription
Agreement (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 1-A filed on November 20,
2019). |
| 6.1 |
Agreement
and Plan of Reorganization, dated as of December 15, 1998, by and among HHH Entertainment, Inc. and Earth Sports Products, Inc. (incorporated
by reference to Exhibit 10.1 to the Company’s Registration Statement on Form 10-12G (File No. 000-53497) filed on November
12, 2008). |
| 6.2 |
Agreement
and Plan of Merger of HHH Entertainment, Inc. and Savage Mountain Sports Corporation, dated as of January 6, 2000 (incorporated by
reference to Exhibit 10.2 to the Company’s Registration Statement on Form 10-12G (File No. 000-53497), filed on November 12,
2008). |
| 6.3 |
Agreement
and Plan of Acquisition by and between Neu-Hope Technologies, Inc., UTEK Corporation and Advanced Medical Isotope Corporation, dated
September 22, 2006 (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form 10-12G (File
No. 000-53497), filed on November 12, 2008). |
| 6.4 |
Agreement
and Plan of Acquisition by and between Isonics Corporation and Advanced Medical Isotope Corporation dated June 13, 2007 (incorporated
by reference to Exhibit 10.6 to the Company’s Registration Statement on Form 10-12G (File No. 000-53497), filed on November
12, 2008). |
| 6.5 |
Form
of Non-Statutory Stock Option Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K filed on March 15, 2012). |
| 6.6 |
Promissory
Note dated December 16, 2008 between Advanced Medical Isotope Corporation and Carlton M. Cadwell (incorporated by reference to Exhibit
10.11 to the Company’s Annual Report on Form 10-K filed on March 3, 2012). |
| 6.7 |
2015
Omnibus Securities and Incentive Plan (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K,
filed May 25, 2016). |
| 6.8 |
Washington
State University Sub-Award Agreement for the period December 15, 2017 through January 31, 2018 (incorporated by reference to Exhibit
10.13 to the Company’s Annual Report on Form 10-K, filed April 2, 2018). |
| 6.9 |
The
Curators of the University of Missouri Sponsored Research Contract for the period November 1, 2017 through October 31, 2018 (incorporated
by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K, filed April 2, 2018). |
| 6.10 |
Form
of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
on October 17, 2018). |
| 6.11 |
Employment
Agreement by and between Vivos Inc. and Michael Korenko, dated June 4, 2019 (incorporated by reference to Exhibit 6.18 to the Company’s
Offering Statement on Form 1-A filed on July 29, 2019). |
| 6.12 |
Form
of Vivos Note 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on December
10, 2020). |
| 6.13 |
Form
of Warrant 2020 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on December 10,
2020). |
| 6.14 |
Employment
Agreement between the Company and Mr. Korenko, dated May 3, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed on May 7, 2021). |
| 11.1 |
Consent of Independent Registered Public Accounting Firm - Fruci & Associates II, PLLC (filed herewith) |
| 12.1 |
Attorney opinion on legality of the offering (filed herewith) |
SIGNATURES
Pursuant
to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Richland, State of Washington, on October 10, 2023.
| |
By: |
/s/
Michael K. Korenko |
| |
Name: |
Michael
K. Korenko |
| |
Title: |
President
and Chief Executive Officer |
| |
|
(Principal
Executive Officer) |
The
offering statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature |
|
Title |
|
Date |
| |
|
|
|
|
| /s/
Michael K. Korenko |
|
President,
Chief Executive Officer, |
|
October 10,
2023 |
| Michael
K. Korenko |
|
Director
and Corporate Secretary |
|
|
| |
|
(Principal
Executive Officer) |
|
|
| |
|
|
|
|
| /s/
Michael Pollack |
|
Interim
Chief Financial Officer |
|
October 10,
2023 |
| Michael
Pollack |
|
(Principal
Financial and Accounting Officer) |
|
|
| |
|
|
|
|
| /s/
Carlton M. Cadwell |
|
Chairman
of the Board |
|
October 10,
2023 |
| Carlton
M. Cadwell |
|
|
|
|
Exhibit
11.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the inclusion in the Registration Statement to Form 1-A, Amendment 2 (File No. 024-11627) of our audit report dated March
1, 2023, with respect to the balance sheets of Vivos Inc. as of December 31, 2022 and 2021, and the related statements of operations,
changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022.
Our
report relating to those financial statements includes and emphasis of matter paragraph regarding substantial doubt as to the Company’s
ability to continue as a going concern.
We
also consent to the reference to us under the heading “Experts” in such Registration Statement.
| /s/
Fruci & Associates II, PLLC |
|
| Spokane,
Washington |
|
| October
5, 2023 |
|
Exhibit
12.1
OPINION
AND CONSENT OF DISCLOSURE LAW GROUP
October
10, 2023
Vivos
Inc.
719
Jadwin Avenue
Richland,
Washington 99352
| Re: |
Offering
Statement on Form 1-A for Vivos Inc. |
Ladies
and Gentlemen:
We
have acted as counsel to Vivos Inc., a Delaware corporation (the “Company”), in connection with the Offering Statement
on Form 1-A (the “Offering Statement”) filed by the Company with the Securities and Exchange Commission (the “Commission”)
registering under the Securities Act of 1933, as amended (the “Act”). The Offering Statement relates to the proposed
sale of up to 5,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”).
We
have examined copies of such corporate records and made such inquiries as we have deemed necessary for purposes of rendering the opinion
set forth below.
Based
upon the foregoing, in our opinion, the shares of Common Stock, when issued in the manner contemplated by the Plan, will be legally issued,
fully paid and non-assessable.
In
rendering the opinion set forth above, we express no opinion as to the laws of any jurisdiction other than the General Corporation Law
of the State of Delaware and the federal laws of the United States of America.
We
hereby consent to the filing of a copy of this opinion with the Commission as an exhibit to the Offering Statement. In giving such consent,
we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission thereunder.
| |
Very truly yours, |
| |
|
| |
/s/ Disclosure
Law Group |
| |
Disclosure Law Group, a Professional Corporation |
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