UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2023

or

For the transition period from ____ to ____

Commission File Number 333-184948001-39531

Heatwurx,Processa Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

530 S Lake Avenue #6157380 Coca Cola Drive, Suite 106,

Pasadena, CA 91101Hanover, Maryland21076

(Address(443)776-3133

Securities registered pursuant to Section 12(b) of principal executive offices and Zip Code)the Exchange Act:

(626) 364-5342

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)  YES [  ]  NO [X]

Indicate by check mark whether the registrant, and (2) has been subject to such filing requirements for the past 90 days. YES [X]  NO [  ]Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [  ]  NO [X]Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or emerging growth company. See the definitionsdefinition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [  ]  NO [X]Yes ☐ No ☒

The registrant has 11,017,388number of outstanding shares of the registrant’s common stock outstanding as of September 28, 2017.at May 9, 2023 was 24,531,474.

HEATWURX,

PROCESSA PHARMACEUTICALS, INC.

FORM 10-Q

For the Quarter Ended March 31, 2017

TABLE OF CONTENTS

Part I: Financial Information

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTSItem 1: Financial Statements

HEATWURX, INC.Processa Pharmaceuticals, Inc.

CONSOLIDATED BALANCE SHEETSCondensed Consolidated Balance Sheets

(Unaudited)

The accompanying notes are an integral part of these unauditedcondensed consolidated financial statements.

HEATWURX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONSProcessa Pharmaceuticals, Inc.

(Unaudited)Condensed Consolidated Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these unauditedcondensed consolidated financial statements.

HEATWURX, INC.

CONSOLIDATED STATEMENT OF CASH FLOWSProcessa Pharmaceuticals, Inc.

(Unaudited)Condensed Consolidated Statement of Changes in Stockholders’ Equity

(Unaudited)

The accompanying notes are an integral part of these unauditedcondensed consolidated financial statements.

HEATWURX, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSProcessa Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

1.

PRINCIPAL BUSINESS ACTIVITIES:The accompanying notes are an integral part of these condensed consolidated financial statements.

Processa Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Organization and BusinessSummary of Significant Accounting Policies

- Heatwurx, Inc. (“Heatwurx,”

Organization

We are a clinical-stage biopharmaceutical company focused on incorporating our Regulatory Science Approach into the “Company”) isdevelopment of our Next Generation Chemotherapy (NGC) drugs to improve the safety and efficacy of cancer treatment. Our NGC drugs are modifications of existing FDA-approved oncology drugs resulting in an asphalt repair equipmentalteration of the metabolism and/or distribution while maintaining the well-known and technology company.established existing mechanisms of killing the cancer cells. By modifying the NGC drugs in this manner, we believe our three NGC treatments will provide improved safety-efficacy profiles when compared to their currently marketed counterparts.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation - These

The accompanying unaudited interimcondensed consolidated financial statements and related notes are presentedhave been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and are expressed in U.S. dollars.  with the instructions of the Securities and Exchange Commission (“SEC”) on Form 10-Q and Article 8 of Regulation S-X.

Accordingly, they do not include all the information and disclosures required in the annual financial statements by U.S. GAAP.GAAP for complete financial statements. All material intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments considered necessary to present fairly in all material respects the financial position as of March 31, 2017.

The Company’scondensed consolidated financial statements include Dr. Pave, LLCall adjustments necessary, which are of a normal and Dr. Pave Worldwide, LLC; both wholly-owned subsidiariesrecurring nature, for the fair presentation of our financial position and of the Company, which are represented inresults of operations and cash flows for the Company’s discontinued operations (Note 3).  All intercompany balances and transactions have been eliminated in theperiods presented. These condensed consolidated financial statements.

Interim Financial Statements - These financial statements should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2016, and have been prepared on a consistent basis with the accounting policies described in Note 2 - Summary of Significant Accounting Policies of the Notes to Financial Statementsthereto included in our Annual Report on Form 10-K for the year ended December 31, 2016.  Our accounting policies did not change in2022, as filed with the first three monthsSEC. The results of 2017.  Operating resultsoperations for the three months ended March 31, 2017interim periods shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the year ending Decemberfull year.

Liquidity

We have incurred losses since inception, devoting substantially all of our efforts toward research and development, and have an accumulated deficit of $68.3 million at March 31, 2017 or any future period.

Use of estimates - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Accordingly, actual results could differ from those estimates. Such estimates include management’s assessments of the carrying value of certain assets.

Going Concern and Management’s Plan - The Company’s financial statements are prepared using U.S. GAAP and are subject to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company faces certain risks and uncertainties that are present in many emerging companies regarding product development, future profitability, ability to obtain future capital, protection of patents and property rights, competition, rapid technological change, government regulations, recruiting and retaining key personnel, and third party manufacturing organizations.

The Company has previously relied exclusively on private placements with a small group of investors to finance its business and operations.  The Company has had little revenue since inception.  For2023. During the three months ended March 31, 2017, the Company incurred2023, we generated a net loss of $4.0 million and we expect to continue to generate operating losses and negative cash flow from continuing operations for the foreseeable future. Based on our current plans, we believe our current cash balances are adequate for at least the next twelve months. Our ability to execute our longer-term operating plans, including future clinical trials for our portfolio of approximately $75,627 and used approximately $1,598 in net cash from operating activities from continuing operations.  The Company had total cashdrugs depend on hand of approximately $1,639 as of March 31, 2017. The Company is not ableour ability to obtain additional financing adequate to fulfill its commercialization activities, nor achievefunding from the sale of equity and/or debt securities, a level of revenues adequate to support the Company’s cost structure. The Company does not currently have any revenue under contract nor does it have any immediate sales prospects.  The Company has significantly reduced employees and overhead. The decision to cease operations of Dr. Pave, LLC and Dr. Pave Worldwide, LLC was made on December 31, 2015. These business components are captured within discontinued operations as of March 31, 2017 (Note 3). The Company has significantly scaled back operations to maintain only a minimal level of operations necessary to support our licensee, warehouse the equipment held for the licensee and look for potential merger candidates.  It is the Company’s intention to move forward as a public entity and to seek potential merger candidates.  If the Company fails to mergestrategic transaction or be acquired by another company, we will be required to terminate all operations.

6

Based upon the Company’s current financial position and inability to obtain additional financing, the Company was not able to satisfy the mandatory principal payments in 2016 under the $2,000,000 senior secured debt.  The Company will continue to work with the lenders to explore extension or conversion options, but there is no guarantee the lenders will agree to modify the repayment terms of the notes under conditions that will allow the Companyother funding transactions. We plan to continue to repayactively pursue financing alternatives, but there can be no assurance that we will obtain the notes, if at all. As these notes are secured by allnecessary funding in the assets of the Company, including intellectual property rights, the Company is in default in regard to interest payments on the notes, and the lenders may call the notes and foreclose on the Company’s assets.future when necessary.

The issues described above raise substantial doubt about the Company’s ability to continue as a going concern.  The Company has been solely reliant on raising debt and capital in order to maintain its operations.  Previously the Company was able to raise debt and equity financing through the assistance of a small number of investors who have been substantial participants in its debt and equity offerings since the Company’s formation.  These investors have chosen not to further assist the Company with its capital raising initiatives and, at this time, the Company is not able to obtain any alternative forms of financing and the Company will not be able to continue to satisfy its current or long term obligations.  The Company needs to merge with or be acquired by another company.  If a candidate is not identified, the Company will be forced to cease operations all together.

The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be different should the Company be unable to continue as a going concern.

Cash and cash equivalents - The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Net income (loss) per share - The Company computes basic and diluted earnings per share amounts pursuant to ASC 260-10-45. Basic earnings per share is computed by dividing net income (loss) available to common shareholders, by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share is computed by dividing net income (loss) available to common shareholders by the diluted weighted average number of shares of common stock during the period.  The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of the first day of the year for any potentially diluted debt or equity.  The computation does not assume conversion, exercise or contingent exercise of securities since that would have an anti-dilutive effect on earningsWe had no revenue during the three months ended March 31, 20172023 and 2016, respectively.do not have any revenue under contract or any immediate sales prospects. Our primary uses of cash are to fund our planned clinical trials, research and development expenditures and other operating expenses. Cash used to fund operating expenses is impacted by the timing of when we incur and pay these expenses.

During the three months ended March 31, 2023, we raised gross proceeds of $7.0 million (net proceeds of $6.4 million) from the sale of 8,432,192 shares of our common stock, as described in Note 2. We plan to use the net proceeds from these financings to prepare for future clinical trials; and on research and development expenses, working capital and other general corporate purposes.

Subsequent events

Use of Estimates

In preparing our condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP and pursuant to the rules and regulations of the SEC, we make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are used for, but not limited to preclinical and clinical trial expenses, stock-based compensation, intangible assets, future milestone payments and income taxes. These estimates and assumptions are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. While we believe the estimates to be reasonable, actual results could differ materially from those estimates and could impact future results of operations and cash flows.

Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes. - The Company follows the guidance in ASC 855-10-50Deferred income taxes are recorded for the disclosureexpected tax consequences of subsequent events.temporary differences between the basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. At March 31, 2023 and December 31, 2022, we recorded a valuation allowance equal to the full recorded amount of our net deferred tax assets since it is more-likely-than-not that such benefits will not be realized. The Company will evaluate subsequent events throughvaluation allowance is reviewed quarterly and is maintained until sufficient positive evidence exists to support its reversal.

Under ACS 740-270 Income Taxes – Interim Reporting, we are required to project our annual federal and state effective income tax rate and apply it to the date whenyear-to-date ordinary operating tax basis loss before income taxes. Based on the projection, no current income tax benefit or expense is expected for 2023 and the foreseeable future since the deferred tax liability has been offset completely at December 31, 2021 and we expect to generate taxable net operating losses.

Concentration of Credit Risk

Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of our cash and cash equivalents. We utilize only well-established banks and financial statements were issued.institutions with high credit ratings. Balances on deposit are insured by the Federal Deposit Insurance Corporation (FDIC) up to specified limits. Total cash held by our banks at March 31, 2023, exceeded FDIC limits.

Recent Accounting Pronouncements -

From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believeWe have implemented all new accounting pronouncements that theare in effect and that may impact ofour condensed consolidated financial statements. We have evaluated recently issued guidance will not beaccounting pronouncements and determined that there is no material toimpact on our consolidated financial statements upon adoption.position or results of operations.

In October 2016,Note 2 – Stockholders’ Equity

Preferred Stock

There were no issued or outstanding shares of preferred stock at either March 31, 2023 or December 31, 2022.

Common Stock

During the FASBthree months ended March 31, 2023, we issued ASU 2016-16, Accounting8,432,192 shares of our common stock through several fundraising efforts.

ATM Offering

On August 20, 2021, we entered into the Sales Agreement with Oppenheimer & Co. Inc. (the “Sales Agent”) under which we may issue and sell up to $30.0 million from time to time under the ATM Offering. We expect to use net proceeds from the ATM Offering over time as a source for Income Taxesworking capital and general corporate purposes. During the three months ended March 31, 2023, we sold 569,648 shares at an average price of $1.22 per share for aggregate gross proceeds of $693,000 (net proceeds of $672,000) prior to deducting sales commissions. On February 5, 2023, in connection with our Registered Direct Offering, we suspended the Sales Agreement with the Sales Agent, but we expect to reinstate it during 2023.

Lincoln Park Capital Fund, LLC Purchase Agreement

On March 23, 2022, we entered into the Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park has committed to purchase up to $15.0 million of shares (the “Purchase Shares”) of our common stock, subject to the terms and conditions in the Purchase Agreement with Lincoln Park, including that the closing sale price of the common stock on the purchase date is not below a threshold price of $1.00. Any proceeds that we receive under the Purchase Agreement are expected to be used for working capital and general corporate purposes. During the three months ended March 31, 2023, we sold 50,000 shares at an average price of $1.08 per share for aggregate gross proceeds of $54,000 under the Purchase Agreement with Lincoln Park.

Registered Direct Offering

On February 14, 2023, we closed a registered direct offering (the “Offering”) for the sale of 7,812,544 shares of common stock at a purchase price of $0.80 per share for gross proceeds of $6.3 million (net proceeds of $5.6 million). The Purchase Agreement provides that, subject to certain exceptions, until the earlier of (i) 90 days after the closing of the Offering or (ii) the trading day following the date that our common stock’s closing price exceeds $2.00 for a period of 10 consecutive trading days, neither we nor our subsidiary will issue or enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or common stock equivalents.

We paid the Placement Agent a cash fee of 8.0% of the gross proceeds from the Offering, excluding proceeds received from our insiders, and reimbursed the Placement Agent for legal fees of $60,000. The engagement agreement with the Placement Agent requires us to indemnify the Placement Agent and certain of its affiliates against certain customary liabilities. On February 14, 2023, we amended our consulting agreement with Spartan originally entered into on August 24, 2022, extending the term of the consulting agreement until February 10, 2024. As compensation for services under the agreement, on April 17, 2023, we granted Spartan a warrant to purchase 3,160,130 shares of our common stock with an exercise price of $1.02. The warrant will expire three yearsfrom the date of issuance and contains both call and cashless exercise provisions.

Note 3 - Intra-Entity Asset TransfersStock-based Compensation

On June 19, 2019, our stockholders approved, and we adopted the Processa Pharmaceuticals Inc. 2019 Omnibus Equity Incentive Plan (the “2019 Plan”). The 2019 Plan allows us, under the direction of Assetsour Board of Directors or a committee thereof, to make grants of stock options, restricted and unrestricted stock and other than Inventory (“ASU 2016-16”)stock-based awards to employees, including our executive officers, consultants and directors. The 2019 Plan provides for the aggregate issuance of 6,000,000 shares of our common stock. At March 31, 2023, we have 1,394,122 shares available for future grants.

Stock Compensation Expense

We recorded stock-based compensation expense for the three month ended March 31, 2023 and 2022 as follows:

Schedule of Stock-based Compensation Expense

We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and audited consolidated financial statements and related notes thereto included inof our 2016most recent Annual Report on Form 10-K and withhave the unaudited condensed consolidatedgreatest potential impact on our financial statements, and related notes thereto presented in this Quarterly Report on Form 10-Q.

Forward-Looking Statements

The statements contained in this report that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, need for financing, competitive position, potential growth opportunities, potential operating performance improvements, ability to retain and recruit personnel, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “should,” “anticipates,” “expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends. Althoughso we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances thatconsider these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual futureour critical accounting policies. Actual results could differ materially from those describedthe estimates we use in such forward-looking statements.

Factors that may cause actual results to differ materially from current expectations include, butapplying our critical accounting policies. We are not limited to:currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

·

risks associated with the asphalt repair industry, including competition, increases in wages, labor relations, energy and fuel costs, actual and threatened pandemics, actual and threatened terrorist attacks, and downturns in domestic and international economic and market conditions;

·

risks associated with the asphalt repair industry, includingThere have been no changes in laws or regulations, increases in taxes, rising insurance premiums, costs of compliance with environmental laws and other governmental regulations;

·

the availability and terms of financing and capital and the general volatility of securities markets;

·

changes in the competitive environment in the asphalt repair industry;

·

risks related to natural disasters;

·

litigation; and

·

other risk factors discussed in the 2016our critical accounting policies from our most recent Annual Report on Form 10-K, filed by the Company with the Securities and Exchange Commission.10-K.

Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those expected. We disclaim any intention or obligation to update publicly or revise such statements whether as a result of new information, future events or otherwise.Recently Issued Accounting Pronouncements

Overview and Basis of Presentation

Heatwurx, Inc. was incorporated under the laws of the State of Delaware on March 29, 2011 as Heatwurxaq, Inc. and subsequently changed its name to Heatwurx, Inc. on April 15, 2011.

We are an asphalt preservation and repair, equipment company. Our innovative, and eco-friendly hot-in-place recycling process corrects surface distresses within the top 3 inches of existing pavement by heating the surface material to a temperature between 325° and 375° Fahrenheit with our electrically powered infrared heating equipment, mechanically loosening the heated material with our processor/tiller attachment that is optimized for producing a seamless repair, and mixing in additional recycled asphalt pavement and a binder (asphalt-cement), and then compacting repaired area with a vibrating roller or compactor. We consider our equipment to be eco-friendly as the Heatwurx process reuses and rejuvenates distressed asphalt, uses recycled asphalt pavement for filler material, eliminates travel to and from asphalt batch plants, and extends the life of the roadway.  We believe our equipment, technology and processes provide savings over other processes that can be more labor and equipment intensive.

12

Our hot-in-place recycling process and equipment was selected by the Technology Implementation Group of the American Association of State Highway Transportation Officials (“AASHTO TIG”) as an “additionally Selected Technology” for the year 2012. We develop, manufacture and intend to sell our unique and innovative and eco-friendly equipment to federal, state and local agencies as well as contractors for the repair and rehabilitation of damaged and deteriorated asphalt surfaces.

During 2014, we acquired Dr. Pave, LLC a service company offering asphalt repair and restoration utilizing the Heatwurx asphalt repair technology and established a new entity Dr. Pave Worldwide LLC to house our franchise program providing franchisees with the exclusive Heatwurx equipment and processing.  We launched our franchise sales program throughout the U.S. in the third quarter of 2014; however, to date, no franchises have been sold.  The Company decided not to renew its franchise registrations throughout the U.S. do to the extensive costs.  In 2015, we offered license agreements, which grants a license of all Heatwurx equipment and supplies and the use of the Heatwurx intellectual property within a specified territory.  We have one licensee as of March 31, 2017.

We are no longer receiving financial supportevaluated recently issued accounting pronouncements and we do not believe we will be able to obtain financing from another source.  We do not believe we are able to achieve a level of revenues adequate to support our cost structure.  Do to the slow growth in the service sector and the high cost of the franchise registrations, we discontinued the operations of Dr. Pave, LLC and Dr. Pave Worldwide LLC.  In addition, we significantly scaled back operations to maintain only a minimal level of operations necessary to support our licensee and look for potential merger candidates.  The Company sold the remaining equipment and inventory to the licensee during 2016.  Based upon the Company’s current financial position, the Company does not believe it will be able to satisfy the mandatory principal payments.  The Company will work with the lenders to explore extension or conversion options.  Theredetermined that there is no guarantee the lenders will accommodate our requests.  As of March 31, 2017; principal in the amount of $962,361 is outstanding and payable under the secured notes.  These notes are secured by all the assets of the Company, including intellectual property rights.  We are in default on the notes, and as a result the Company’s assets may be foreclosed upon.

The issues described above raise substantial doubt about the Company’s ability to continue as a going concern.  It is our intention to move forward as a public entity and to seek potential merger candidates.  If the Company fails to merge or be acquired by another company, we will be required to terminate all operations.

Section 107 of the JOBS Act provides that an “emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.  In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.  However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.  Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Results of operations

The following discussion of the financial condition and results of operations should be read in conjunction with the financial statements included herewith.  This discussion should not be construed to imply that results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.

For the three months ended March 31, 2017 compared to the three months ended March 31, 2016

For the three months ended March 31, 2017, our net loss was approximately $76,000, compared to a net loss of approximately $134,000 including loss from discontinued operations of approximately $2,000 for the same period of 2016.  Further description of these losses is provided below.

13

Revenue

The Company did not recognize any revenue during the three months ended March 31, 2017 compared to $5,000 in revenue in the three months ended March 31, 2016.  Operations have been significantly reduced; the Company sold equipment to our licensee in the first quarter of 2016. The Company does not anticipate any revenue during 2017 from equipment sales.

Cost of goods sold

The Company had no cost of goods sold during the three months ended March 31, 2017 and 2016.

Selling, general and administrative

Selling, general and administrative expenses decreased to approximately $14,000 for the three months ended March 31, 2017 from approximately $81,000 for the three months ended March 31, 2016. The decrease in selling, general and administrative expenses is principally due to the significant reduction in operating activities which include a decrease in employee expenses of approximately $51,000; a decrease in travel and office expenses of approximately $8,000 which includes commercial insurance, rent and other expenses; and a decrease in legal and investor relations expenses of $8,000.

Research and Development

The Company had approximately $100 in research and development costs during the three months ended March 31, 2017; and no research and development costs during the three months ended March 31, 2016.  The Company is only utilizing legal representation to maintain the existing patents.

Liquidity and capital resources

Overview

We have incurred operating losses, accumulated deficit and negative cash flows from operations since inception.  As of March 31, 2017, we had an accumulated deficit of approximately $15,341,000 from operating activities.  The Company had total cash on hand of approximately $1,600 as of March 31, 2017. The Company is not able to obtain additional financing adequate to fulfill its commercialization activities, nor achieve a level of revenues adequate to support the Company’s cost structure.  

Operating Activities

During the three months ended March 31, 2017, the Company used $1,598 in cash for continuing operations compared to cash used of $43,900 for continuing operations and $6,469 for discontinued operations during the three months ended March 31, 2016. This decrease in cash used for operating activities was due to the significant reduction in employees and overhead expenses.  The Company has had little revenue since inception.  The Company does not currently have any revenue under contract nor does it have any immediate sales prospects. The Company has significantly scaled back operations to maintain only a minimal level of operations necessary to support our licensee and look for potential merger candidates.  For the year three months ended March 31, 2017, the Company incurred a net loss from continuing operations of approximately $76,000. The operations of Dr. Pave, LLC and Dr. Pave Worldwide, LLC were discontinued in 2015 and have not activity in the current period. These business components are included in discontinued operations as of March 31, 2017. It is the Company’s intention to move forward as a public entity and to seek potential merger candidates.  If the Company fails to merge or be acquired by another company, we will be required to terminate all operations.

Investing Activities

There were no investing activities during the three months ended March 31, 2017 compared to proceeds of $27,000 from the sale of assets held for sale during the three months ended March 31, 2017.

Financing Activities

There were no investing activities during the three months ended March 31, 2017 compared to cash provided by financing activities of $15,000 in the three months ended March 31, 2016.  This decrease in cash provided by financing activities was due to the Company no longer receiving financial support for the business and operations from their small group of investors.  The Company entered into a Senior secured loan agreement on February 16, 2015, extended on March 23, 2016, with JMW Fund, Richland Fund, and San Gabriel Fund (collectively, the “lenders”) whereby the lenders agreed to loan to the Company up to an aggregate of $2,000,000.  The interest rate on the notes is 12% per annum and monthly interest payments are due the first day each month beginning March 1, 2015.  The notes mature six months from the date of issuance.  If any interest payment remains unpaid in excess of 90 days, and the lender has not declared the entire principal and unpaid accrued interest due and payable, the interest rate on that amount only will be increased to 18% per annum, until the past due interest amount is paid in full.  The notes and any future notes under the loan agreement are secured by all the assets of the Company, including intellectual property rights. Upon the occurrence of an event of default the lenders have the right to foreclose on the assets of the Company.

Based upon the Company’s current financial position and inability to obtain additional financing, we do not believe it will be able to satisfy the mandatory principal payments under the $2,000,000 senior secured debt.  We will continue to work with the lenders to explore additional extension or conversion options as needed.  These notes are secured by all the assets of the Company, including intellectual property rights.  We are in default on the notes, our assets may be foreclosed upon.

Cash Requirements

The issues described above raise substantial doubt about our ability to continue as a going concern. We have been solely reliant on raising capital or borrowing funds in order to maintain our operations.  We were able to raise debt and equity financing through the assistance of a small number of our investors who have been substantial participants in its debt and equity offerings since our formation.  These investors have chosen not to assist us with our capital raising initiatives.  At this time we are not able to obtain any alternative forms of financing and we will not be able to continue to satisfy our current or long term obligations.  We desire to merge or be acquired by another company.  If a candidate is not identified we will cease operations all together.

Recent accounting pronouncements

There were no new accounting pronouncements issued during the three months ended March 31, 2017 that had a material impact or are anticipated to have a material impact on our financial position cash flows or operating results.results of operations.

ITEMItem 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk

AsItem 3 is not applicable to us as a smaller reporting company we have elected not to provide the disclosure required by this item.and has been omitted.

ITEMItem 4. CONTROLS AND PROCEDURESControls and Procedures

Evaluation of disclosure controls and procedures

OurAt March 31, 2023, management, with the participation of ourthe Chief Executive Officer who also serves as ourand Chief Financial Officer, has concluded, based onconducted an evaluation as of the endeffectiveness of the period covered by this report,design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the evaluation of its disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) are (1) notwere effective at March 31, 2023to ensureprovide reasonable assurance that material information required to be disclosed by us in our reports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms of the Securities and Exchange Commission due to the material weakness noted below, and (2) lacking design to ensure that material information required to be disclosed by us in such reports is(ii) accumulated organized and communicated to our management, including our principal executive officer and principal financial officer, as appropriated,appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Material Weakness and Related Remediation Initiatives

Our management concluded that as of March 31, 2017, the following material weaknesses existed: 1. Due to the Company’s budget constraints, the Company’s accounting department does not maintain the number of accounting personnel (either in-house or external) necessary to ensure more complete and effective financial reporting controls.  Through the efforts of management, external consultants, and our Director, we have developed a specific action plan to remediate the material weaknesses.  Due to the significant reduction in operations, the Company was unable to remediate the material weakness during 2017.

We have fewer than 300 record holders and, thus, our reporting obligations were automatically suspended.  As a voluntary filer, we may choose to cease filing Exchange Act reports at any time.

Changes in internal controlInternal Control over financial reportingFinancial Reporting

There has beenwere no changechanges in our internal control over financial reporting as defined in Rules 13a-15(f) ofduring the Exchange Act, during our most recent fiscal quarter ended March 31, 2017,2023 that hashave materially affected, or isare reasonably likely to materially affect ourthe Company’s internal control over financial reporting.

Part II. Other Information

PART II. OTHER INFORMATIONItem 1. Legal Proceedings

We are currently not a party to any material legal proceedings.

ITEMItem 1A. RISK FACTORSRisk Factors

See “ItemThere have been no material changes to our risk factors as described in Item 1A - Risk Factors” as disclosed inof our Annual Report on Form 10-K as filed withfor the Securities and Exchange Commission on September 25, 2017.year ended December 31, 2022.

ITEMItem 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSUnregistered Sales of Equity Securities and Use of Proceeds

NoneNone.

(b) Use of Proceeds from Public Offering of Common Stock

None.

(c) Issuer Purchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

ITEMItem 6. EXHIBITSExhibits