March 31, 2021
Delaware
| 58-2029543 | |
| (State or other jurisdiction of incorporation or organization) |
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5835 Peachtree Corners East, Suite D Norcross, Georgia | 30092
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| (Address of principal executive offices) | (Zip Code) |
| Large Accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] | Smaller reporting company [X] |
| Emerging growth company [ ] |
Yes [ ] No [X]
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| 3 | |
3 | |
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| 6 | |
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| 43 | |
INFORMATION: ITEM 1. FINANCIAL STATEMENTS Accounts receivable, net of allowance for doubtful accounts of $244 and $279 at September 30, 2017 and December 31, 2016, respectively COMMITMENTS & CONTINGENCIES (Note 7) STOCKHOLDERS’ DEFICIT: AND SUBSIDIARY PREFERRED STOCK DIVIDENDS NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS GUIDED THERAPEUTICS INC. AND SUBSIDIARY FOR THE NINE MONTHS ENDED SEPTEMBER 30, fair presentation have been included. our consolidated financial statements. year ended December 31, 2020. September 30, 2017 revenue respectively. Compensation cost is recorded as earned for all unvested stock options outstanding at the beginning of the first year based upon the grant date fair value estimates, and for compensation cost for all the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense. 2020: Fair Value at December 31, 2016 Fair Value Measurements Using Significant Unobservable Inputs (Level 3) March 31, 2021: March 31, 2021. As of December 31, 2020, the fair value of warrants was approximately $2.2 million and the fair value of the derivative liability was $25,000. Stock”). Pursuant to the Series C certificate of designations, shares of Series C preferred stock are convertible into common stock by their holder at any time and may be mandatorily convertible upon the achievement of specified average trading prices for the Company’s common stock. At In addition, the purchasers of the Series C preferred stock received, on a pro rata basis, warrants exercisable to purchase an aggregate of approximately $512,000. stock; for a total convertible of 2,098,500 common stock shares. within 90 days of the date of the Registration Rights Agreement and cause such registration statement to be declared effective within 120 days of the date of the Registration Rights Agreement. All reasonable expenses related to such registration shall be borne by the Company. (Underlying Shares) Warrants Exercise Price Expiration Date agreement is not achieved, the warrants will expire three years after the issuance date. The warrants The plan provides for stock options to be granted up to 10% of the outstanding common stock shares. March 31, 2021, year. payments at March 31, 2021 under non-cancellable operating leases for office space and equipment are as follows (in thousands): clinical trial data retrieval at investigational study sites. result of that exchange agreement, the Company will hold a $150,000 unsecured note for Mr. Fowler. The note will accrue interest at the rate of 6% (18% in the event of default) on March 22, 2022 and be payable in monthly installments of $3,600 for four years, with the first payment being due on March 15, 2022. .08. which closed on January 8, 2020, the Company exchanged in part $600,653 in debt for several common stock shares and warrants as described above. The exchange resulted in a gain of $249,938. This debt extinguished met the criteria for troubled debt. The basic criteria are that the borrower is troubled, i.e., they are having financial difficulties, and a concession is granted by the creditor. Due to the Company being in default on several of its loans the debt is considered troubled debt. For December 31, 2020, the troubled debt restructuring for Related Party Convertible Note Payable – Short-Term, would have reduced the income per share calculation from .04 to .01. the $89,250 convertible promissory note issued on July 3, 2018 to Auctus. On May that time. On exchange agreement, the Company recorded a gain for extinguishment of debt of $199,000 and a capital contribution of $235,000 during the year ended December 31, 2018. The resulting difference of $20,000 was recorded to accrued interest. In the July 20, 2018 exchange agreement, Dr, Cartwright, agreed to exchange outstanding amounts due to him for loans, interest, bonus, salary and vacation pay in the amount of $1,621,000 for a $319,000 promissory note dated September 4, 2018. As a result of the exchange agreement, the Company recorded a gain for extinguishment of debt of $840,000 and a capital contribution of $432,000 during the year ended December 31, 2018. The resulting difference of $30,000 was recorded to accrued interest and elimination of debt. year. products. the entity and the entity has the right to be paid for performance to date. Research and Development expenses. marketing payroll expenses. warrants issued to Mr. Blumberg for consulting services. 2020. The decrease of $1,000 or 100% was the result of not recording any refunds from prior years for insurance policies. 2020. The increase of approximately $59,000, or 211%, was primarily related to an increase in debt extinguished in 2021. the fair value price of the Company’s stock the fair value of the warrants recovered increased. recurring net operating losses. outstanding for: $175,000, an unsecured promissory note in the amount of $550,000; due 13 months form the date of issuance, that may be called at any time prior to maturity upon a payment of $150,000; and an unsecured promissory note in the principal amount of $444,768, bearing an annualized interest rate of 6.0% and due in four equal annual installments beginning on the second anniversary of the date of issuance. By: PARTINFORMATIONGUIDED THERAPEUTICS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited (in Thousands) ASSETS September 30, 2017 December 31, 2016 CURRENT ASSETS: Cash and cash equivalents $ 74 $ 14 — — Inventory, net of reserves of $409 and $278, at September 30, 2017 and December 31, 2016, respectively 577 773 Other current assets 179 259 Total current assets 830 1,046 Property and equipment, net 56 126 Other assets, net of reserve of $293 at September 30, 2017 19 320 Total noncurrent assets 75 446 TOTAL ASSETS $ 905 $ 1,492 LIABILITIES AND STOCKHOLDERS’ DEFICIT CURRENT LIABILITIES: Notes payable in default, including related parties $ 689 $ 1,008 Short-term notes payable, including related parties 820 197 Accounts payable 2,965 2,600 Convertible notes in default 2,322 2,361 Convertible notes payable 814 468 Accrued liabilities 3,650 2,670 Deferred revenue 156 34 Total current liabilities 11,416 9,338 Warrants at fair value 1,834 1,420 TOTAL LIABILITIES 13,250 10,758 Series C convertible preferred stock, $.001 par value; 9.0 shares authorized, 1.2 and 1.6 shares issued and outstanding as of September 30, 2017 and December 31, 2016, (Liquidation preference of $1,177 and $1,643 at September 30, 2017 and December 31, 2016, respectively) 431 601 Series C1 convertible preferred stock, $.001 par value; 20.3 shares authorized, 4.3 shares issued and outstanding as of September 30, 2017 and December 31, 2016 (Liquidation preference of $4,312 at September 30, 2017 and December 31, 2016) 701 701 Common stock, $.001 Par value; 1,000,000 shares authorized, 9,253 and 669 shares issued and outstanding as of September, 30 2017 and December 31, 2016, respectively 751 742 Additional paid-in capital 117,223 116,380 Treasury stock, at cost (132 ) (132 ) Accumulated deficit (131,319 ) (127,558 ) TOTAL STOCKHOLDERS’ DEFICIT (12,345 ) (9,266 ) TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 905 $ 1,492 The accompanying notes are an integral part of these condensed consolidated financial statements. 3CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited,CONSOLIDATED BALANCE SHEETS (unaudited, in Thousands)thousands) FOR THE THREE
MONTHS
ENDED SEPTEMBER 30, FOR THE NINE
MONTHS
ENDED SEPTEMBER 30, 2017 2016 2017 2016 REVENUE: Sales – devices and disposables $ 33 $ 95 $ 137 $ 486 Cost of goods sold 97 85 195 185 Gross (loss) profit (64 ) 10 (58 ) 301 OPERATING EXPENSES: Research and development 69 87 251 525 Sales and marketing 37 92 187 295 General and administrative 1,169 510 1,894 2,187 Total operating expenses 1,275 689 2,332 3,007 Operating loss (1,339 ) (679 ) (2,390 ) (2,706 ) OTHER INCOME (EXPENSES): Other income 3 24 18 67 Interest expense (268 ) (226 ) (814 ) (1,597 ) Change in fair value of warrants (761 ) 670 (359 ) 2,276 Total other income (expenses) (1,026 ) 468 (1,155 ) 746 LOSS BEFORE INCOME TAXES (2,365 ) (211 ) (3,545 ) (1,960 ) PROVISION FOR INCOME TAXES — — — — NET LOSS $ (2,365 ) $ (211 ) $ (3,545 ) (1,960 ) (52 ) (179 ) (216 ) (941 ) $ (2,417 ) $ (390 ) $ (3,761 ) (2,901 ) NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS BASIC $ (0.35 ) $ (1.36 ) $ (1.43 ) (25.52 ) DILUTED $ (0.35 ) $ (1.36 ) $ (1.43 ) (25.52 ) WEIGHTED AVERAGE SHARES OUTSTANDING BASIC 6,884 283 2,632 114 DILUTED 6,884 283 2,632 114 ASSETS CURRENT ASSETS: Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $126 at March 31, 2021 and December 31, 2020 Inventory, net of reserves of $758 at March 31, 2021 and December 31, 2020 Other current assets Total current assets NONCURRENT ASSETS: Property and equipment, net Lease asset-right, net of amortization Other assets Total noncurrent assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS’ DEFICIT CURRENT LIABILITIES: Current portion of long-term debt Notes payable in default, related parties Notes payable in default Short-term notes payable Short-term notes payable, related parties, past due Convertible notes in default Convertible notes payable, past due Short-term convertible notes payable Accounts payable Accounts payable, related parties Accrued liabilities Mandatorily redeemable Series G convertible preferred stock Current portion of lease liability Deferred revenue Total current liabilities LONG-TERM LIABILITIES: Warrants, at fair value Lease liability Derivative liability Long-term debt Long-term debt-related parties Total long-term liabilities TOTAL LIABILITIES COMMITMENTS & CONTINGENCIES (Note 7) STOCKHOLDERS’ DEFICIT: Series C convertible preferred stock, $.001 par value; 9.0 shares authorized, 0.3 shares issued and outstanding as of March 31, 2021 and December 31, 2020. (Liquidation preference of $286 at March 31, 2021 and December 31, 2020). Series C1 convertible preferred stock, $.001 par value; 20.3 shares authorized, 1.0 shares issued and outstanding as of March 31, 2021 and December 31, 2020. (Liquidation preference of $1,049 at March 31, 2021 and December 31, 2020). Series C2 convertible preferred stock, $.001 par value; 5,000 shares authorized, 3.3 shares issued and outstanding as of March 31, 2021 and December 31, 2020. (Liquidation preference of $3,263 at March 31, 2021 and December 31, 2020). Series D convertible preferred stock, $.001 par value; 6.0 shares authorized, 0.8 shares issued and outstanding as of March 31, 2021 and December 31, 2020. (Liquidation preference of $763 at March 31, 2021 and December 31, 2020). Series E convertible preferred stock, $.001 par value; 5.0 shares authorized, 1.7 shares issued and outstanding as of March 31, 2021 and December 31, 2020. (Liquidation preference of $1,736 at March 31, 2021 and December 31, 2020). Series F convertible preferred stock, $.001 par value; 5.0 shares authorized, 4.5 and nil shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively. (Liquidation preference of $4,508 and nil at March 31, 2021 and December 31, 2020), respectively. Series G convertible preferred stock, $.001 par value; 1,000 shares authorized, 153 and nil shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively. (Liquidation preference of $153 and nil at March 31, 2021 and December 31, 2020), respectively. Common stock, $.001 par value; 3,000,000 shares authorized, 13,180 and 13,138 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively Additional paid-in capital Treasury stock, at cost TOTAL STOCKHOLDERS’ DEFICIT TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT condensed consolidated financial statements.4CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in Thousands) 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,545 ) $ (1,960 ) Adjustments to reconcile net loss to net cash used in operating activities: Bad debt (recovery) expense 298 4 Depreciation 77 148 Amortization of debt issuance costs and discounts 196 930 Stock based compensation 56 72 Change in fair value of warrants 359 (2,276 ) Changes in operating assets and liabilities: Inventory 196 (40 ) Accounts receivable (89 ) (53 ) Other current assets 80 317 Other assets 300 47 Accounts payable 366 626 Deferred revenue 122 (148 ) Accrued liabilities 1,103 728 Total adjustments 3,064 355 Net cash used in operating activities (481 ) (1,605 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt financing, net of discounts and debt issuance costs 746 1,719 Payments made on notes payable (205 ) (145 ) Net cash provided by financing activities 541 1,574 NET CHANGE IN CASH AND CASH EQUIVALENTS 60 (31 ) CASH AND CASH EQUIVALENTS, beginning of year 14 35 CASH AND CASH EQUIVALENTS, end of period $ 74 $ 4 SUPPLEMENTAL SCHEDULE OF: Cash paid for: Interest $ 1 $ 62 NONCASH INVESTING AND FINANCING ACTIVITIES: Issuance of common stock as debt repayment $ 185 $ 251 Dividends on preferred stock $ 216 $ 941 REVENUE: Sales – devices and disposables, net Cost of goods sold Gross profit OPERATING EXPENSES: Research and development Sales and marketing General and administrative Total operating expenses Operating loss OTHER INCOME (EXPENSE): Other income Interest expense Change in fair value of derivative liability Gain from extinguishment of debt Change in fair value of warrants Total other income (LOSS) INCOME BEFORE INCOME TAXES PROVISION FOR INCOME TAXES NET (LOSS) INCOME NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS BASIC DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING BASIC DILUTED condensed consolidated financial statements.5NOTES Issuance of preferred stock in financing Conversion of debt into common stock Issuance of common stock in financing Issuance of warrants in financing Issuance of common stock for manufacturing agreements Accrued preferred dividends Net income BALANCE, March 31, 2020 BALANCE, December 31, 2020 Series D preferred offering Series E preferred offering Series F preferred offering Conversion of debt and expenses for Series F preferred stock Issuance of warrants to finders Series G preferred offering Issuance of common stock for payment of Series D preferred dividends Issuance of warrants to consultants Conversion of warrants from liability to equity Stock-based compensation Accrued preferred dividends Net loss BALANCE, March 31, 2021
Issuance of preferred stock in financing Conversion of debt into common stock Issuance of common stock in financing Issuance of warrants in financing Issuance of common stock for manufacturing agreements Accrued preferred dividends Net income BALANCE, March 31, 2020 BALANCE, December 31, 2020 Series D preferred offering Series E preferred offering Series F preferred offering Conversion of debt and expenses for Series F preferred stock Issuance of warrants to finders Series G preferred offering Issuance of common stock for payment of Series D preferred dividends Issuance of warrants to consultants Conversion of warrants from liability to equity Stock-based compensation Accrued preferred dividends Net loss BALANCE, March 31, 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income Adjustments to reconcile net (loss) income to net cash used in operating activities: Amortization of debt issuance costs and discounts Amortization of beneficial conversion feature Stock-based compensation Change in fair value of warrants Warrants issued for consulting services Gain from extinguishment of debt Change in fair value of derivative Changes in operating assets and liabilities: Accounts receivable Inventory Other current assets Other assets Accounts payable Deferred revenue Accrued liabilities Total adjustments Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Additions to fixed assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Series F offering, net of costs Proceeds from Series G offering, net of costs Payments made on notes payable Proceeds from the issuance of common stock Net cash provided (used in) by financing activities NET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, beginning of year CASH AND CASH EQUIVALENTS, end of period SUPPLEMENTAL SCHEDULE OF: Cash paid for: Interest NONCASH INVESTING AND FINANCING ACTIVITIES: Issuance of common stock as debt repayment Issuance of Series F preferred stock Issuance of warrants to finders in connection with Series F preferred stock Issuance of common stock for accrued interest of debt repaid Dividends on preferred stock Subscription receivable Settlement of dividends through common stock issuance Warrants exchanged for fixed price warrants Other receivable CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)OrganizationBackgroundA 1:800 reverse stock splitextension of its cancer detection technology into other cancers, including esophageal. The Company’s technology, including products in research and development, primarily relates to biophotonics technology for the non-invasive detection of cancers.Company’s issuedinformation and outstanding common stock was implementedfootnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with our Annual Report on November 7, 2016. AsForm 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934. In the opinion of management, all adjustments (consisting of normal recurring accruals and other items) considered necessary for a result of the reverse stock split, every 800 shares of issued and outstanding common stock was converted into 1 share of common stock. All fractional shares created by the reverse stock split were rounded to the nearest whole share. The number of authorized shares of common stock did not change. The reverse stock split decreased the Company’s issued and outstanding shares of common stock from 453,694,400 shares to 570,707 shares as of that date. See Note 4, Stockholders’ Deficit. Unless otherwise specified, all per share amounts are reported on a post-stock split basis, as of September 30, 2017. On February 24, 2016, the Company had also implemented a 1:100 reverse stock split of its issued and outstanding common stock.September 30, 2017,March 31, 2021, it had an accumulated deficit of approximately $131.3$140.5 million. To date, the Company has engaged primarily in research and development efforts and the early stages of marketing its products. The Company may not be successful in growing sales for its products. Moreover, required regulatory clearances or approvals may not be obtained in a timely manner, or at all. The Company’s products may not ever gain market acceptance and the Company may not ever generate significant revenues or achieve profitability. The development and commercialization of the Company’s products requires substantial development, regulatory, sales and marketing, manufacturing and other expenditures. The Company expects operating losses to continue through at leastfor the end of 2017foreseeable future as it continues to expend substantial resources to complete development of its products, obtain regulatory clearances or approvals, build its marketing, sales, manufacturing and finance capabilities, and conduct further research and development.Basis of PresentationThe accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. These statements reflect adjustments, all of which are of a normal, recurring nature, and which are, in the opinion of management, necessary to present fairly the Company’s financial position as of September 30, 2017, results of operations for the three and nine months ended September 30, 2017 and 2016, and cash flows for the three and nine months ended September 30, 2017 and 2016. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results for a full fiscal year. Preparing financial statements requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2016.All information and footnote disclosures included in the consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.September 30, 2017,March 31, 2021, the Company had a negative working capital of approximately $10.6$4.2 million, accumulated deficit of $131.3$140.5 million, and incurred a net loss of $2.4$0.6 million for the quarterthree months then ended. Stockholders’ deficit totaled approximately $12.3$4.8 million at September 30, 2017,March 31, 2021, primarily due to recurring net losses from operations.deemed dividends on warrants and preferred stock, offset by proceeds from the exercise of warrants and proceeds from sales of stock.6The Company’s capital-raising efforts are ongoing. FDA approval process. If sufficient capital cannot be raised during the first quarter of 2018,2021, the Company will continue its plans of curtailing operations by reducing discretionary spending and staffing levels and attempting to operate by only pursuing activities for which it has external financial support. However, there can be no assurance that such external financial support will be sufficient to maintain even limited operations or that the Company will be able to raise additional funds on acceptable terms, or at all. In such a case, the Company might be required to enter into unfavorable agreements or, if that is not possible, be unable to continue operations, and to the extent practicable, liquidate and/or file for bankruptcy protection.86.828.0 million shares of its common stock outstanding at September 30, 2017,March 31, 2021, with exercise prices ranging between $0.017$0.15 and $40,000$0.75 per share. Exercises of thesein the money warrants would generate a total of approximately $6.2$7.3 million in cash, assuming full exercise, although the Company cannot be assured that holders will exercise any warrants. Management may obtain additional funds through the public or private sale of debt or equity, and grants, if available.The Company’s significant accounting policies were set forth in the audited financial statements and notes thereto for the year ended December 31, 2016 included in its annual report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”).May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015,December 2019, the FASB issued ASU 2015-14, “Deferral of the Effective Date”, which amends ASU 2014-09. As a result, the effective date will be the first quarter of fiscal year 2018 with early adoption permitted in the first quarter of fiscal year 2017. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU 2016-08, “Revenue from Contracts with Customers2019-12, “Income Taxes (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net),740)” (“ASU 2016-08”); ASU 2016-10, “Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing,” (“ASU 2016-10”); ASU 2016-12, “Revenue from Contracts with Customers (Topic 606) Narrow-Scope Improvements and Practical Expedients,” (“ASU 2016-12”); and ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” (“ASU 2016-20”), which are intended to provide additional guidance and clarity to ASU 2014-09. The Company must adopt ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 along with ASU 2014-09 (collectively, the “New Revenue Standards”). The New Revenue Standards may be applied using oneamendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by clarifying and amending other areas of two retrospective application methods: (1) a full retrospective approach for all periods presented, or (2) a modified retrospective approach that presents a cumulative effect as of the adoption date and additional required disclosures.Topic 740. The Company is evaluating the impact that adoption ofamendments in this guidance will have on the determination or reporting of its financial results.7In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” (“ASU 2015-11”). ASU 2015-11 requires inventory be measured at the lower of cost and net realizable value and options that currently exist for market value be eliminated. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance isare effective for reportingannual and interim periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. ASU 2015-11 should be applied prospectively. The Company has2020. We adopted this guidance during the quarter ended September 30, 2017ASU on a prospective basis. The adoption of this guidance did not have a significantJanuary 1, 2021 with no material impact on the operating results for the period ended September 30, 2017.February 2016,August 2020, the FASB issued ASU 2016-02, “Leases (Topic 842)” that requires lessees to recognize onNo. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the balance sheet the assetsaccounting for certain financial instruments with characteristics of liabilities and liabilities associated with the rightsequity, including convertible instruments and obligations created by those leases. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with currentcontracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the recognition, measurement,liability and presentationequity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of expensesthe instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and cash flows arisingHedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from a lease by a lessee primarily will dependstockholders’ equity to liabilities as it relates to the Company’s convertible senior notes. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on its classification as finance or operating lease. The updatediluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard. ASU 2020-06 is effective for reporting periodsfiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.In March 2016, the FASB issued ASU 2016-05, “Derivatives and Hedging (Topic 815),” (“ASU 2016-05”). ASU 2016-05 provides guidance clarifying that novation of a derivative contract (i.e., a change in counterparty) in a hedge accounting relationship does not, in and of itself, require dedesignation of that hedge accounting relationship. The effective date will be the first quarter of fiscal year 2017, with early adoption permitted. The Company has adopted this guidance during the quarter ended March 31, 2017 on a prospective basis. The adoption of this guidance did not have a significant impact on the operating results for the period ended September 30, 2017.In March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (Topic 815),” (“ASU 2016-06”). ASU 2016-06 simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by clarifying that an exercise contingency does not need to be evaluated to determine whether it relates to interest rates and credit risk in an embedded derivative analysis. The effective date will be the first quarter of fiscal year 2017, with early adoption permitted. The Company has adopted this guidance during the quarter ended March 31, 2017 on a prospective basis. The adoption of this guidance did not have a significant impact on the operating results for the period ended September 30, 2017.In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting,” (“ASU 2016-09”). ASU 2016-09 is intended to simplify several aspects related to how share-based payments are accounted for and presented in the financial statements, such as requiring all income tax effects of awards to be recognized in the income statement when the awards vest or are settled and allowing a policy election to account for forfeitures as they occur. In addition, all related cash flows resulting from share-based payments will be reported as operating activities on the statement of cash flows. ASU 2016-09 could result in increased volatility of the Company’s provision for income taxes and earnings per share, depending on the Company’s share price at exercise or vesting of share-based awards compared to grant date. The effective date will be the first quarter of fiscal year 2017, with early adoption permitted. The Company has adopted this guidance during the quarter ended March 31, 2017 on a prospective basis. The adoption of this guidance did not have a significant impact on the operating results for the period ended September 30, 2017.In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses,” (“ASU 2016-13”). ASU 2016-13 sets forth a “current expected credit loss” model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. The guidance in this new standard replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. The effective date will be the first quarter of fiscal year 2020. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements.In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments,” (“ASU 2016-15”). ASU 2016-15 reduces the existing diversity in practice in financial reporting by clarifying existing principles in ASC 230, “Statement of Cash Flows,” and provides specific guidance on certain cash flow classification issues. The effective date for ASU 2016-15 will be the first quarter of fiscal year 2018, with early adoption permitted. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.8In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) - Restricted Cash,” (“ASU 2016-18”). ASU 2016-18 requires a statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment. The effective date will be the first quarter of fiscal year 2020,2021, with early adoption permitted in 2017. Adoption is not expected to have a material effect on the Company’s consolidated financial statements.In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718), Scope of Modification Accounting)” (“ASU 2017-09”) which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date. The guidance is effective for annual periods, and interim periods within those annual periodsfiscal years beginning after December 15, 2017, with2020, and can be adopted on either a fully retrospective or modified retrospective basis. The Company has early adopted ASU No. 2020-06 under a modified retrospective basis on January 1, 2021. The result of the early adoption permitted. The Company is currently evaluatingwould have been a change to retained earnings of $102,000 for the impact that this standard will have on its consolidated financial statementscustomers’distributors’ financial conditions and generally does not require collateral. The Company reviews all outstanding accounts receivable for collectability on a quarterly basis. An allowance for doubtful accounts is recorded for any amounts deemed uncollectable. Uncollectibility, is determined based on the determination that a distributor will not be able to make payment and the time frame has exceeded one year. The Company does not accrue interest receivablereceivables on past due accounts receivable.Revenue RecognitionRevenue from the sale of the Company’s products is recognized upon shipment of such products to its customers. The Company recognizes revenue from contracts on a straight-line basis, over the terms of the contract. The Company recognizes revenue from grants based on the grant agreement, at the time the expenses are incurred. 9Significant CustomersDuring the nine months ended September 30, 2017 and 2016, all of the Company’s revenues were from four and three customers, respectively. Revenue from these customers totaled $136,750 and $369,000 for the nine months ended September 30, 2017 and 2016, respectively. All accounts receivable are fully reserved at September 30, 2017. September 30, 2017March 31, 2021 and December 31, 2016,2020, our inventories were as follows (in thousands): September 30, December 31, 2017 2016 Raw materials $ 795 $ 795 Work in process 83 115 Finished goods 108 141 Inventory reserve (409 ) (278 ) Total $ 577 $ 773 Raw materials Work in process Finished goods Inventory reserve Total isare included in general and administrative expense on the statement of operations. Expenditures for repairs and maintenance are expensed as incurred. Property and equipment are summarized as follows at September 30, 2017March 31, 2021 and December 31, 20162020 (in thousands): September 30, December 31, 2017 2016 Equipment $ 1,378 $ 1,378 Software 740 740 Furniture and fixtures 124 124 Leasehold Improvement 199 199 2,441 2,441 Less accumulated depreciation and amortization (2,385 ) (2,315 ) Total $ 56 $ 126 Equipment Software Furniture and fixtures Leasehold improvement Less accumulated depreciation and amortization Total that debt liability consistent with the debt discount.Other AssetsOther assets primarily consist of short- and long-term deposits for various tooling inventory that are being constructed for the Company and deferred financing costs.$15,000$3,000 and $9,000$4,000 for the nine monthsquarter ended September 30, 2017March 31, 2021 and 2016,2020, respectively.10 December 31,
2016Accrued compensation $ 2,037 $ 1,656 Accrued professional fees 74 161 Deferred rent — 13 Accrued warranty 44 58 Accrued vacation 151 175 Accrued interest 449 — Accrued dividends 316 296 Other accrued expenses 579 311 Total $ 3,650 $ 2,670 Compensation Professional fees Subscription receivable Interest Vacation Preferred dividends Other accrued expenses Total Revenueon a straight-line basis, over the terms of the contract.and applying ASC 606 as required. As of September 30, 2017,March 31, 2021, and December 31, 2020, the Company has received prepayments for deviceshad $62,000 and disposables and$42,000 in deferred that revenue, in the amount of $156,000.is currently delinquent withhas filed its 2020 federal and applicable state corporate tax returns filings. Some ofreturns. The Company has entered into an agreed upon payment plan with the federal income tax returns are currently under examination by the U.S. Internal Revenue Service (“IRS”). None of the Company’sIRS for delinquent payroll taxes. The Company has an established payment arrangement for its delinquent state income tax returns are currently under review by state authorities.taxes with the State of Georgia. Although the Company has been experiencing recurring losses, it is obligated to file tax returns for compliance with IRS regulations and that of applicable state jurisdictions. At September 30, 2017 and December 31, 2016,2020, the Company has approximately $37 and $33$61.6 million of net operating losses respectively.carryforward available to next year. This net operating loss will be eligible to be carried forward for tax purposes at federal and applicable states level. A full valuation allowance has been recorded related the deferred tax assets generated from the net operating losses.more-likely-than-notmore likely than not criteria, the benefit recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. At September 30, 2017 and December 31, 20162020 and, 2019, there were no uncertain tax positions. issued to non-employees based on the fair value at the date of issue. The fair value of warrants classified as equity instruments at the date of issuance is estimated using the Black-Scholes Model. The fair value of warrants classified as liabilities at the date of issuance is estimated using the Monte Carlo Simulation or Binomial model.11share-basedstock based payments granted or modified subsequently based on fair value estimates.ninethree months ended September 30, 2017March 31, 2021 and 20162020 share-based compensation for options attributable to employees, non-employees, officers and Board members were approximately $56,000$62,000 and $72,000.$5,000, respectively. These amounts have been included in the Company’s statements of operations.operations under general and administrative expense. Compensation costs for stock options which vest over time are recognized over the vesting period. As of September 30, 2017,March 31, 2021, and 2020 the Company had approximately $53,000$509,000 and nil of unrecognized compensation costs related to granted stock options that will be recognized, respectively.vesting periodproceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of approximately three years.follows:follow:1 – 1–Quoted market prices in active markets for identical assets and liabilities;•Level 2 – Inputs, other than level 1 inputs, either directly or indirectly observable; and•Level 3 – Unobservable inputs developed using internal estimates and assumptions (there is little or no market date) which reflect those that market participants would use.September 30, 2017.March 31, 2021 and December 31, 2020. The fair value of the warrants was estimated using the Binomial Simulation model. Gains and losses from derivative contracts are included in net gain (loss) fromthe change in fair value of the derivative contractsliability in the statement of operations. The fair value of the Company’s derivative warrants is classified as a Level 3 measurement, since unobservable inputs are used in the valuation.September 30, 2017March 31, 2021 and December 31, 2016: Fair Value at September 30, 2017 Level 1 Level 2 Level 3 Total Warrants issued in connection with Distributor Debt $ — $ — $ (114 ) (114 ) Warrants issued in connection with Senior Secured Debt — — (1,720 ) (1,720 ) Total long-term liabilities at fair value $ — $ — $ (1,834 ) (1,834 ) 12 Level 1 Level 2 Level 3 Total Warrants issued in connection with Distributor Debt $ — $ — $ (114 ) $ (114 ) Warrants issued in connection with Senior Secured Debt — — (1,306 ) (1,306 ) Total long-term liabilities at fair value $ — $ — $ (1,420 ) $ (1,420 ) Derivative liability/bifurcated conversion option in connection with Auctus $1,100,000 loan on December 17, 2019 Total long-term liabilities at fair value Warrants issued in connection with Senior Secured Debt Derivative liability/bifurcated conversion option in connection with Auctus $1,100,000 loan on December 17, 2019 Total long-term liabilities at fair value ninethree months ended September 30, 2017: Series C Warrants Series B Warrants Senior Secured Debt Distributor Debt Total Balance, December 31, 2016 $ — $ — $ (1,306 ) $ (114 ) $ (1,420 ) Warrants issued during the period — — (55 ) — (55 ) Change in fair value during the period — — (359 ) — (359 ) Balance, September 30, 2017 $ — $ — $ (1,720 ) $ (114 ) $ (1,834 ) Balance, December 31, 2020 Change in the terms of warrants previously recorded as a liability and now reclassified to equity Change in value due to warrants expiring during the year Change in fair value during the year Balance, March 31, 2021 September 30, 2017,March 31, 2021, the fair value of warrants was approximately $1,834,000.nil and the fair value of the derivative liability was approximately $113,000. A net change of approximately $359,000$2.1 million has been recorded to the accompanying statement of operations for the ninethree months ended September 30, 2017.1,000,000,0003,000,000,000 shares of common stock with $0.001 par value, of which 9,252,88913,180,417 were issued and outstanding as of September 30, 2017.March 31, 2021. As of December 31, 2016,2020, there were 1,000,000,0003,000,000,000 authorized shares of common stock, of which 668,65113,138,282 were issued and outstanding.A 1:800 reverse stock split of all of our issued and outstanding common stock was implemented on November 7, 2016. As a result of the reverse stock split, every 800 shares of issued and outstanding common stock was converted into 1 share of common stock. All fractional shares created by the reverse stock split were rounded to the nearest whole share. The number of authorized shares of common stock did not change. On February 24, 2016, the Company had also implemented a 1:100 reverse stock split of its issued and outstanding common stock. The number of the authorized shares did not change.ninethree months ended September 30, 2017,March 31, 2021, the Company issued 8,584,23842,135 shares of common stock as listed below:Shares issued for payments of Series C Preferred Stock ConversionsD dividends2,475,095Series C Preferred Stock DividendsIssued during the three months ended March 31, 20211,195,800Issuance of shares due to commitment in Debt agreement50,000Convertible Debt Conversions4,863,343 Total8,584,2381342,135 Balance at December 31, 2020 Issued in 2021 Balance at March 31, 2021 22, 2017,8, 2021, the Company entered into a licensemade the final payment of $750,000 out of the total $1,500,000 as required by this exchange agreement with Shandong Yaohua Medical Instrument Corporation, or SMI, pursuant to whichGPB. On March 31, 2021, the Company granted SMI an exclusive global license to manufacture the LuViva device and related disposables (subject to a carve-out for manufacture in Turkey) and exclusive distribution rights in the Peoples Republic of China, Macau, Hong Kong and Taiwan. In exchange for the license, SMI will pay a $1.0 million licensing fee, payable in five installments through November 2017, as well as a royalty on each disposable sold in the territories. As of September 30, 2017, SMI had paid $750,000. SMI will also underwrite the cost of securing approval of LuViva with the Chinese Food and Drug Administration, or CFDA. Pursuant to the SMI agreement, SMI must become capable of manufacturing LuVivaissued 2,236 series F preferred stock shares in accordance with ISO 13485 for medical devices by the second anniversaryterms of the SMI agreement or else forfeit the license. During 2017, SMI must purchase no fewer than ten devices (with up to two devices pushed to 2018 if there is a delay in obtaining approval from the CFDA)(seeNOTE 10: CONVERTIBLE DEBT). In the three years following CFDA approval, SMI must purchase a minimum of 3,500 devices (500 in the first year, 1,000 in the second, and 2,000 in the third) or else forfeit the license. As manufacturer of the devices and disposables, SMI will be obligated to sell each to us at costs no higher than our current costs. As partial consideration for, and as a condition to, the license, and to further align the strategic interests of the parties,agreed to issue $1.0 millionexchanged $100,000 and $85,000 of long-term debt for Dr. Cartwright and Dr. Faupel in exchange for 100 and 85 shares of its commonSeries F Preferred Stock, respectively.to SMI, in five installments through October 2017, at a price per share equal to the lesser of the average closing price for the five days prior to issuance and $1.25. These shares have not been issued as of September 30, 2017.In order to facilitate the SMI agreement, immediately prior to its executionshares.Shenghuo Medical, LLC, regarding its previous licenseRichard Fowler. As of December 31, 2020, the Company owed Mr. Fowler $546,214 ($412,624 in deferred salary and $133,590 in accrued interest). The Company exchanged the amount owed of $546,214 for 50 Series F Preferred Shares (convertible into 200,000 common stock shares), a $150,000 unsecured note and Mr. Fowler remains on the Company health insurance plan. The note will accrue interest at the rate of 6% (18% in the event of default) on March 22, 2022 and be payable in monthly installments of $3,600 for four years, with the first payment being due on March 15, 2022.Shenghuo (see Note 7, Commitmentshave a total fair value of $2,065,548, resulting in a loss on extinguishment of debt of $1,183 which is recorded in other income (expense) on the accompanying consolidated statements of operations. The Company also issued 6,957,013 warrants to purchase common stock shares; with exercise prices of $0.25, $0.75 and Contingencies). Under the terms$0.20. In addition, one of the new agreement, Shenghuo agreed to relinquish its manufacturing license and its distribution rights in SMI’s territories, and to waive its rights under the original Shenghuo agreement, allinvestors forgave approximately $29,000 of debt, which was recorded as a gain for as long as SMI performs under the SMI agreement. As consideration,extinguishment of debt.agreedexchanged $328,422 in debt from Auctus, (summarized infootnote 10: Convertible Notes),for 500,000 common stock shares and 700,000 warrants to split with Shenghuopurchase common stock shares. The fair value of the licensing feescommon stock shares was $250,000 (based on a $0.50 fair value for the Company’s stock) and of the warrants to purchase common stock shares was $196,818 (based on a $0.281 black scholes fair valuation). This resulted in a net royalties from SMI thatloss on extinguishment of debt of $118,396 ($446,818 fair value less the $328,422 of exchanged debt).under the SMI agreement. Shouldfollowing: (i) cash payments of $20,000 within 60 days of the SMI agreement be terminated,signing of the agreement; cash payments over time in the amount of $90,000 in the form of an unsecured note with the Company to be executed within 30 days of a new financing(s) totaling at least $3.0 million. The note shall bear interest of 6.0% and mature over 18 months; (ii) 66,000 common share stock options that vest at a rate of 3,667 per month and have agreeda $0.49 exercise price (if two consecutive payments in (iii) are not made the stock options will be canceled and a cash payment will be required; and (iv) the total amount of forgiveness by creditor of approximately $110,000 shall be prorated according to re-issueamount paid. During the original licenseyear ended December 31, 2020, the Company made a payment of $20,000; this payment allowed the Company to Shenghuo underreduce $40,000 in debt, with the original terms. corresponding $20,000 difference recorded as a gain. Aquarius Mr. Blumberg Mr. Case Mr. Grimm Mr. Gould Mr. Mamula Auctus Mr. Clavijo as well as Dr. John Imhoff,and a director and anotherformer director, Richard Blumberg, is a managing member of Shenghuo.of directors designated 525,000 shares of preferred stock redeemable convertible preferred stock, none of which remain outstanding, 33,000 shares of preferred stock as Series B Preferred Stock, none of which remain outstanding, 9,000 shares of preferred stock as Series C Convertible Preferred Stock, of which 1,177 and 1,643 were issued and outstanding at September 30, 2017 and December 31, 2016, respectively, and 20,250 shares of preferred stock as Series C1 Convertible(the “Series C Preferred Stock, of which 4,312 shares were issued and outstanding at September 30, 2017 and December 31, 2016.Series B Convertible Preferred StockHolders of the Series B Preferred Stock were entitled to quarterly dividends at an annual rate of 10.0%, payable in cash or, subject to certain conditions, common stock, at the Company’s option.The Series B Preferred Stock were issued with Tranche A warrants to purchase 24 shares of common stock and Tranche B warrants purchasing 7,539 shares of common stock, at an exercise price of $8,364 and $75 per share, respectively.At December 31, 2015, as a result of the operation of certain anti-dilution provisions, the Tranche B warrants were convertible into 1 shares of common stock. These warrants were re-measured based upon their fair value each reporting period and classified as a liability on the Balance Sheet. Between June 13, 2016 and June 14, 2016, the Company entered into various agreements with holders of the Company’s “Series B Tranche B” warrants, pursuant to which each holder separately agreed to exchange the warrants for either (1) shares of common stock equal to 166% of the number of shares of common stock underlying the surrendered warrants, or (2) new warrants exercisable for 200% of the number of shares underlying the surrendered warrants, but without certain anti-dilution protections included with the surrendered warrants.Series C Convertible Preferred StockOn June 29, 2015, the Company entered into a securities purchase agreement with certain accredited investors, including John Imhoff and Mark Faupel, members of the Board, for the issuance and sale of an aggregate of 6,737 shares of Series C convertible preferred stock, at a purchase price of $750 per share and a stated value of $1,000 per share. On September 3, 2015 the Company entered into an interim agreement amending the securities purchase agreement to provide for certain of the investors to purchase an additional aggregate of 1,166 shares. Total cash and non-cash expenses were valued at $853,000, resulting in net proceeds of $3,698,000.14September 30, 2017,March 31, 2021 and December 31, 2020, there were 1,177286 shares outstanding with a conversion price of $0.0299$0.50 per share, such that each share of Series C preferred stock would convert into approximately 31,4922,000 shares of the Company’s common stock; for a total convertible of 572,000 common stock shares, subject to customary adjustments, including for any accrued but unpaid dividends and pursuant to certain anti-dilution provisions, as set forth in the Series C certificate of designations. The conversion price will automatically adjust downward to 80% of the then-current market price of the Company’s common stock 15 trading days after any reverse stock split of the Company’s common stock, and 5 trading days after any conversions of the Company’s outstanding convertible debt.amountnumber of unpaid dividends through the Dividend End Date on the converted shares. At September 30, 2017,March 31, 2021 and December 31, 2020, the “make-whole payment” for a converted share of Series C preferred stock would convert to 14,030200 shares of the Company’s common stock. The Series C preferred stock generally has no voting rights except as required by Delaware law. Upon the Company’s liquidation or sale to or merger with another corporation, each share will be entitled to a liquidation preference of $1,000, plus any accrued but unpaid dividends.150 shares1 share of Company’s common stock. The warrants contain anti-dilution adjustments in the event that the Company issues shares of common stock, or securities exercisable or convertible into shares of common stock, at prices below the exercise price of such warrants. As a result of the anti-dilution protection, the Company is required to account for the warrants as a liability recorded at fair value each reporting period. At September 30, 2017,March 31, 2021 and December 31, 2020, the exercise price per share was $640.On May 23, 2016, an investor canceled certain of these warrants, exercisable into 903 shares of common stock. The same investor also transferred certain of these warrants, exercisable for 150 shares of common stock, to two investors who also had participated in the 2015 Series C financing.preferred stockPreferred Stock and 12 (9,600 pre-split) shares of the Company’s common stock (the “Series C Exchanges”). In connection with the Series C Exchanges, each holder also agreed to roll over the $1,000 stated value per share of the holder’s shares of Series C1 preferred stockPreferred Stock into the next qualifying financing undertaken by the Company on a dollar-for-dollar basis and, except in the event of an additional $50,000 cash investment in the Company by the holder, to execute a customary “lockup” agreement in connection with the financing. In total, for 1,916 shares of Series C preferred stock surrendered, the Company issued 4,312 shares of Series C1 preferred stockPreferred Stock and 22,99629 shares of common stock.September 30, 2017,March 31, 2021 and December 31, 2020, there were 4,3121,049.25 shares outstanding with a conversion price of $0.0299$0.50 per share, such that each share of Series CC1 preferred stock would convert into approximately 31,4922,000 shares of the Company’s common stock.quarterthree months ended September 30, 2017:March 31, 2021: 15WarrantsOutstanding, January 1, 201720214,349,762Issuances 82,476,451Canceled / Expired — Exercised — Outstanding, September 30, 2017March 31, 202186,826,213September 30, 2017:
(Underlying Shares) 23 (1) $8,368.00 per share May 23, 2018 7,538 (2) $75.00 per share June 14, 2021 3 (3) $40,000.00 per share April 23, 2019 7 (4) $36,000.00 per share May 22, 2019 4 (5) $30,400.00 per share September 10, 2019 2 (6) $36,864.80 per share September 27, 2019 9 (7) $22,504.00 per share December 2, 2019 105 (8) $7,200.00 per share December 2, 2020 105 (9) $8,800.00 per share December 2, 2020 25 (11) $20,400.00 per share March 30, 2018 22 (12) $9,504.00 per share June 29, 2020 145 (10) $640.00 per share June 29, 2020 150 (11) $640.00 per share September 4, 2020 362 (12) $640.00 per share September 21, 2020 6 (13) $9,504.00 per share September 4, 2020 1 (14) $640.00 per share October 23, 2020 6 (15) $9,504.00 per share October 23, 2020 82,614,942 (16) $0.017 per share June 14, 2021 3,965,519 (17) $0.017 per share February 21, 2021 17,239 (18) $13.92 per share June 6, 2021 200,000 (19) $0.67 per share February 13, 2022 20,000 (20) $0.18 per share May 16, 2022 86,826,213 $0.20 per share February 12, 2023 $0.18 per share April 4, 2022 $0.25 per share July 1, 2022 $0.25 per share September 1, 2022 $0.20 per share December 17, 2024 $0.16 per share March 31, 2025 $0.25 per share December 30, 2022 $0.75 per share December 30, 2022 $0.20 per share December 30, 2022 $0.25 per share April 23, 2023 $0.25 per share December 30, 2022 $0.75 per share December 30, 2022 $0.15 per share May 21, 2023 $0.50 per share June 23, 2023 $0.50 per share August 10, 2022 $0.25 per share February 22, 2023 $0.25 per share March 3, 2024 (1) IssuedExchanged in June 2015 in exchange for warrants originallyJanuary 2020 from amount issued as part of a May 2013 private placement.(2)Issued in June 2015 in exchange for warrants originally issued as part of a May 2013 private placement.(3)Issued to a placement agent in conjunction with an April 2014 private placement.(4)Issued to a placement agent in conjunction with a September 2014 private placement.(5)Issued as part of a September 2014 Regulation S offering.(6)Issued to a placement agent in conjunction with a 2014 public offering.(7)Issued in June 2015 in exchange for warrants originally issued as part of a 2014 public offering.(8)Issued as part of a March 2015 private placement.(9)Issued to a placement agent in conjunction with a June 2015 private placement.(10)Issued as part of a June 2015 private placement.(11) Issued as part of a June 2015 private placement.(12)Issued as part of a June 2015 private placement.(13)Issued to a placement agent in conjunction with a June 2015 private placement.(14)Issued as part of a June 2015 private placement.(15)Issued to a placement agent in conjunction with a June 2015 private placement.(16)Issued as part of a February 2016 private placement.placement with senior secured debt holder(2) Issued to investors for a loan in April 2019 (3) Issued to investors for a loan in July 2019 (4) Issued to investors for a loan in September 2019 (5) Issued to investors for a loan in December 2019 (6) Issued to investors for a loan in January 2020 (7) Issued to investors as part of Series D Preferred Stock Capital raise in December 2020 (8) Issued to investors as part of Series D Preferred Stock Capital raise in December 2020 (9) Issued to investors as part of Series D Preferred Stock Capital raise in December 2020 (10) Issued to a consultant for services in April 2020 (11) Issued to an investor as part of Series D Preferred Stock Capital raise in April 2020 (12) Issued to an investor as part of Series D Preferred Stock Capital raise in April 2020 (13) Issued to an investor for a loan in May 2020 (14) Issued to an investor in exchange of debt in June 2020 (15) Issued to a consultant for services in August 2020 (16) Issued to a consultant (director) in February 2021 (17) Issued to a placement agentconsultant for Series F Preferred Stock Capital raise in conjunction with a February 2016 private placement.(18)(19)Issued pursuant to a strategic license agreement.Issued as part of a February 2017 private placement.(20)Issued as part of a May 2017 private placement.16March 2021 Allwarrant agreements provide for anti-dilution adjustments in the event of certain mergers, consolidations, reorganizations, recapitalizations, stock dividends, stock splits or other changes in the Company’s corporate structure; except for (9). In addition, warrants, which were subject to footnotes (2)anti-dilution and (10)-(12), (14), and (16) – (19) in the table above are subjectratchet provisions, to “lower price issuance” anti-dilution provisions that automatically reduce the exercise price of the warrants (and, in the cases of warrants subject to footnote (2), (16) and (17) in the table above, increase the number ofpurchase 35,937,500 shares of common stock issuable upon exercise), toat an exercise price of $0.04 per share and resulted in the offering price in a subsequent issuance of the Company’snew warrants to purchase 7,185,000 share of common stock unless such subsequent issuanceat a price of $0.20 per share. The new warrants have fixed exercise prices of $0.20. On January 8, 2021, the Company met the requirement by making the final payment of $750,000 as required by the exchange agreement with GPB, which canceled the previously issued warrants.exempt underpartially owned by Mr. Blumberg, to provide investor and public relations services for a period of two years. As compensation for these services, the Company will issue a total of 5,000,000 warrants, broken into four tranches of 1,250,000. The warrants have a strike price of $0.25 and are subject to vesting based upon the close of the Series D offering and a minimum share price based on the 30-day VWAP. If the minimum share price per the terms of the warrants.subject to footnote (2) are subject towere valued using the Black Scholes model on the grant date of January 22, 2020, which resulted in a mandatory exercise provision. This provision permitstotal fair value of $715,000. The Company did not appropriately expense the services received in connection with this agreement in 2020. The Company subject to certain limitations, to require exercisebooked consulting expenses of such warrants at any time following (a)$397,222 for the date that isquarter ended March 31, 2021, which includes twelve months of expense for the 30th day after the later of the Company’s receipt of an approvable letter from the U.S. FDA for LuViva and the date on which the common stock achieves an average market price for 20 consecutive trading days of at least $1,040.00 with an average daily trading volume during such 20 consecutive trading days of at least 250 shares, or (b) the date on which the average market price of the common stock for 20 consecutive trading days immediately prior to the date the Company delivers a notice demanding exercise is at least $129,600.00 and the average daily trading volume of the common stock exceeds 250 shares for such 20 consecutive trading days.year ended December 31, 2020. If these warrants are not timely exercised upon demand, they will expire. Upon the occurrence of certain events, the Company may be required to repurchase these warrants, as well as the warrants subject to footnote (2) in the table above.The warrants subject to footnote (5) in the table above are also subject to a mandatory exercise provision. This provision permits the Company, subject to certain limitations; to require the exercise of such warrants should the average trading price of its common stock over any 30 consecutive day trading period exceed $92.16.The warrants subject to footnote (7) in the table above are also subject to a mandatory exercise provision. This provision permits the Company, subject to certain limitations, to require exercise of 50% of the then-outstanding warrants if the trading price of its common stock is at least two times the initial warrant exercise price for any 20-day trading period. Further, in the event that the trading price of the Company’s common stock is at least 2.5 times the initial warrant exercise price for any 20-day trading period, the Company will have the right to require the immediate exercise of 50% of the then-outstanding warrants. Any warrants not exercised within the prescribed time periods will be canceled to the extent of the number of shares subject to mandatory exercise.The holders of the warrants subject to footnote (2) in the table above have agreed to surrender the warrants, upon consummation of a qualified public financing, for new warrants exercisable for 200% of the number of shares underlying the surrendered warrants, but without certain anti-dilution protections included with the surrendered warrants.Series B Tranche B WarrantsAs discussed in Note 3, Fair Value Measurements, between June 13, 2016 and June 14, 2016, the Company entered into various agreements with holders of the Company’s “Series B Tranche B” warrants, pursuant to which each holder separately agreed to exchange the warrants for either (1) shares of common stock equal to 166% of the number of shares of common stock underlying the surrendered warrants, or (2) new warrants exercisable for 200% of the number of shares underlying the surrendered warrants, but without certain anti-dilution protections included with the surrendered warrants. In total, for surrendered warrants then-exercisable for an aggregate of 1,185,357 shares of common stock (but subject to exponential increase upon operation of certain anti-dilution provisions), the Company issued or is obligated to issue 16,897 shares of common stock and new warrants that, if exercised as of the date hereof, would be exercisable for an aggregate of 216,707 shares of common stock. As of September 30, 2017, the Company had issued 14,766 sharesproperly accounted for the straight-line expensing of common stockthese services in 2020, net loss would have increased by $318,000 for a total net loss of $719,000 for the year ended December 31, 2020 and rightsaccumulated deficit would have increased to common stock shares for 2,131. In certain circumstances, in lieu$140.2 million as of presently issuing allDecember 31, 2020. Unrecognized consulting expense to be recognized under this agreement is $317,778 as of the shares (for each holder that opted for shares of common stock),March 31, 2021.the holder further agreed that the Company will, subject to the terms and conditions set forth in the applicable warrant exchange agreement, from time to time, be obligated to issue the remaining shares to the holder. No additional consideration will be payable in connection with the issuance of the remaining shares. The holders that elected to receive shares for their surrendered warrants have agreed that they will not sell shares on any trading day in an amount, in the aggregate, exceeding 20% of the composite aggregate trading volume of the common stock for that trading day. The holders that elected to receive new warrants will be required to surrender their old warrants upon consummation of the Company’s next financing resulting in net cash proceeds to the Company of at least $1 million.consultants. The new warrants will have an initial exercise price equal to the exercise price of the surrendered warrants as of immediately prior to consummation of the financing, subject to customary “downside price protection” for as long as the Company’s common stock is not listed on a national securities exchange, and will expire five years from the date of issuance.175. STOCK OPTIONSThe Company’s 1995 Stock Plan (the “Plan”) has expired pursuant to its terms, so zero shares remained available for issuance at September 30, 2017. The Plan allowedallows for the issuance of incentive stock options, nonqualified stock options, and stock purchase rights. The exercise price of options was determined by the Company’s board of directors, but incentive stock options were granted at an exercise price equal to the fair market value of the Company’s common stock as of the grant date. Options historically granted have generally become exercisable afterover four years and expire ten years from the date of grant.September 30, 2017,March 31, 2021, the Company has issued and outstanding options to purchase a total of 1181,825,000 shares of common stock pursuant to the Plan,plan, at a weighted average exercise price of $37,049$0.49 per share.The fair valuestock options are estimated using the Black-Scholes option pricing model. No options were issued during the period ended September 30, 2017.Stock options vested Stock options unvested Total stock options granted at March 31, 2021 September 30, 2017the three months ended March 31, 2021 is as follows: 2017 Weighted Average Shares Exercise Price Outstanding at beginning of year 125 $ 37,920 Options granted - $ - Options exercised - $ - Options expired/forfeited (7 ) $ 55,200 Outstanding at end of the period 118 $ 37,049 Outstanding at beginning of year Options granted Options exercised Options expired/forfeited Outstanding at end of the period period.September 30, 2017March 31, 2021, and December 31, 2016,2020, there was no accrual recorded for any potential losses related to pending litigation.approximately 23,00012,835 square feet under afeet.that expiredof its offices in June 2017.Norcross, Georgia. The Company occupieshas extended the spacelease for sixty-two (62) months. The lease will begin on April 1, 2021 and end on May 31, 2026. Rents for the one-year periods beginning on April 1, 2021 and ending on May 31, 2026 are: $8,824, $9,091, $9,370, $9,648, $9,936, and $10,236. Also, the Company will pay any additional rent for the Company’s proportionate share of basic costs and all other charges when due and payable under the lease. These costs are accounted for as variable costs and are not determinable at the lease commencement date and are not included in the measurement of the lease asset and liabilities. The landlord will abate the rent for the first two months. In addition, the Company will have a five-year renewal option effective June 1, 2026. The rent for the renewal option will be based upon prevailing market rate and shall escalate by three percent (3%). As of March 31, 2021, the right of use asset calculated for the amended lease was $425,680.month to monthstraight-line basis over the estimated lease term and combine lease and non-lease components. Future minimum rental basis. The fixed monthly lease expense is approximately $15,000 plus common charges.Year 2021 2022 2023 2024 2025 Thereafter Total Less: Interest Present value of lease liability The Company’s COO and director, Mark Faupel, is a shareholder of Shenghuo, as well as Dr. John Imhoff, a director and another director, Richard Blumberg, is a managing member of Shenghuo. Shenghuo was already the Company’s exclusive distributor in China, Macau and Hong Kong, and the license extended to manufacturing in those countries as well. Under the terms of the license agreement, once Shenghuo was capable of manufacturing LuViva in accordance with ISO 13485 for medical devices, Shenghuo would pay the Company a royalty equal to $2.00 or 20% of the distributor price (subject to a discount under certain circumstances), whichever is higher, per disposable distributed within Shenghuo’s exclusive territories. In connection with the license grant, Shenghuo was to underwrite the cost of securing approval of LuViva with Chinese Food and Drug Administration. At its option, Shenghuo also would provide up to $1.0 million in furtherance of the Company’s efforts to secure regulatory approval for LuViva from the U.S. Food and Drug Administration, in exchange for the right to receive payments equal to 2% of the Company’s future sales in the United States, up to an aggregate of $4.0 million. Pursuant to the license agreement, Shenghuo had the option to have a designee appointed to the Company’s board of directors (director(current director Richard Blumberg is thatthe designee). As partial consideration for, and as a condition to, the license, and to further align the strategic interests of the parties, the Company agreed to issue a convertible note to Shenghuo, in exchange for an aggregate cash investment of $200,000. The note will provide for a payment to Shenghuo of $300,000, expected to be due within 90 days from issuance and consummation of any capital raising transaction by the Company with net cash proceeds of at least $1.0 million. The note will accrue interest at 20% per year on any unpaid amounts due after that date. The note will be convertible into shares of the Company’s common stock at a conversion price per share of $13.92, subject to customary anti-dilution adjustment. The note will be unsecured, and is expected to provide for customary events of default. The Company will also issue Shenghuo a five-year warrant exercisable immediately for approximately 21,549 shares of common stock at an exercise price equal to the conversion price of the note, subject to customary anti-dilution adjustment. On January 22, 2017, the Company entered into a license agreement with SMI, pursuant to which the Company granted SMI an exclusive global license to manufacture the LuViva device and related disposables (subject to a carve-out for manufacture in Turkey) and exclusive distribution rights in the Peoples Republic of China, Macau, Hong Kong and Taiwan. In order to facilitate the SMI agreement, immediately prior to its execution the Company entered into an agreement with Shenghuo regarding its previous license to Shenghuo. Under the terms of the new agreement, Shenghuo agreed to relinquish its manufacturing license and its distribution rights in SMI’s territories, and to waive its rights under the original Shenghuo agreement, all for as long as SMI performs under the SMI agreement.18See also Note 8, Notes Payable,respectRichard Blumberg. The consulting agreement requires Mr. Blumberg to certain short-term notes payable issuedprovide $350,000 to certainthe Company in exchange for the following: (1) on September 26, 2021, 900,000 3-year warrants with an exercise price of $0.30 and 400,000 common stock shares; (2) on March 26, 2022, 900,000 3-year warrants with an exercise price of $0.40 and 400,000 common stock shares; (3) on September 26, 2022, 900,000 3-year warrants with an exercise price of $0.50 and 400,000 common stock shares; and (4) on March 26, 2023, 900,000 3-year warrants with an exercise price of $0.60 and 400,000 common stock shares.officersoperating business, including but not limited to, the sourcing of materials for product candidates, manufacture of supplies for preclinical and/or clinical studies, delays in clinical operations, which may include the availability or the continued availability of patients for trials due to such things as quarantines, conduct of patient monitoring and directors.September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company maintained notes payable and accrued interest to both related and non-related parties totaling $689,000approximately $296,000 and $1,008,000,$329,000, respectively. These notes are short term, straight-line amortizing notes. The notes carry annual interest rates between 0% and 10% and have default rates as high as 20%. The Company is accruing interest at the default rate of 18.0% on the only loan in default. As described inNote 4: STOCKHOLDERS’ DEFICIT,certain notes payable in default outstanding had been exchanged for equity and cash as described in the note. Mr. Mermelstein Dr. Cartwright Mr. Fowler GPB Notes payable in default 10%19%.haveMr. Faupel, in the amounts of approximately $43,000 and $5,000, respectively. The notes were initially issued with 0% interest, however interest increased to 6.0% interest 90 days after the Company received $1,000,000 in financing proceeds.rates as highwith an interest rate of 18%. As part of the March 22, 2021, exchange agreement these notes were brought current and will accrue interest at 6%.16.5%.Short Term Notes PayableThe following table summarizes the Short-term notes payable, including related partiesAt September 30, 2017: Dr. Cartwright Dr. Faupel Mr. Fowler Premium Finance (insurance) Short-term notes payable, including related parties 2016,2020.maintained short term notes payable and accrued interestbeing in default on several of its loans the debt is considered troubled debt. The troubled debt restructuring for Note Payable, would have increased the loss per share calculation from ..04 to both related and non-related parties totaling $820,000 and $197,000, respectively. These notes are short term, straight-line amortizing notes. The notes carry annual interest rates between 5% and 10%. September 30, 2017, December 31, 2019, the Company had a note due of $400,817. The$512,719. As of December 31, 2020, the note will accrue interest at 20% per year on any unpaid amounts due after that date. The note will be convertible intohad been exchanged for common stock shares and warrants. This was part of the Company’sexchange made on January 8, 2020, for $790,544 of debt outstanding for: 1,905,270 common stock shares issued on March 23, 2020; 496,602 warrants issued to purchase common stock shares at a conversionstrike price per share of $13.92, subject$0.20; 692,446 warrants issued to customary anti-dilution adjustment. The note will be unsecured, and is expected to provide for customary events of default. The Company will also issue the distributor a five-year warrant exercisable immediately for 17,239 shares ofpurchase common stock shares at an exercise price equal to the conversiona strike price of the note, subject$0.25; and 692,446 warrants issued to customary anti-dilution adjustment.
purchase common stock shares at a strike price of $0.75.19February 13, 2017,December 17, 2019, the Company entered into a securities purchase agreement and convertible note with Auctus Fund, LLC for the issuance and sale to Auctus of $170,000 in aggregate principal amount of a 12%Auctus. The convertible promissory note for an aggregate purchase price of $156,400 (representing a $13,600 original issue discount). On February 13, 2017, the Company issued the note to Auctus. Pursuant to the purchase agreement, the Company also issued to Auctus will be for a warrant exercisable to purchase an aggregatetotal of 200,000 shares$2.4 million. The first tranche of the Company’s common stock. The warrant is exercisable at any time, at an exercise price per share equal to $0.77 (110% of the closing price of the common stock on the day prior to issuance), subject to certain customary adjustments$700,000 was received in December 2019 and price-protection provisions contained in the warrant. The warrant has a five-year term. The note matured nine months from the date of issuancematures December 17, 2021 and in addition to the original issue discount, accrues interest at a rate of 12% per year.ten percent (10%). The Company could havenote may not be prepaid the note, in whole or in part for 115%except as otherwise explicitly allowed. Any amount of outstanding principal andor interest until 30 days from issuance, for 125% of outstanding principal andon the note which is not paid when due shall bear interest at any time from 31the rate of the lessor of 24% or the maximum permitted by law (the “default interest”). The variable conversion prices shall equal the lesser of: (i) the lowest trading price on the issue date, and (ii) the variable conversion price. The variable conversion price shall mean 95% multiplied by the market price (the market price means the average of the five lowest trading prices during the period beginning on the issue date and ending on the maturity date), minus $0.04 per share, provided however that in no event shall the variable conversion price be less than $0.15. If an event of default under this note occurs and/or the note is not extinguished in its entirety prior to 60 days from issuance, and for 130%December 17, 2020 the $0.15 price shall no longer apply. In connection with the first tranche of outstanding principal and interest$700,000, the Company issued to 7,500,000 warrants to purchase common stock at any time from 61 days from issuance to 180 days from issuance. After six months froman exercise price of $0.20. The fair value of the warrants at the date of issuance Auctus may convertwas $745,972 and was $635,000 allocated to the note,warrant liability and a loss of $110,972 was recorded at any time, in whole or in part, into sharesthe date of issuance for the amount of the Company’s common stock, at a conversion price equal to the lowerfair value in excess of the price offered in the Company’s next public offering or a 40% discount to the averagenet proceeds received of the two lowest trading prices$635,000. The $700,000 proceeds were received net of the common stock during the 20 trading days prior to the conversion, subject to certain customary adjustments and price-protection provisions contained in the note. The note includes customary events of default provisions and a default interest rate of 24% per year. Upon the occurrence of an event of default, Auctus may require the Company to redeem the note (or convert it into shares of common stock) at 150% of the outstanding principal balance plus accrued and unpaid interest. In connection with the transaction, the Company agreed to reimburse Auctus for $30,000 in legal and diligence fees, of which we paid $10,000 in cash and $20,000 in restricted shares of common stock, valued at $0.40 per share (a 42.86% discount to the closing price of the common stock on the day prior to issuance). The Company allocated proceeds of $90,000 to the warrants and common stock issued in connection with the financing. As of September 30, 2017, the Company has net debt of $124,601 including unamortized debt issuance costs of $6,653, unamortized original issue discount$65,000 (net proceeds of $2,192,$635,000, after administrative and unamortized discount relatedlegal expenses Company received $570,000). The Company used $65,000 of the proceeds to common stock and warrantsmake a partial payment of $19,074.17, 2017, the Company entered into a securities purchase agreement with Eagle Equities, LLC, providing for the purchase by Eagle of two convertible redeemable notes in the aggregate principal amount of $88,000, with the first note being in the amount of $44,000, and27, 2020, the second note being in the amounttranche of $44,000.$400,000 was received. The first note was fully funded on May 19, 2017, upon which the Companylast tranche of $1.3 million will be received $40,000 of net proceeds (net of a 10% original issue discount). The second note has not been issued and will initially be paid for by the issuance of an offsetting $40,000 secured note issued by Eagle. Eagle is required to pay the principal amount of its secured note in cash and in full prior to executing any conversions under the second note the Company issued. The notes bear an interest rate of 8%, and are due and payable on May 17, 2018. The notes may be converted by Eagle at any time after five months from issuance into shares of our common stock (as determined in the notes) calculated at the time of conversion, except for the second note, which also requires full payment by Eaglewithin 60 days of the secured note it issued to us before conversions may be made.S-1 registration statement becoming effective. The conversion price of the notes will be at market value with a minimum conversion amount of $0.15. The last two tranches will have warrants attached. As of March 31 , 2021 and December 31, 2020, $700,000 remained outstanding and accrued interest of $91,389 and $73,889, respectively. Further, as March 31, 2021 and December 31, 2020, the Company had unamortized debt issuance costs of $23,020 and $31,146, respectively and an unamortized debt discount on warrants of $123,335, and $304,271, respectively and providing a net balance of $553,644 and $364,583, respectively. The Company also recorded a liability for the fair value of derivative liability in the amount of $113,000 as of March 31, 2021.to 60% ofthe lesser of: (i) the lowest trading price on the issue date, and (ii) the variable conversion price. The variable conversion price shall mean 95% multiplied by the market price (the market price means the average of the common stock forfive lowest trading prices during the 20 prior trading days includingperiod beginning on the day upon whichissue date and ending on the Company receive a notice of conversion. The notes maymaturity date), minus $0.04 per share, provided however that in no event shall the variable conversion price be prepaid in accordance with the terms set forth in the notes. The notes also contain certain representations, warranties, covenants and events of default including if the Company are delinquent in our periodic report filings with the SEC, and increases in the amount of the principal and interest rates under the notes in the event of such defaults. In theless than $0.15. If an event of default at Eagle’s option andunder this note occurs and/or the note is not extinguished in its sole discretion, Eagle may consider the notes immediately due and payable. As of September 30, 2017, the Company has net debt of $37,800, including unamortized original issue discount of $1,771, unamortized and debt issuance costs of $4,429.On May 17, 2017, the Company entered into a securities purchase agreement with Adar Bays, LLC, providing for the purchase by Adar of two convertible redeemable notes in the aggregate principal amount of $88,000, with the first note being in the amount of $44,000, and the second note being in the amount of $44,000. The first note was fully funded on May 19, 2017, upon which the Company received $40,000 of net proceeds (net of a 10% original issue discount). The second note has not been issued and will initially be paid for by the issuance of an offsetting $40,000 secured note issued by Adar. Adar is required to pay the principal amount of its secured note in cash and in fullentirety prior to executing any conversions underDecember 17, 2020 the second note the Company issued.$0.15 price shall no longer apply. The notes bear an interest ratelast tranche of 8%, and are due and payable on May 17, 2018. The notes may$1.3 million will be converted by Adar at any time after five months from issuance into shares of our common stock (as determined in the notes) calculated at the time of conversion, except for the second note, which also requires full payment by Adarreceived within 60 days of the secured note it issued to us before conversions may be made.S-1 registration statement becoming effective. The conversion price of the notes will be equalat market value with a minimum conversion amount of $0.15. In addition, as part of this transaction the Company was required to 60%pay a 2.0% fee to a registered broker-dealer. As of March 31, 2021 and December 31, 2020, $400,000 remained outstanding and accrued interest of $34,222 and $24,222, respectively. Further, as of March 31, 2021 and December 31, 2020, the Company had unamortized debt issuance costs of $38,711 and $47,086, providing a net balance of $361,289 and $352,914.lowest trading price$0.15 floor price. As of March 31, 2021 and December 31, 2020, the Company calculated an intrinsic value of the commonbifurcation to be nil and $8,425. Auctus Debt discount and issuance costs to be amortized Convertible notes payable – short-term for the 20 prior trading days including the day upon which the Company receive a notice of conversion. The notes may be prepaidshares in accordance with the terms set forth in the notes. The notes also contain certain representations, warranties, covenants and events of default including if the Company are delinquent in our periodic report filings with the SEC, and increases in the amount of the principal and interest rates under the notes in the event of such defaults.January 15, 2020 exchange agreement. In the event of default, at Adar’s option and in its sole discretion, Adar may consider the notes immediately due and payable. As of September 30, 2017, the Company has net debt of $37,800, including unamortized original issue discount of $1,771, unamortized and debt issuance costs of $4,429.20On May 18, 2017, the Company entered into a securities purchase agreement with GHS Investments, LLC, an existing investor, providing for the purchase by GHS of a convertible promissory note in the aggregate principal amount of $66,000, for $60,000 in net proceeds (representing a 10% original issue discount). The transaction closed on May 19, 2017. The note matures upon the earlier of our receipt of $100,000 from revenues, loans, investments, or any other means (other than the Eagle and Adar bridge financings) and December 31, 2017. In addition, to the 10% original issue discount, the note accrues interest at a rate of 8% per year. The Company may prepay the note, in whole or in part, for 110% of outstanding principal and interest until 30 days from issuance, for 120% of outstanding principal and interest at any time from 31 to 60 days from issuance and for 140% of outstanding principal and interest at any time from 61 days to 180 days from issuance. The note may not be prepaid after 180 days. After six months from the date of issuance, the note will become convertible, at any time thereafter, in whole or in part, at the holder’s option, into shares of our common stock, at a conversion price equal to 60% of the lowest trading price during the 25 trading days prior to conversion. The note includes customary event of default provisions and a default interest rate of the lesser of 20% per year or the maximum amount permitted by law. Upon the occurrence of an event of default, the holder of the note may require us to redeem the note (or convert it into shares of common stock) at 150% of the outstanding principal balance. As of September 30, 2017, the Company has net debt of $59,515, including unamortized original issue discount of $2,431, unamortized and debt issuance costs of $4,053.On August 18, 2017, the Company entered into a securities purchase agreement with Power Up Lending Group Ltd., providing for the purchase by Power Up from the Company of a convertible note in the aggregate principal amount of $53,000. The note bears an interest rate of 12%, and is due and payable on May 19, 2018. The note may be converted by Power Up at any time after 180 days from issuance into shares of Company’s common stock at a conversion price equal to 58% of the average of the lowest two day trading prices of duringpurchase warrant exercise price had been adjusted to $0.20 and the 15 trading days prior to conversion. The note may be prepaid in accordance with its terms, at premiums ranging from 15% to 40%, depending on the time of prepayment. The note contains certain representations, warranties, covenants and events of default, including if the Company is delinquent in its periodic report filings with the SEC, and provides for increases in principal and interest in the event of such defaults. As of September 30, 2017, the Company has a net debt of $42,040, including unamortized debt issuance costs of $10,960.On October 12, 2017, the Company issued an additional note to Power Up, on substantially identical terms, in the aggregate principal amount of $53,000, due and payable on July 20, 2018. See Note 12, Subsequent Events.On December 28, 2016, the Company entered into a securities purchase agreement with an investor for the issuance and sale to investor of up to $330,000 in aggregate principal amount of 10% original issuance discount convertible promissory notes, for an aggregate purchase price of $300,000. On that date, the Company issued to the investor a note in the principal amount of $222,000, for a purchase price of $200,000. The note matures six months from their date of issuance and, in addition to the 10% original issue discount, accrue interest at a rate of 10% per year. The Company may prepay the notes, in whole or in part, for 115% of outstanding principal and interest until 30 days from issuance, for 125% of outstanding principal and interest at any time from 31 to 60 days from issuance, and for 130% of outstanding principal and interest at any time from 61 days from issuance until immediately prior to the maturity date. After six months from the date of issuance (i.e., if the Company fails to repay all principal and interest due under the notes at the maturity date), the investor may convert the notes, at any time, in whole or in part, into shares of the Company’s common stock, at a conversion price equal to 60% of the lowest volume weighted average price of our common stock during the 20 trading days prior to conversion, subject to certain customary adjustments and anti-dilution provisions contained in the note.As of September 30, 2017, the Company has fully amortized debt issuance costs $30,000 and original issue discount of $22,000. As of September 30, 2017, the balance due to the investor for the December 28, 2016 note, is $111,240.2110. CONVERTIBLE DEBT IN DEFAULTSecured Promissory Note.On September 10, 2014, the Company sold a secured promissory note to an accredited investor with an initial principal amount of $1,275,000, for a purchase price of $700,000 (an original issue discount of $560,000). The Company may prepay the note at any time. The note is secured by the Company’s current and future accounts receivable and inventory, pursuant to a security agreement entered into in connection with the sale. On March 10, 2015, May 4, 2015, June 1, 2015, June 16, 2015, June 29, 2015, January 21, 2016, January 29, 2016, and February 12, 2016 the Company amended the terms of the note to extend the maturity ultimately until August 31, 2016. During the extension, interest accrues on the note at a rate of the lesser of 18% per year or the maximum rate permitted by applicable law. On February 11, 2016, the Company consented to an assignment of the note to two accredited investors. In connection with the assignment, the holders waived an ongoing event of default under the notes related to the Company’s minimum market capitalization, and agreed to eliminate the requirement going forward. Pursuant to the terms of the amended note, the holder may convert the outstanding balance into sharesnumber of common stock at a conversion price per share equalshares exchangeable for was 7,185,000. The exchange agreement was subject to the lower of (1) $25.0 or (2) 75% of the lowest daily volume weighted average price of the common stock during the five days prior to conversion. If the conversion price at the time of any conversion is lower than $15.00,Company meeting repayment conditions, which the Company hasdid. Those conditions involved in part the optionrepayment of delivering$450,000, $100,000 and $950,000 for the conversion amount in cash in lieucompletion of shares of common stock. On March 7, 2016,each Auctus financing tranche. Further on September 2, 2020, the Company further amended the note to eliminate the volume limitations on salesmade a payment of common stock issued or issuable upon conversion. On July 13, 2016,$50,000, which provided the Company consenteda four-month forbearance as well as paying and additional $150,000 to reduce the assignment by one of the accredited investors of its portion of the note of to a third accredited investor.The balance due on the note was $184,997 and $530,691outstanding at September 30, 2017 and December 31, 2016, respectively. The balance was reduced by $306,863 as part of a debt restructuring on December 7, 2016.Total debt issuance costs as originally capitalized were approximately $130,000. This amount was amortized over nine months and was fully amortized as of December 31, 2015. The original issue discount of $560,000 was fully amortized as of December 31, 2015.November 2, 2016,January 8, 2021, the Company entered into a lockup andmade the final payment of $750,000 as required by this exchange agreement with GHS Investments, LLC, holder of approximately $221,000 in outstanding principal amount of the Company’s secured promissory note and all of the outstanding shares of the its Series C preferred stock. Pursuant to the agreement, upon the effectiveness of the 1:800 reverse stock split and continuing for 45 days after, GHS and its affiliates were prohibited from converting any portion of the secured promissory note or any of the shares of Series C preferred stock or selling any of the Company’s securities that they beneficially owned. The Company agreed that, upon consummation of its next financing, the Company would use $260,000 of net cash proceeds first, to repay GHS’s portion of the secured promissory note and second, with any remaining amount from the $260,000, to repurchase a portion of GHS’s shares of Series C preferred stock. In addition, GHS has agreed to exchange the stated value per share (plus any accrued but unpaid dividends) of its remaining shares of Series C preferred stock for new securities of the same type that the Company separately issue in the next qualifying financing it undertakes, on a dollar-for-dollar basis in a private placement exchange.Senior Secured Promissory NoteGPB.11,12, 2016, the Company entered into a securities purchase agreement with GPB Debt Holdings II LLC (“GPB”) for the issuance and sale on February 12, 2016 of $1.4375 million in aggregate principal amount of a $1,437,500 senior secured convertible note for an aggregate purchase price of $1.15 million (a 20%$1,029,000 (representing an original issue discount of $287,500)$287,500 and a discount for debt issuance costs paid at closing of $121,000 for a total of $408,500. In addition, GPB received a warrant exercisable to purchase an aggregate of approximately 2,246 shares of the Company’s common stock. The Company allocated proceeds totaling $359,555 to the fair value of the warrants at issuance. This was recorded as an additional discount on the debt. The convertible note matures on the second anniversary of issuance and, in addition to the 20% original issue discount, accrues interest at a rate of 17% per year. The Company is required to pay monthly interest coupons and beginning nine months after issuance, the Company is required to pay amortized quarterly principal payments. If the Company does not receive, on or before the first anniversary after issuance, an aggregate of at least $3.0 million from future equity or debt financings or non-dilutive grants, then the holder will have the option of accelerating the maturity date to the first anniversary of issuance. The Company may prepay the convertible note, in whole or in part, without penalty, upon 20 days’ prior written notice. Subject to resale restrictions under Federal securities laws and the availability of sufficient authorized but unissued shares of the Company’s common stock, the convertible note is convertible at any time, in whole or in part, at the holder’s option, into shares of the Company’s common stock, at a conversion price equal to the lesser of $0.80 per share or 70% of the average closing price per share for the five trading days prior to issuance, subject to certain customary adjustments and anti-dilution provisions contained in the convertible note.$121,000). On May 28, 2016, the balance of the note was increased by $87,500 for a total principal balance of $1,525,000. On December 7, 2016, the Company entered into an exchange agreement with GPB and as a result the principal balance increased by a transfer $312,500 (see – “Senior Secured Promissory Note”) for a total principal balance of $1,837,500.an additional $87,500a royalty payment, payable quarterly, equal to 3.85% of the Company’s revenues from the sale of products. As of March 31, 2021 and December 31, 2020, and 2019, GPB had earned approximately $35,000 in cash from GPB to the Company, the principal balance was increased by the same amount. The Company is currently in default as theyroyalties that are past dueunpaid. Based on the required monthly interest payments. In the eventexchange agreement GPB will no longer earn royalties. default, the Company shall accrue interest at a rate the lesser of 22% or the maximum permitted by law. The Company has accrued $117,000 for past due interest payments at December 31, 2016. Upon the occurrence of an event of default, the holder may require the Company to redeem the convertible note at 120% of the outstanding principal balance (but as of September 30, 2017, had not done so). As of September 30, 2017,2020, the balance due on the convertible debt was $2,136,863 as$1,709,414, consisting of principal of $1,362,384 and a prepayment penalty of $347,030. Interest accrued on the Company has fully amortized debt issuance costs of $47,675note total $1,233,637 at December 31, 2020, and is included in accrued expenses on the debt discount of $768,055 and recorded a 20% penalty totaling $305,000. In addition, the Company has accrued $253,701 of interest expense. The convertible note is secured by a lien on all of the Company’s assets, including its intellectual property, pursuant to a security agreement entered into by the Company and GPB.
accompanying consolidated balance sheet.22The warrant is exercisable at any time, pending availability of sufficient authorized but unissued shares of the Company’s common stock, at an exercise price per share equal to the conversion price of the convertible note, subject to certain customary adjustments and anti-dilution provisions contained in the warrant. The warrant has a five-year term. As of September 30, 2017, the exercise price had been adjusted to $0.017 and the number of common stock shares exchangeable for was 82,614,943. As of September 30, 2017, the effective interest rate considering debt costs was 29%.In connection with The warrants issued to that placement agent had expired during the transaction, on February 12, 2016, the Company and GPB entered into a four-year consulting agreement, pursuant to which the investor will provide management consulting services to the Company in exchange for a royalty payment, payable quarterly, equal to 3.5% of the Company’s revenues from the sale of products. As of September 30,three months ended March 31, 2021. GPB had earned approximately $28,000 in royalties.Debt Restructuring.On December 7, 2016, the Company entered into an exchangea securities purchase agreement with GPB with regard toGHS for the $1,525,000 in outstanding principal amountpurchase of senior secureda $66,000 convertible note originally issued to GPB on February 11, 2016, and the $306,863 in outstanding principal amount of the Company’s secured promissory note that GPB holds (see “—Secured Promissory Note”)for the purchase of $60,000 in net proceeds (representing a 10% original issue discount of $6,000). Pursuant to the exchange agreement, upon completion of the next financing resulting in at least $1 million in cash proceeds, GPB will exchange both securities for a new convertible note in principal amount of $1,831,863. The new convertible note will mature on the second anniversary of issuance and will accrueaccrued interest at a rate of 19%8% per year. The Company will pay monthly interest coupons and, beginning one year after issuance, will pay amortized quarterly principal payments. Subject to resale restrictions under Federal securities laws anduntil it matured in December 31, 2017. Beginning February 2018, the availability of sufficient authorized but unissued shares of the Company’s common stock, the newnote is convertible, note will be convertible at any time, in whole or in part, at the holder’s option, into shares of the Company’s stock at a conversion price equal to 60% of the lowest trading price during the 25 trading days prior to conversion. Upon the occurrence of an event of default, the note will bear interest at a rate of 20% per year and the holder of the note may require the Company to redeem or convert the note at 150% of the outstanding principal balance. GHS converted $12,700 of principal and accrued interest during the year ended December 31, 2019. On December 16, 2020, the Company paid $25,000 on the note balance. At March 31, 2021 the note was paid in full. On December 31, 2020, the balance due on this note was $63,520 including a default penalty of $37,926. Interest accrued on the note totaled $17,816, at December 31, 2020 and is included in accrued expenses on the accompanying consolidated balance sheet.offered in(55% multiplied by the qualifying financing that triggersmarket price, market price means the exchange, subjectlowest trading price for the common stock during the twenty-five (25) trading day period ending on the latest complete trading day prior to certainthe conversion date. Trading price is the lowest trade price on the trading market as reported. The note includes customary adjustments and anti-dilution provisions contained in the new convertible note. The new convertible note will include customary eventevents of default provisions and a default interest rate of 24% per year. As of March 31, 2021 and December 31, 2020, the lessernote outstanding was $112,750, which consisted of 21% orunamortized balance of $8,424 of a beneficial conversion feature. In addition, as of March 31, 2021 and December 31, 2020, unamortized debt issuance costs of $2,550 and $5,100 and interest of $13,643 and $10,260 are included in accrued expenses on the maximum amount permitted by law. Uponaccompanying consolidated balance sheet, respectively. occurrence of an event of default, GPB will be entitled to requireConvertible notes (including debt in default): GPB GHS Auctus Convertible notes, past due (including debt in default) redeem the new convertible note at 120% of the outstanding principal balance. The new convertible note will be secured by a lien on all of the Company’s assets, including its intellectual property, pursuantchange from .04 to .07 net loss per share.securitydebt restructuring exchange agreement entered into byand to modify the Company and GPB in connection with the issuanceterms of the original senior secured convertible note. Asexchange agreement. Under this modification Dr. Faupel and Mr. Cartwright agreed to extend the note to be due in full on the third anniversary of that agreement. The modification also included simple interest at a 6% rate, with the principal and accrued interest due in total at the date of maturity or September 4, 2021, the terms are currently being updated and an inducementamended modification is expected to GPB to enter into these transactions,be completed.increaseexchange outstanding amounts due to him for loans, interest, bonus, salary and vacation pay in the royalty payable to GPB pursuant to its consulting agreement with us from 3.5% to 3.85%amount of revenues from the sales$661,000 for a $207,000 promissory note dated September 4, 2018. As a result of the Company’s products.August 7, 2017,February 19, 2021, the Company entered into a forbearancenew promissory note replacing the original note from September 4, 2018, with Mark Faupel and Gene Cartwright. For Dr. Cartwright the principal amount on the new note was $267,085, matures on February 18, 2023, and will accrue interest at a rate of 6%. For Dr. Faupel the principal amount on the new note was $153,178, matures on February 18, 2023, and will accrue interest at a rate of 6%.Salary Bonus Vacation Interest on compensation Loans to Company Interest on loans Total outstanding prior to exchange Amount forgiven Total Interest accrued through December 31, 2020 Balance outstanding at December 31, 2020 Exchange for Series F Preferred Stock Interest accrued through March 31, 2021 Balance outstanding at March 31, 2021 Salary Bonus Interest on compensation Loans to Company Interest on loans Total outstanding prior to exchange Amount forgiven Total Interest accrued through December 31, 2020 Balance outstanding at December 31, 2020 Exchange for Series F Preferred Stock Interest accrued through March 31, 2021 Balance outstanding at March 31, 2021 GPB,Richard Fowler. As of December 31, 2020, the Company owed Mr. Fowler $546,214 ($412,624 in deferred salary and $133,590 in accrued interest). The Company exchanged the amount owed of $546,214 for 50 Series F Preferred Shares (convertible into 200,000 common stock shares), a $150,000 unsecured note and Mr. Fowler remains on the Company health insurance plan. The note will accrue interest at the rate of 6% (18% in the event of default) on March 22, 2022 and be payable in monthly installments of $3,600 for four years, with regardthe first payment being due on March 15, 2022.Year 2021 2022 2023 2024 2025 Thereafter Totals senior secured convertible note. Under the forbearance agreement, GPB has agreed to forbear from exercising certain of its rights and remedies (but not waive such rights and remedies), arisingPaycheck Protection Program (PPP) as a resultpart of the Company’s failure to payCoronavirus Aid, Relief, and Economic Security Act (CARES Act) in the monthlyamount of $50,184. The loan bears interest dueat a rate of 1.00%, and owing onmatures in 24 months, with the note. In consideration for the forbearance, the Company agreed to waive, release,principal and discharge GPB from all claims against GPB based on facts existing on or beforeinterest payments being deferred until the date of forgiveness with interest accruing, then converting to monthly principal and interest payments, at the forbearance agreement in connection withinterest rate provided herein, for the note, or the dealings between the Company and GPB, or the Company’s equity holders and GPB, in connection with the note. Pursuantremaining eighteen (18) months. Lender will apply each payment first to pay interest accrued to the forbearance agreement,day Lender received the Company has reaffirmed its obligations underpayment, then to bring principal current, and will apply any remaining balance to reduce principal. Payments must be made on the note and related documents and executed a confessionsame day as the date of judgment regardingthis Note in the amount due undermonths they are due. Lender shall adjust payments at least annually as needed to amortize principal over the note, which GPB may file upon any future eventremaining term of default by the Company. DuringNote. Under the forbearance period, the Company must continue to comply will all the terms, covenants, and provisions of the notePPP, the loan amounts will be forgiven as long as: the loan proceeds are used to cover payroll costs, and related documents.
most mortgage interest, rent, and utility costs over a 24 week period after the loan is made; and employee and compensation levels are maintained. In addition, payroll costs are capped at $100,000 on an annualized basis for each employee. Not more than 40% of the forgiven amount may be for non-payroll costs. As of March 31, 2021 and December 31, 2020, the outstanding balance was $50,604 and $50,477 including $420 and $293 in accrued interest, respectively. The Company was notified that the application for loan forgiveness was approved in the amount of $23,742 in principal and $234 in interest. The Company is planning on appealing the amount forgiven.2311.period.period,year, plus Series C, Series D, Series E and Series F convertible preferred stock, Series G preferred stock, convertible debt, convertible preferred dividends and warrants convertible into common stock shares.DilutedIn thousands Net (loss) income Basic weighted average number of shares outstanding Net (loss) income per share (basic) Diluted weighted average number of shares outstanding Net (loss) income per share (diluted) Dilutive equity instruments (number of equivalent units): Stock options Preferred stock Convertible debt Warrants Total Dilutive instruments isare the same as the assumed exercise of warrants and the conversion of convertible debt are anti-dilutive.common share sinceshare.was operatingmade a $25,000 payment to an investment banker to assist in a loss position for 2017 and 2016.12. SUBSEQUENT EVENTSOn October 12, 2017,financing efforts, which will be presented within prepaid expenses as of June 30, 2021. These costs will be charged against the gross proceeds of the offering when it occurs.aseveral securities purchase agreement with Power Up Lending Group Ltd. (“Power Up”), providingagreements for the purchase by Power Up from the Companyissuance of 10.0% senior secured convertible debentures. Each debenture unit will represent a convertible note in the aggregate principal amountsubscription price of $53,000.$1,000 per debenture unit. The note bears an interest rate of 12%, and is due and payable on July 20, 2018. The note may be converted by Power Up at any time after 180 days from issuancedebentures are convertible into shares of Company’s common stock at a conversion price equalof $0.50 for a period of thirty-six months from the closing date. In addition, the investors will receive one two-year warrant to 58% of the average of the lowest two day trading prices of thepurchase one common stock during the 15 trading days prior to conversion. The note may be prepaid in accordance with its terms,share at premiums ranging from 15% to 40%, depending on the timean exercise price of prepayment. The note contains certain representations, warranties, covenants and events$0.80 per share. As of default, including ifMay 17, 2021, the Company is delinquent in its periodic report filings with the SEC,had subscription agreements for 868 debentures and provides for increases in principal and interest in the eventreceived a total of such defaults.
$868,000.24ITEMITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS20162020 and subsequently filed quarterly reports on Form 10-Q. Examples of these uncertainties and risks include, but are not limited to:··●the extent of dilution of the holdings of our existing stockholders upon the issuance, conversion or exercise of securities issued as part of our capital raising efforts; ·●the extent to which certain debt holders may call the notes to be paid; ● the effectiveness and ultimate market acceptance of our products and our ability to generate sufficient sales revenues to sustain our growth and strategy plans; ·●whether our products in development will prove safe, feasible and effective; ·●whether and when we or any potential strategic partners will obtain required regulatory approvals in the markets in which we plan to operate; ·●our ability to stay current and make upgrades to our products as technology continuously changes;·our abilityneed to achieve manufacturing scale-up in a timely manner, and our need to provide for the efficient manufacturing of sufficient quantities of our products;·●the lack of immediate alternate sources of supply for some critical components of our products; ·●our ability to establish and protect the proprietary information on which we base our products, including our patent and intellectual property position; ·●Based on the current outbreak of the Coronavirus SARS-CoV-2, the pathogen responsible for COVID-19, which has already had an impact on financial markets, there could be additional repercussions in our operating business, including but not limited to, the sourcing of materials for product candidates, manufacture of supplies for preclinical and/or clinical studies, delays in clinical operations, which may include the availability or the continued availability of patients for trials due to such things as quarantines, conduct of patient monitoring and clinical trial data retrieval at investigational study sites; ● The future impact of the outbreak is highly uncertain and cannot be predicted, and we cannot provide any assurance that the outbreak will not have a material adverse impact on our operations or future results or filings with regulatory health authorities. The extent of the impact, if any, we will depend on future developments, including actions taken to contain the coronavirus; ● the need to fully develop the marketing, distribution, customer service and technical support and other functions critical to the success of our product lines; ·●the dependence on potential strategic partners or outside investors for funding, development assistance, clinical trials, distribution and marketing of some of our products; and ·●other risks and uncertainties described from time to time in our reports filed with the SEC. netoperating losses since our inception and, as of September 30, 2017,March 31, 2021 we hadhave an accumulated deficit of approximately $131.3$140.5 million. To date, we have engaged primarily in research and development efforts and the early stages of marketing our products. We do not have significant experience in manufacturing, marketing or selling our products. We may not be successful in growing sales for our products. Moreover, required regulatory clearances or approvals may not be obtained in a timely manner, or at all. Our products may not ever gain market acceptance and we may not ever generate significant revenues or achieve profitability. The development and commercialization of our products requires substantial development, regulatory, sales and marketing, manufacturing and other expenditures. We expect our operating losses to continue through at leastfor the end of 2017foreseeable future as we continue to expend substantial resources to complete commercialization of our products, obtain regulatory clearances or approvals, build our marketing, sales, manufacturing and finance capabilities, and conduct further research and development.252016,2020, the majority of our revenues were from the sale of components of our LuViva devices and disposables. We expect that the majority of our revenue in 20172021 will be derived from revenue from the sale of LuViva devices and disposables.Reverse Stock Split: On November 7, 2016,Company implementeddistributors or that parts to build product will be available to meet demand, such that existing orders will result in actual sales. Because we have a 1:800 reverse stock splitshort history of allsales of our issuedproducts, we cannot confidently predict future sales of our products beyond this time frame and outstanding common stock. As a resultcannot be assured of the reverse stock split, every 800 shares of issued and outstanding common stock was converted into 1 share of common stock. All fractional shares created by the reverse stock split were rounded to the nearest whole share. The number of authorized shares of common stock did not change. The reverse stock split decreased the Company’s issued and outstanding shares of common stock from 453,694,400 shares of Common Stock to 570,707 shares as of that date. See Note 4, Stockholders’ Deficit. Unless otherwise specified, all per share amounts are reported on a post-stock split basis, as of September 30, 2017. On February 24, 2016, the Company had also implemented a 1:100 reverse stock split of its issued and outstanding common stock. RECENT DEVELOPMENTSOn October 12, 2017, we entered into a securities purchase agreement with Power Up Lending Group Ltd., providing for the purchase by Power Up from us of a convertible note in the aggregate principalany particular amount of $53,000. The note bears an interest rate of 12%, and is due and payable on July 20, 2018. The note may be converted by Power Up atsales. Accordingly, we have not identified any time after 180 days from issuance into sharesparticular trends with regard to sales of our common stock at a conversion price equal to 58% of the average of the lowest two day trading prices of the common stock during the 15 trading days prior to conversion. The note may be prepaid in accordance with its terms, at premiums ranging from 15% to 40%, depending on the time of prepayment. The note contains certain representations, warranties, covenants and events of default, including if we are delinquent in our periodic report filings with the SEC, and provides for increases in principal and interest in the event of such defaults. an investors understanding of our financial results and condition, are discussed below. Because we are still early in our enterprise development, the number of these policies requiring explanation is limited. AsWhen we begin to generate increased revenue from different sources, we expect that the number of applicable policies and complexity of the judgments required will increase.WeASC 606 Revenue from Contracts with Customers establishes a single and comprehensive framework which sets out how much revenue is to be recognized, and when. The core principle is that a vendor should recognize revenue from contracts onto depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. Revenue will now be recognized by a straight line basis,vendor when control over the termsgoods or services is transferred to the customer. In contrast, Revenue based revenue recognition around an analysis of the transfer of risks and rewards; this now forms one of a number of criteria that are assessed in determining whether control has been transferred. The application of the core principle in ASC 606 is carried out in five steps: Step 1 – Identify the contract with a customer: a contract is defined as an agreement (including oral and implied), between two or more parties, that creates enforceable rights and obligations and sets out the criteria for each of those rights and obligations. The contract needs to have commercial substance and it is probable that the entity will collect the consideration to which it will be entitled. Step 2 – Identify the performance obligations in the contract: a performance obligation in a contract is a promise (including implicit) to transfer a good or service to the customer. Each performance obligation should be capable of being distinct and is separately identifiable in the contract. WeStep 3 – Determine the transaction price: transaction price is the amount of consideration that the entity can be entitled to, in exchange for transferring the promised goods and services to a customer, excluding amounts collected on behalf of third parties. Step 4 – Allocate the transaction price to the performance obligations in the contract: for a contract that has more than one performance obligation, the entity will allocate the transaction price to each performance obligation separately, in exchange for satisfying each performance obligation. The acceptable methods of allocating the transaction price include adjusted market assessment approach, expected cost plus a margin approach, and, the residual approach in limited circumstances. Discounts given should be allocated proportionately to all performance obligations unless certain criteria are met and reallocation of changes in standalone selling prices after inception is not permitted. Step 5 – Recognize revenue as and when the entity satisfies a performance obligation: the entity should recognize revenue from grants based on the grant agreement, at thea point in time, the expenses are incurred. Revenue from the saleexcept if it meets any of the Company’s products is recognized upon shipmentthree criteria, which will require recognition of such productsrevenue over time: the entity’s performance creates or enhances an asset controlled by the customer, the customer simultaneously receives and consumes the benefit of the entity’s performance as the entity performs, and the entity does not create an asset that has an alternative use to its customers. See Note 3consolidated financial statements accompanying this report for the assumptions usedinvestor at inception (a beneficial conversion feature) or may become beneficial in the Black-Scholes valuation.
future due to potential adjustments. The beneficial conversion feature guidance in ASC 470-20 applies to convertible stock as well as convertible debt which are outside the scope of ASC 815. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. The beneficial conversion feature guidance requires recognition of the conversion option’s in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as a dividend over either the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the dividend must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.26customersdistributors to make required payments and periodically review the payment history of each of our customers,distributors, as well as their financial condition, and revise our reserves as a result. To the extent market value is less than our cost or net realizable value, a valuation reserve is established.SEPTEMBER 30, 2017MARCH 31, 2021 AND 2016Sales Revenue, Cost of Sales and Gross Loss from Devices and Disposables2020: Revenues from the sale of LuViva devices and disposables for the three months ended September 30, 2017 and 2016 were $33,000 and $95,000, respectively. Revenues decreased by approximately $62,000, or 65% from the same period in 2016. The decrease was due to a lack of funding to support sales and marketing efforts. Related costs of sales were approximately $97,000 and $85,000 for the three months ended September 30, 2017 and 2016, respectively. This resulted in a gross loss of approximately $64,000 on the sales of devices and disposables for the three months ended September 30, 2017, compared with a gross profit of approximately $10,000 for the same period in 2016.Expenses:Expenses: Research and development expenses for the three months ended September 30, 2017March 31, 2021, decreased to approximately $69,000,$16,000, from approximately $87,000 for$24,000 to the same period in 2016.2020. The decrease of approximately $18,000,$8,000, or 21%33%, was primarily due to decreasesa reduction in research and development payroll expenses for cost reduction plans. expenses for the three months ended September 30, 2017 decreasedMarch 31, 2021, increased to approximately $37,000,$36,000, from approximately $92,000 for$34,000 to the same period in 2016.2020. The decrease,increase of approximately $55,000,$2,000, or 60%7%, was primarily due to Company-wide expense reductionan increase in sales and cost savings efforts.Expenses:Expense: General and administrative expenses for the three months ended September 30, 2017March 31, 2021, increased to approximately $1,169,000, from approximately $510,000$771,000, compared to $184,000 for the same period in 2016.2020. The increase of approximately $659,000,$587,000, or 129%319%, was primarily related to other professional fee expenses and bad debthigher compensation expenses incurred during the same period and payments requiredthe recording of a charge of $398,000 for financing agreements.Income (Expense):Income: Other income for the three months ended September 30, 2017 wasMarch 31, 2021, decreased to approximately $3,000,nil, compared to other income of $24,000$1,000 for the same period in 2016.September 30, 2017 increasedMarch 31, 2021 decreased to approximately $268,000,$141,000, compared to $226,000$287,000 for the same period in 2016.2020. The decrease of approximately $126,000, or 51%, was primarily related to amortization expense of and interest recorded for the value of the beneficial conversion feature on convertible debt outstanding and amortization of debt issuance costs.$42,000,$88,000, or 19%100%, was primarily duerelated to amortizationthe change in the value of the derivative liability.discount, debt issuance costs and penalty on event of default of convertible loan that were lowerfor the three months ended March 31, 2021 increased to approximately 87,000, compared to $28,000 for the same period in 2016.Expense:Recovery: Fair value of warrants recovery for the three months ended September 30, 2017 increasedMarch 31, 2021, decreased to approximately a negative $761,000,$448,000 compared to $670,000fair value of warrants recovery of $3,228,000 for the same period in 2016.2020. The decrease of approximately $1,431,000,$2,780,000, or 213%,86% was primarily due to the recording of the debt exchange for the debt to GPB and the elimination of the warrant liability. During 2020, due to significant changesincreases in warrant conversion prices.loss:loss/ Income: Net loss attributable to common stockholders wasincreased to approximately $2,417,000,$572,000, or $0.35$0.043 per share, for the three months ended September 30, 2017, compared to $390,000,March 31, 2021, from net income of $2,716,000, or $1.36$0.54 per share, for the same period in 2016.2020. The increasedecrease in the net income of $2,027,000,$3,288,000, or 520%,121% was for reasons outlined above. COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016Sales Revenue, Cost of Sales and Gross Loss from Devices and Disposables: Revenues from the sale of LuViva devices and disposables for the nine months ended September 30, 2017 and 2016 were $137,000 and $486,000, respectively. Revenues decreased by approximately $349,000, or 72%, from the same period in 2016. The decrease was due to a lack of funding to support sales and marketing efforts. Related costs of sales were approximately $195,000 and $185,000 for the nine months ended September 30, 2017 and 2016, respectively. Costs of sales for the nine months ended September 30, 2017 were approximately $10,000, or 5% higher than the same period in 2016. This resulted in a gross loss of approximately $58,000 on the sales of devices and disposables for the nine months ended September 30, 2017, compared with a gross profit of approximately $301,000 for the same period in 2016.27Research and Development Expenses: Research and development expenses for the nine months ended September 30, 2017 decreased to approximately $251,000, from approximately $525,000 for the same period in 2016. The decrease, of approximately $274,000, or 52%, was primarily due to decreases in payroll expenses for cost reduction plans.Sales and Marketing Expenses: Sales and marketing expenses for the nine months ended September 30, 2017 decreased to approximately $187,000, from approximately $295,000 for the same period in 2016. The decrease, of approximately $108,000, or 37%, was primarily due to Company-wide expense reduction and cost savings efforts.General and Administrative Expenses: General and administrative expenses for the nine months ended September 30, 2017 decreased to approximately $1,894,000, from approximately $2,187,000 for the same period in 2016. The decrease, of approximately $293,000, or 13%, was primarily related to lower compensation and option expenses incurred during the same period.Other Income (Expense): OtherAs stated previously, our net income for the ninethree months ended September 30, 2017 was approximately $18,000, compared to other income of $67,000 for the same period in 2016, a decrease of $49,000 or 73%.Interest Expense: Interest expense for the nine months ended September 30, 2017 decreased to approximately $814,000, compared to $1,597,000 for the same period in 2016. The decrease of approximately $783,000, or 49%,March 31, 2021, and 2020 was primarily realized due to amortization of debt discount, debt issuance costsan approximate $448,000 and penalty on event of default of convertible loan that were lower for same period in 2016.Fair Value of Warrants Expense: Fair$3,228,000 fair value of warrants recovery recorded, respectively.ninethree months ended September 30, 2017 decreased to a negative $359,000, compared to $2,276,000 for the same period in 2016. The decrease of approximately $2,635,000,March 31, 2021 or 102%, was primarily2019, due to the significant changes in warrant conversion prices.Net loss: Net loss attributable to common stockholders was approximately $3,761,000, or $1.43 per share, for the nine months ended September 30, 2017, compared to $2,901,000, or $25.52 per share, for the same period in 2016. The increase of $860,000, or 30%, was for reasons outlined above.September 30, 2017,March 31, 2021, we had cash of approximately $74,000$1.2 million and a negative working capital of approximately $10.6$4,2 million.quarterthree months ended September 30, 2017March 31, 2021 consisted of cash out-flows of $481,000$0.3 million from operations, including approximately $3,545,000$0.6 million of net loss and a change in fair value of warrants of $0.5 million, and a net change from financing activities of $541,000,$1.4 million, which primarily represented the proceeds received from proceedsissuance of preferred stock and exchanged outstanding debt.financing.AugustJanuary 8, 2020, we exchanged $2,064,366 in debt for several equity instruments (noted below) that were determined to have a total fair value of $2,065,548, resulting in a loss on extinguishment of debt of $1,183 which is recorded in other income (expense) on the accompanying consolidated statements of operations. We also issued 6,957,013 warrants to purchase common stock shares; with exercise prices of $0.25, $0.75 and $0.20.2017,months; (iii) 66,000 common share stock options that vest at a rate of 3,667 per month and have a $0.49 exercise price (if two consecutive payments in (ii) are not made the stock options will be canceled and a cash payment will be required; and (iv) the total amount of forgiveness by creditor of approximately $110,000 shall be prorated according to amount paid. Aquarius Mr. Blumberg Mr. Case Mr. Grimm Mr. Gould Mr. Mamula Auctus Mr. Clavijo Power Up Lending Group Ltd., providingAuctus Fund, LLC for the purchase by Power Up from usissuance and sale to Auctus of a convertible note$112,750 in the aggregate principal amount of $53,000.a 12% convertible promissory note. On March 31, 2020, we issued the note to Auctus and issued 250,000 five-year common stock warrants at an exercise price of $0.16. On April 3, 2020, we received net proceeds of $100,000. The note bearsmatures on January 26, 2021 and accrues interest at a rate of 12% per year.12%, and is due and payableten percent (10%).May 19, 2018. The note may be converted by Power Up at any time after 180 days from issuance into shares of our common stock at a conversion price equal to 58%the current outbreak of the averageCoronavirus SARS-CoV-2, the pathogen responsible for COVID-19, which has already had an impact on financial markets, there could be additional repercussions in our operating business, including but not limited to, the sourcing of materials for product candidates, manufacture of supplies for preclinical and/or clinical studies, delays in clinical operations, which may include the availability or the continued availability of patients for trials due to such things as quarantines, conduct of patient monitoring and clinical trial data retrieval at investigational study sites.lowest two-day trading prices of the common stock during the 15 trading days prior to conversion. The note may be prepaid in accordance with its terms, at premiums ranging from 15% to 40%, depending on the time of prepayment. The note contains certain representations, warranties, covenantsoutbreak is highly uncertain and events of default, including if we are delinquent in our periodic report filings with the SEC, and provides for increases in principal and interest in the event of such defaults. On October 12, 2017, we issued an additional note to Power Up, on substantially identical terms, in the aggregate principal amount of $53,000, due and payable on July 20, 2018.We will be required to raise additional funds through public or private financing, additional collaborative relationships or other arrangements, as soon as possible. We cannot be certainpredicted, and we cannot provide any assurance that our existing and available capital resourcesthe outbreak will be sufficient to satisfy our funding requirements through the fourth quarter of 2017. We are evaluating various options to further reduce our cash requirements to operate at a reduced rate, as well as options to raise additional funds, including loans.Generally, substantial capital will be required to develop our products, including completing product testing and clinical trials, obtaining all required U.S. and foreign regulatory approvals and clearances, and commencing and scaling up manufacturing and marketing our products. Any failure to obtain capital wouldnot have a material adverse effectimpact on our business, financial condition andoperations or future results or filings with regulatory health authorities. The extent of operations. Based on discussions with our customers, we expect to generate purchase orders for approximately $3 million to $4 million in LuViva devices and disposables in 2017, and expect those purchase orders to result in actual sales of $750,000 to $1 million in 2017, representing what we view as current demand for our products. We cannot be assured thatthe impact, if any, we will generate all or any of these additional purchase orders, or that existing orders will not be canceled bydepend on future developments, including actions taken to contain the customers or that parts to build product will be available to meet demand, such that existing orders will result in actual sales. Because we have a short history of sales of our products, we cannot confidently predict future sales of our products beyond this time frame, and cannot be assured of any particular amount of sales. Accordingly, we have not identified any particular trends with regard to sales of our products. We currently do not have cash on hand sufficient to build the inventory required to fill these orders, and material delays in product deliveries could result in canceled orders.
coronavirus.28Our financial statements have been prepared and presented on a basis assuming we will continue as a going concern. The above factors raise substantial doubt about our ability to continue as a going concern, as more fully discussed in Note 1 to the consolidated financial statements contained herein and in the report of our independent registered public accounting firm accompanying our financial statements contained in our annual report on Form 10-K for the year ended December 31, 2016.ITEMITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEMITEM 4. CONTROLS AND PROCEDURES2017.2018. The controls and system currently used by the Company to calculate and record inventory is not operating effectively. Additionally, the Company lacks the resources to properly research and account for complex transactions. The combination of these controls deficiencies havehas resulted in a material weakness in our internal control over financial reporting.September 30, 2017March 31, 2021 to provide reasonable assurance that (1) information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (2) information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.September 30, 2017March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.29PARTPART II - OTHER INFORMATIONITEMITEM 1. LEGAL PROCEEDINGSITEMITEM 1A. RISK FACTORS2016,2020, for information regarding factors that could affect our results of operations, financial condition and liquidity.ITEMITEM 2. UNREGISTERRED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.ITEMITEM 3. DEFAULTS UPON SENIOR SECURITIESITEMITEM 4. MINE SAFETY DISCLOSURESNot applicable.ITEM 5. OTHER INFORMATIONNot applicable.ITEM 6. EXHIBITSExhibit Number Exhibit Description 4.112% Convertible Redeemable Note (Power Up Note) (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed August 24, 2017)10.1Forbearance Agreement (GPB Debt Holdings II LLC) (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed August 17, 2017)10.2Securities Purchase Agreement, dated August 18, 2017, between the Company and Power Up Lending Group LTD (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed August 24, 2017)31*Rule 13a-14(a)/15d-14(a) Certification 32*Section 1350 Certification 101.1*XBRL30SIGNATURES /s/ Gene S. CartwrightBy: Gene S. Cartwright President, Chief Executive Officer and Acting Chief Financial Officer Date:November 20, 201731