UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| |
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017.2021.
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission File Number:000-55453
ENDONOVO THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 45-2552528 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
6320 Canoga Avenue, 15th Floor, Woodland Hills, CA91367
(Address of principal executive offices, zip code)
(800)489-4774
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act: None
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), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] ☒ 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 [X] ☒ No [ ]☐
Indicate by check mark whether the registrant is a large acceleratedlarge-accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated“large-accelerated filer,” “accelerated filer”filer,” “non-accelerated filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer |
Non-accelerated filer
| Smaller reporting company |
| Emerging growth company |
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. [X]☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] ☐ No [X] ☒
As of November 3, 2017,19, 2021, there were 3,274,764 shares of common stock, $0.0001 par value issued and outstanding.
ENDONOVO THERAPEUTICS, INC.
TABLE OF CONTENTS
FORM 10-Q REPORT
September 30, 20172021
Page Number | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Condensed Consolidated Financial | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | |
| Item 4. | Controls and Procedures. | |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings. | |
| Item 1A. | Risk Factors. | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | |
| Item 3. | Defaults Upon Senior Securities. | |
| Item 4. | Mine Safety Disclosures | |
| Item 5. | Other Information. | |
| Item 6. | Exhibits. | |
| SIGNATURES | 31 | |
| 2 |
PART I - FINANCIAL INFORMATION
Endonovo Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 64,479 | $ | 55,533 | ||||
| Prepaid expenses and other current assets | 91,000 | 247,321 | ||||||
| Total current assets | 155,479 | 302,854 | ||||||
| Property Plant and Equipment, net | 4,754 | 15,825 | ||||||
| Total assets | $ | 160,233 | $ | 318,679 | ||||
| LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 3,238,237 | $ | 4,727,247 | ||||
| Short term advances | 6,973 | 5,823 | ||||||
| Notes payable, net of discounts of $920,773 as of September 30, 2017 and $1,145,849 as of December 31, 2016 | 2,549,445 | 1,878,107 | ||||||
| Notes payable - related parties | 170,000 | 170,000 | ||||||
| Derivative liability | 7,217,059 | 1,927,752 | ||||||
| Current portion of long term loan | 7,355 | 12,395 | ||||||
| Total current liabilities | 13,189,069 | 8,721,324 | ||||||
| Long term loan | - | 4,221 | ||||||
| Acquisition payable | 155,000 | 155,000 | ||||||
| Total liabilities | 13,344,069 | 8,880,545 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Shareholders' deficit | ||||||||
| Super AA super voting preferred stock, $0.001 par value; 1,000,000 authorized and 5,000 and 1,000 issued and outstanding at September 30, 2017 and December 31, 2016 | 5 | - | ||||||
| Series B convertible preferred stock, $0.0001 par value; 50,000 shares authorized, 0 shares issued and outstanding at September 30, 2017 and December 31, 2016 | - | - | ||||||
| Common stock, $.0001 par value; 500,000,000 shares authorized; 284,063,508 and 134,336,637 shares issued and outstanding as of September 30, 2017 and December 31, 2016 | 28,404 | 13,434 | ||||||
| Additional paid-in capital | 17,755,199 | 9,800,553 | ||||||
| Stock subscriptions | (14,070 | ) | (1,570 | ) | ||||
| Accumulated deficit | (30,953,374 | ) | (18,374,283 | ) | ||||
| Total shareholders' deficit | (13,183,836 | ) | (8,561,866 | ) | ||||
| Total liabilities and shareholders' deficit | $ | 160,233 | $ | 318,679 | ||||
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 5,732 | $ | 13,420 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $0 | 7,092 | 942 | ||||||
| Prepaid expenses and other current assets | 49,725 | 31,825 | ||||||
| Total current assets | 62,549 | 46,187 | ||||||
| Property, Plant and Equipment, net | - | 1,580 | ||||||
| Patents, net | 2,074,084 | 2,559,268 | ||||||
| Total assets | $ | 2,136,633 | $ | 2,607,035 | ||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 753,041 | $ | 700,932 | ||||
| Accrued interest | 2,334,302 | 1,904,136 | ||||||
| Deferred compensation | 3,970,056 | 3,384,117 | ||||||
| Notes payable, net of discounts of $48,927 and $201,157 as of September 30, 2021, and December 31, 2020 | 6,639,056 | 6,491,039 | ||||||
| Notes payable – former related party | 132,600 | 143,000 | ||||||
| Derivative liability | 6,446,149 | 4,202,597 | ||||||
| Total current liabilities | 20,275,204 | 16,825,821 | ||||||
| Acquisition payable | 79,825 | 155,000 | ||||||
| Total liabilities | 20,355,029 | 16,980,821 | ||||||
| COMMITMENTS AND CONTINGENCIES, note 10 | - | |||||||
| Shareholders’ deficit | ||||||||
| Super AA super voting preferred stock, $ par value; authorized and issued and outstanding at September 30, 2021, and December 31, 2020 | 25 | 25 | ||||||
| Series B convertible preferred stock, $ par value; shares authorized, shares issued and outstanding at September 30, 2021, and December 31, 2020 | 1 | 1 | ||||||
| Series C convertible preferred stock, $ par value; shares authorized, and shares issued and outstanding at September 30, 2021, and December 31, 2020 | - | - | ||||||
| Series D convertible preferred stock, $ par value; shares authorized, issued and outstanding at September 30, 2021, and December 31, 2020 | - | - | ||||||
| Preferred value | - | |||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding as of September 30, 2021, and December 31, 2020 | 6,920 | 2,453 | ||||||
| Additional paid-in capital | 40,615,974 | 38,963,827 | ||||||
| Stock subscriptions | (1,570 | ) | (1,570 | ) | ||||
| Accumulated deficit | (58,839,746 | ) | (53,338,522 | ) | ||||
| Total shareholders’ deficit | (18,218,396 | ) | (14,373,786 | ) | ||||
| Total liabilities and shareholders’ deficit | $ | 2,136,633 | $ | 2,607,035 | ||||
See accompanying summary of accounting policies and notes to unaudited condensed consolidated financial statements.
| 3 |
Endonovo Therapeutics, Inc. and Subsidiaries
Condensed Consolidated StatementStatements of Operations
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | September 30, | September 30, | |||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
| Revenue | $ | 7,790 | $ | 39,980 | $ | 72,789 | $ | 154,296 | ||||||||||||||||||||||||
| Cost of revenue | 3,103 | 760 | 6,124 | 18,320 | ||||||||||||||||||||||||||||
| Gross profit | 4,687 | 39,220 | 66,665 | 135,976 | ||||||||||||||||||||||||||||
| Operating expenses | $ | 1,035,628 | $ | 1,310,748 | $ | 3,770,929 | $ | 4,778,109 | 696,943 | 986,019 | 1,919,418 | 2,364,213 | ||||||||||||||||||||
| Loss from operations | (1,035,628 | ) | (1,310,748 | ) | (3,770,929 | ) | (4,778,109 | ) | (692,256 | ) | (946,799 | ) | (1,852,753 | ) | (2,228,237 | ) | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||
| Change in fair value of derivative liability | (4,544,656 | ) | 46,997 | (6,945,434 | ) | 2,645,681 | (542,346 | ) | 416,370 | (2,962,795 | ) | 6,016,625 | ||||||||||||||||||||
| Gain (loss) on extinguishment of debt | (58,197 | ) | (42,507 | ) | 2,175,459 | (435,625 | ) | |||||||||||||||||||||||||
| Settlement expense | (80,000 | ) | - | (80,000 | ) | - | ||||||||||||||||||||||||||
| Gain (loss) on settlement of debt | (42,460 | ) | (47,602 | ) | 28,536 | (564,385 | ) | |||||||||||||||||||||||||
| Other expense | - | (58,902 | ) | - | (58,902 | ) | ||||||||||||||||||||||||||
| Interest expense, net | (953,623 | ) | (912,583 | ) | (3,958,187 | ) | (2,007,788 | ) | (246,612 | ) | (432,108 | ) | (714,212 | ) | (1,530,375 | ) | ||||||||||||||||
| Other income (expense) | (831,418 | ) | (122,242 | ) | (3,648,471 | ) | 3,862,963 | |||||||||||||||||||||||||
| (5,636,476 | ) | (908,093 | ) | (8,808,162 | ) | 202,268 | ||||||||||||||||||||||||||
| Loss before income taxes | (6,672,104 | ) | (2,218,841 | ) | (12,579,091 | ) | (4,575,841 | ) | ||||||||||||||||||||||||
| Income (Loss) before income taxes | (1,523,674 | ) | (1,069,041 | ) | (5,501,224 | ) | 1,634,726 | |||||||||||||||||||||||||
| Provision for income taxes | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Net loss | $ | (6,672,104 | ) | $ | (2,218,841 | ) | $ | (12,579,091 | ) | $ | (4,575,841 | ) | ||||||||||||||||||||
| Net Income (loss) income | $ | (1,523,674 | ) | $ | (1,069,041 | ) | $ | (5,501,224 | ) | $ | 1,634,726 | |||||||||||||||||||||
| Basic and diluted loss per share | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.06 | ) | $ | (0.04 | ) | ||||||||||||||||||||
| Basic Income (Loss) per share | $ | (0.02 | ) | $ | (0.07 | ) | $ | (0.10 | ) | $ | 0.17 | |||||||||||||||||||||
| Diluted Income (Loss) per share | $ | (0.02 | ) | $ | (0.07 | ) | $ | (0.10 | ) | $ | (0.15 | ) | ||||||||||||||||||||
| Weighted average common share outstanding: | ||||||||||||||||||||||||||||||||
| Basic and diluted | 263,535,090 | 123,138,397 | 220,353,026 | 113,649,351 | ||||||||||||||||||||||||||||
| Basic | 66,291,292 | 16,137,373 | 55,303,026 | 9,621,530 | ||||||||||||||||||||||||||||
| Diluted | 66,291,292 | 16,137,373 | 55,303,026 | 23,575,380 | ||||||||||||||||||||||||||||
See accompanying summary of accounting polices and notes to unaudited condensed consolidated financial statements.
Endonovo Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(Unaudited)
| Nine Months ended September 30, | ||||||||
| 2017 | 2016 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (12,579,091 | ) | $ | (4,575,841 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation and amortization expense | 11,070 | 11,876 | ||||||
| Fair value of equity issued for services | 1,410,071 | 2,402,736 | ||||||
| Gain on extinguishment of debt | (2,175,459 | ) | 545,905 | |||||
| Non-cash interest expense | 2,465,912 | 779,045 | ||||||
| Non-cash operating expenses on fees paid | - | 106,720 | ||||||
| Amortization of note discount | 1,467,888 | 826,063 | ||||||
| Change in fair value of derivative liability | 6,945,434 | (2,645,681 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Other current assets | 156,321 | 196,133 | ||||||
| Accounts payable and accrued expenses | 108,658 | 549,360 | ||||||
| Net cash used in operating activities | (2,189,196 | ) | (1,803,684 | ) | ||||
| Investing activities: | ||||||||
| Net cash used in investing activities | - | - | ||||||
| Financing activities: | ||||||||
| Proceeds from the issuance of notes payable | 1,562,000 | 1,051,228 | ||||||
| Proceeds from short term advances | 12,650 | 5,618 | ||||||
| Repayments on short term advances | (11,500 | ) | (15,300 | ) | ||||
| Proceeds from issuance of preferred stock | 5 | - | ||||||
| Proceeds from issuance of common stock and units | 740,250 | 1,055,829 | ||||||
| Payment against long term loan | (9,263 | ) | (8,989 | ) | ||||
| Payment against notes payable | (96,000 | ) | (156,500 | ) | ||||
| Payment against notes payable- related parties | - | (75,000 | ) | |||||
| Net cash provided by financing activities | 2,198,142 | 1,856,886 | ||||||
| Net increase in cash | 8,946 | 53,202 | ||||||
| Cash, beginning of year | 55,533 | 41,473 | ||||||
| Cash, end of period | $ | 64,479 | $ | 94,675 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 27,022 | $ | 25,486 | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Non Cash Investing and Financing Activities: | ||||||||
| Conversion of notes payable and accrued interest to common stock | $ | 1,108,321 | $ | 532,018 | ||||
| Common stock issued on settlement of debt | $ | 289,675 | $ | - | ||||
| Notes payable and accrued interest exchanged for common stock units | $ | 66,367 | $ | - | ||||
| Value of stock options granted in satisfaction of deferred compensation | $ | 1,467,311 | $ | - | ||||
See accompanying summary of accounting polices and notes to unaudited condensed consolidated financial statements.
Endonovo Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statement of Shareholders’ Deficit
(Unaudited)
| Series AA Preferred Stock | Series B Convertible Preferred Stock | Common Stock | Additional Paid-in | Common Stock Subscription | Retained | Total Shareholder's | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Earnings | Deficit | |||||||||||||||||||||||||||||||
| Balance December 31, 2016 | 1,000 | $ | - | - | $ | - | 134,336,637 | $ | 13,434 | $ | 9,800,553 | $ | (1,570 | ) | $ | (18,374,283 | ) | $ | (8,561,866 | ) | ||||||||||||||||||||
| Private placement units issued for cash | - | - | - | - | 28,830,028 | 2,882 | 737,368 | (12,500 | ) | - | 727,750 | |||||||||||||||||||||||||||||
| Preferred stock issued for cash | 4,000 | 5 | - | - | - | - | - | - | - | 5 | ||||||||||||||||||||||||||||||
| Shares issued for services | - | - | - | - | 3,598,996 | 359 | 199,196 | - | - | 199,555 | ||||||||||||||||||||||||||||||
| Shares issued with lock-up agreements | - | - | - | - | 126,618 | 13 | 7,517 | - | - | 7,530 | ||||||||||||||||||||||||||||||
| Shares issued for conversion of notes payable and accrued interest | - | - | - | - | 106,110,372 | 10,610 | 3,977,803 | - | - | 3,988,413 | ||||||||||||||||||||||||||||||
| Private placement units issued for conversion of notes payable and accrued interest | - | - | - | - | 3,370,041 | 337 | 66,029 | - | - | 66,366 | ||||||||||||||||||||||||||||||
| Shares issued related to debt extinguishment | - | - | - | - | 1,565,816 | 156 | 86,838 | - | - | 86,994 | ||||||||||||||||||||||||||||||
| Shares issued for repayment of accrued liabiity | - | - | - | - | 6,125,000 | 613 | 202,068 | - | - | 202,681 | ||||||||||||||||||||||||||||||
| Valuation of stock options issued for servces | - | - | - | - | - | - | 1,139,403 | - | - | 1,139,403 | ||||||||||||||||||||||||||||||
| Valuation of warrants issued for services | - | - | - | - | - | - | 71,113 | - | - | 71,113 | ||||||||||||||||||||||||||||||
| Valuation of stock options issued in exchange of deferred compensation | - | - | - | - | - | - | 1,467,311 | - | - | 1,467,311 | ||||||||||||||||||||||||||||||
| Net loss for the period ended September 30, 2017 | - | - | - | - | - | - | - | - | (12,579,091 | ) | (12,579,091 | ) | ||||||||||||||||||||||||||||
| Balance September 30, 2017 | 5,000 | $ | 5 | - | $ | - | 284,063,508 | $ | 28,404 | $ | 17,755,199 | $ | (14,070 | ) | $ | (30,953,374 | ) | $ | (13,183,836 | ) | ||||||||||||||||||||
See accompanying summary of accounting policies and notes to unaudited condensed consolidated financial statements.
| 4 |
Endonovo Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities: | ||||||||
| Net (Loss) Income | $ | (5,501,224 | ) | $ | 1,634,726 | |||
| Adjustments to reconcile net (loss) income to cash used in operating activities: | ||||||||
| Depreciation and amortization expense | 486,764 | 488,616 | ||||||
| Stock compensation expense | 61,453 | 400,108 | ||||||
| Fair value of commitment shares issued with debt | 70,971 | - | ||||||
| Fair value of equity issued for services | 95,250 | 13,067 | ||||||
| Loss (gain) on extinguishment of debt | (28,536 | ) | 564,385 | |||||
| Amortization of note discount and original issue discount | 103,659 | 50,348 | ||||||
| Amortization of discount on Series C Preferred stock liability | - | 248 | ||||||
| Non-cash interest expense | - | 713,462 | ||||||
| Change in fair value of derivative liability | 2,962,795 | (6,016,625 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (6,150 | ) | 21,800 | |||||
| Deposit | - | (2,500 | ) | |||||
| Prepaid expenses and other current assets | (17,900 | ) | 18,320 | |||||
| Account payable | 52,109 | 82,006 | ||||||
| Accrued interest | 539,582 | 766,319 | ||||||
| Deferred compensation | 585,939 | 716,986 | ||||||
| Net cash used in operating activities | (595,288 | ) | (548,734 | ) | ||||
| Financing activities: | ||||||||
| Proceeds from the issuance of notes payable | 475,000 | 401,424 | ||||||
| Repayments to former related-party of notes payable | (10,400 | ) | (19,000 | ) | ||||
| Repayments of convertible debt in cash | (3,000 | ) | - | |||||
| Proceeds from issuance of common stock and units | 126,000 | 100,000 | ||||||
| Proceeds from issuance of preferred stock | - | 50,000 | ||||||
| Net cash provided by financing activities | 587,600 | 532,424 | ||||||
| Net decrease in cash | (7,688 | ) | (16,310 | ) | ||||
| Cash, beginning of year | 13,420 | 18,893 | ||||||
| Cash, end of period | $ | 5,732 | $ | 2,583 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Conversion of notes payable and accrued interest to common stock | $ | 458,335 | $ | 1,357,573 | ||||
| Issuance of common stock to settle debt | $ | 127,522 | $ | - | ||||
| Conversion of Preferred C Stock to common stock | $ | 33,333 | $ | 1,400,934 | ||||
| Issuance of common stock to Preferred C Stock inducement | $ | - | $ | 8,152 | ||||
| Exchange of note and accrued interest to new convertible note | $ | - | $ | 316,494 | ||||
See accompanying summary of accounting policies and notes to unaudited condensed consolidated financial statements.
| 5 |
Endonovo Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statement of Shareholders’ Deficit
(Unaudited)
For nine months ended September 30, 2020.
| Series AA | Series B Convertible | Series D Convertible | Series C Convertible | Additional | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Paid-in | Subscription | Retained | Shareholder’s | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Earnings | Deficit | |||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2019 | 25,000 | $ | 25 | 600 | $ | 1 | 255 | $ | - | - | - | 1,189,204 | $ | 118 | $ | 32,432,392 | $ | (1,570 | ) | $ | (52,934,786 | ) | $ | (20,503,820 | ) | |||||||||||||||||||||||||||||||
| Reclassification Preferred Series C | - | - | - | - | - | - | 1,814 | - | - | - | 2,418,269 | - | - | 2,418,269 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for Preferred Series D | - | - | - | - | 50 | - | - | - | - | - | 50,000 | - | - | 50,000 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | - | - | 4,388,291 | 439 | 2,545,275 | - | - | 2,545,714 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of Preferred Series C to common share | - | - | - | - | - | - | (936 | ) | - | 1,636,166 | 164 | (164 | ) | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Valuation of stock options issued for services | - | - | - | - | - | - | - | - | - | - | 9,567 | - | - | 9,567 | ||||||||||||||||||||||||||||||||||||||||||
| Restricted shares issued as inducement to Series C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted shares issued as inducement to Series C, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitment shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitment shares, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued with exchange of convertible notes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued with exchange of convertible notes, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for exchange of stock options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for exchange of stock options, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued as inducement to note holder | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued as inducement to note holder, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued as commitment to note holders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued as commitment to note holders, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Shares issued for debt settlement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Shares issued for debt settlement, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued as settlement of debt with former related party | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued as settlement of debt with former related party, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common shares issued pursuant to consulting agreement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common shares issued pursuant to consulting agreement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common shares issued as commitment to note holders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common shares issued as commitment to note holders, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the quarter ended March 31, 2020 | - | - | - | - | - | - | - | - | - | - | - | 4,338,418 | 4,338,418 | |||||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2020 | 25,000 | 25 | 600 | 1 | 305 | - | 878 | - | 7,213,661 | 721 | 37,455,339 | (1,570 | ) | (48,596,368 | ) | (11,141,852 | ) | |||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of Preferred Series C to Common share | - | - | - | - | - | - | (105 | ) | - | 985,322 | 99 | 27 | - | - | 126 | |||||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | 3,353,044 | 335 | 475,627 | - | - | 475,962 | ||||||||||||||||||||||||||||||||||||||||||||
| Restricted shares issued as inducement to Series C | - | - | - | - | - | - | - | - | 58,428 | 6 | 8,146 | - | (8,152 | ) | - | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | - | - | - | 25,000 | 3 | 3,497 | - | - | 3,500 | ||||||||||||||||||||||||||||||||||||||||||||
| Commitment shares | - | - | - | - | - | - | 385,963 | 39 | 55,501 | - | - | 55,540 | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued with exchange of convertible notes | - | - | - | - | - | - | 409,000 | 41 | 58,814 | - | - | 58,855 | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the quarter ended June 30, 2020 | - | - | - | - | - | - | - | - | - | - | (1,634,651 | ) | (1,634,651 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2020 | 25,000 | 25 | 600 | 1 | 305 | - | 773 | - | 12,430,418 | 1,244 | 38,056,951 | (1,570 | ) | (50,239,171 | ) | (12,182,520 | ) | |||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of Preferred Series C to Common share | - | - | - | - | - | - | (10 | ) | - | 133,334 | 13 | (13 | ) | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Shares issued for exchange of stock options | - | - | - | - | - | - | - | - | 1,500,000 | 150 | 164,850 | - | - | 165,000 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued as inducement to note holder | - | - | - | - | - | - | - | - | 500,000 | 50 | 54,950 | - | - | 55,000 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | - | - | 759,669 | 76 | 70,334 | - | - | 70,410 | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash | - | - | - | - | - | - | - | - | 1,234,568 | 123 | 99,877 | - | - | 100,000 | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | - | - | - | - | - | 360,000 | 36 | 35,964 | - | - | 36,000 | ||||||||||||||||||||||||||||||||||||||||||
| Valuation of stock options issued for services | - | - | - | - | - | - | - | - | - | - | 20,490 | - | - | 20,490 | ||||||||||||||||||||||||||||||||||||||||||
| Commitment shares | - | - | - | - | - | - | - | - | 385,963 | 39 | 42,340 | - | - | 42,379 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss for the quarter ended September 30, 2020 | - | - | - | - | - | - | - | - | - | - | - | - | (1,069,041 | ) | (1,069,041 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance September 30, 2020 | 25,000 | 25 | 600 | 1 | 305 | - | 763 | - | 17,303,952 | 1,731 | 38,545,743 | (1,570 | ) | (51,308,212 | ) | (12,762,282 | ) | |||||||||||||||||||||||||||||||||||||||
| 6 |
For nine months ended September 30, 2021.
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Earnings | Deficit | |||||||||||||||||||||||||||||||||||||||||||
| Series AA | Series B Convertible | Series C Convertible | Series D Convertible | Additional | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Paid-in | Subscription | Retained | Shareholder’s | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Earnings | Deficit | |||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2020 | 25,000 | $ | 25 | 600 | $ | 1 | 763 | $ | - | 305 | $ | - | 24,536,689 | $ | 2,453 | $ | 38,963,827 | $ | (1,570 | ) | $ | (53,338,522 | ) | $ | (14,373,786 | |||||||||||||||||||||||||||||||
| Shares issued as commitment to note holders | - | - | - | - | - | - | - | - | 2,300,334 | 230 | 101,652 | - | - | 101,882 | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash | 7,000,000 | 700 | 125,300 | 126,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | - | - | 17,686,548 | 1,769 | 831,429 | - | - | 833,198 | ||||||||||||||||||||||||||||||||||||||||||
| Valuation of stock options issued for services | - | - | - | - | - | - | - | - | - | - | 20,471 | - | - | 20,471 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss for the quarter ended March 31, 2021 | - | - | - | - | - | - | - | - | - | - | - | (2,680,881 | ) | (2,680,881 | ||||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2021 | 25,000 | $ | 25 | 600 | $ | 1 | 763 | $ | - | 305 | $ | - | 51,523,571 | $ | 5,152 | $ | 40,042,679 | $ | (1,570 | ) | $ | (56,019,403 | ) | $ | (15,973,116 | |||||||||||||||||||||||||||||||
| Shares issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | - | - | 3,804,103 | 381 | 116,165 | - | - | 116,546 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of Preferred Series C to Common share | - | - | - | - | (25 | ) | - | - | - | 1,111,111 | 111 | (111 | ) | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Common Shares issued for debt settlement | - | - | - | - | - | - | - | - | 1,515,152 | 152 | 57,576 | - | - | 57,728 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued as commitment to note holders | - | - | - | - | - | - | - | - | 200,000 | 20 | 6,280 | - | - | 6,300 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued as settlement of debt with former related party | - | - | - | - | - | - | - | - | 2,505,834 | 251 | 84,446 | - | - | 84,697 | ||||||||||||||||||||||||||||||||||||||||||
| Valuation of stock options issued for services | - | - | - | - | - | - | - | - | - | - | 20,491 | - | - | 20,491 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss for the quarter ended June 30, 2021 | - | - | - | - | - | - | - | - | - | - | - | - | (1,296,669 | ) | (1,296,669 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2021 | 25,000 | $ | 25 | 600 | $ | 1 | 738 | $ | - | 305 | $ | - | 60,659,771 | $ | 6,067 | $ | 40,327,526 | $ | (1,570 | ) | $ | (57,316,072 | ) | $ | (16,984,023 | ) | ||||||||||||||||||||||||||||||
| Common shares issued as commitment to note holders | - | - | - | - | - | - | - | 1,833,334 | 183 | 46,917 | - | - | 47,100 | |||||||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | - | 4,200,000 | 420 | 126,040 | - | - | 126,460 | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | - | - | - | 20,491 | - | - | 20,491 | |||||||||||||||||||||||||||||||||||||||||||
| Common shares issued pursuant to consulting agreement | - | - | - | - | - | - | - | 2,500,000 | 250 | 95,000 | - | - | 95,250 | |||||||||||||||||||||||||||||||||||||||||||
| Net loss for the quarter ended September 30, 2021 | - | - | - | - | - | - | - | - | - | - | - | (1,523,674 | ) | (1,523,674 | ) | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) for the quarter ended September 30, 2021 | - | - | - | - | - | - | - | - | - | - | - | (1,523,674 | ) | (1,523,674 | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance September 30, 2021 | 25,000 | $ | 25 | 600 | $ | 1 | 738 | $ | - | 305 | $ | 69,193,105 | $ | 6,920 | 40,615,974 | $ | (1,570 | ) | $ | (58,839,746 | ) | $ | (18,218,396 | ) | ||||||||||||||||||||||||||||||||
See accompanying summary of accounting policies and notes to unaudited condensed consolidated financial statements.
| 7 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 1 - Organization and Nature of Business
Endonovo Therapeutics, Inc. and Subsidiaries (the(Endonovo or the “Company” or “ETI”) is primarilyan innovative biotechnology company that has developed a bio-electronic approach to regenerative medicine. Endonovo is a growth stage company whose stock is publicly traded (OTCQB: ENDV).
The Company develops, manufactures, and distributes evolutionary medical devices focused on the rapid healing of wounds and reduction of pain, edema, and inflammation in the businesshuman body. The Company’s non-invasive bioelectric medical devices are designed to target inflammation, cardiovascular diseases, chronic kidney disease, and central nervous system disorders (“CNS” disorders).
The Company’s non-invasive Electroceutical® therapeutics device, SofPulse®, using pulsed short-wave radiofrequency at 27.12 MHz has been FDA-Cleared and CE Marked for the palliative treatment of biomedical researchsoft tissue injuries and development, particularlypost-operative plain and edema, and has CMS National Coverage for the treatment of chronic wounds. The Company’s current portfolio of pre-clinical stage Electroceutical® therapeutics devices address chronic kidney disease, liver disease non-alcoholic steatohepatitis (NASH), cardiovascular and peripheral artery disease (PAD) and ischemic stroke.
Endonovo’s core mission is to transform the field of medicine by developing safe, wearable, non-invasive bioelectric medical devices that deliver the Company’s Electroceutical® Therapy. Endonovo’s bioelectric Electroceutical® devices harnesses bioelectricity to restore key electrochemical processes that initiate anti-inflammatory processes and growth factors in regenerative medicine, which has included the developmentbody necessary for healing to rapidly occur.
Note 2 – Summary of its proprietary non-invasive electrocuetical device. The Company has historically been involved with intellectual property licensing and commercialization.significant accounting policies.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial statements have been presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Article 8 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. The condensed consolidated financial statements as of September 30, 20172021, and 20162020, are unaudited; however, in the opinion of management such interim condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The accompanying financial information should be read in conjunction with the financial statements and the notes thereto in the Company’s most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on April 13, 2021. The results of operations for the period presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year.
Liquidity and Going Concern
The Company’s unaudited condensed consolidated financial statements of the Company include the accounts of ETI and IPR as of March 14, 2012; Aviva as of April 2, 2013; and WeHealAnimals as of November 16, 2013. All significant intercompany accounts and transactions are eliminated in consolidation.
Going Concern
These accompanying consolidated financial statements have been prepared assuming the Company will continue asusing GAAP applicable to a going concern, which contemplates the realization of assets and the satisfactionliquidation of liabilities in the normal course of business forbusiness. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the twelve month period followingCompany to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.
As of September 30, 2021, the Company had cash of approximately $6,000 and a working capital deficiency of approximately $20.2 million. During the nine months ended September 30, 2021, the Company used approximately $0.6 million of cash in its operation. The Company has incurred recurring losses resulting in an accumulated deficit of approximately $58.8 million as of September 30, 2021. These conditions raise substantial doubt as to its ability to continue as going concern within one year from issuance date of these consolidated financial statements are issued. Thestatements.
During the nine months ended September 30, 2021, the Company has raised approximately $2,302,000$0.6 million in debt and equity financing for the period January 1, 2017 to September 30, 2017.financing. The Company is raising additional capital through debt and equity securities in order to continue the funding of its operations. However, there is no assurance that the Company can raise enough funds or generate sufficient revenues to pay its obligations as they become due, which raises substantial doubt about our ability to continue as a going concern.
No adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty. To reduce the risk of not being able to continue as a going concern, management is commercializing its FDA cleared and CE marked products and has implementedcommenced implementing its business plan to materialize revenues from potential, future, license agreements, and has initiated a private placement offering to raiseraised capital through the sale of its common stock,. and the issuance of convertible promissory notes.
In addition, managementMarch 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has a commitment from a current lendercontinued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for a totalthe Company to predict the duration or magnitude of $2.7 millionthe adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.
| 8 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the formUnited States of convertibleAmerica requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. As of September 30, 2017,Critical estimates include the Company has received cash funding of $1,562,000 for $1,667,500 of convertible notes under this commitment. This commitment is subject to the Company not taking any variable financing from any other investor or lender. Although, uncertainty exists as to whether the Company will be able to generate enough cash from operations to fund the Company’s working capital needs or raise sufficient capital to meet the Company’s obligations as they become due, no adjustments have been made to the carrying value of assets or liabilitiesshares issued for services, in connection with notes payable agreements, in connection with note extension agreements, and as a resultrepayment for outstanding debt, the useful lives of this uncertainty.property and equipment, the valuation of the derivative liability, the valuation of warrants and stock options, and the valuation of deferred income tax assets. Management uses its historical records and knowledge of its business in making these estimates. Actual results could differ from these estimates.
The Company utilizes Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 260, “Earnings per Share.” Basic and Diluted Income (Loss) per Share
Basic incomeearnings (loss) per share is computed by dividingbased on the net incomeearnings (loss) attributable to common stockholders for the periodshareholders divided by the weighted average number of common shares outstanding duringfor the period.period excluding any dilutive effects of options, warrants, unvested share awards and convertible securities. Diluted incomeearnings (loss) per common share is calculated similar to basic earnings (loss) per share except that the denominator is computed by dividingincreased to include additional common share equivalents available upon exercise of stock option, warrants, common shares issuable under convertible debt and restricted stock using the treasury stock method. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common share equivalents if their effect would be anti-dilutive. In periods in which a net income (loss)loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. Securities that are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been antidilutive for the period bynine months ended September 30, 2021, include stock options, warrants, and notes payable. The Company has options and 26,115 warrants to purchase common stock outstanding at September 30, 2021. The Company has options and 56,914 warrants to purchase common stock outstanding at September 30, 2020.
Schedule of commonEarnings (Loss) Per Share
| 2021 | 2020 | |||||||
| Nine months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Numerator: | ||||||||
| Net income (loss) attributable to common shareholders | $ | (5,501,224 | ) | $ | 1,634,726 | |||
| Effect of dilutive securities | ||||||||
| Convertible notes | - | (5,063,936 | ) | |||||
| Net loss for diluted earnings per share | $ | (5,501,224 | ) | $ | (3,429,210 | ) | ||
| Denominator: | ||||||||
| Weighted-average number of common shares outstanding during the period | 55,303,026 | 9,621,530 | ||||||
| Dilutive effect of convertible notes payable | - | 13,953,850 | ||||||
| Common stock and common stock equivalents used for diluted earnings per share | 55,303,026 | 23,575,380 | ||||||
Accounts Receivable
The Company uses the specific identification method for recording the provision for doubtful accounts, which was $0 as of September 30, 2021, and dilutive common equivalent shares outstanding duringDecember 31, 2020. Account receivables are written off when all collection attempts have failed.
Research and Development
Costs relating to the period.development of new products are expensed as research and development as incurred in accordance with FASB Accounting Standards Codification (“ASC”) 730-10, Research and Development. Research and development costs amounted to $0 and $3,283 for the nine months ended September 30, 2021, and 2020, respectively, and are included in operating expenses in the condensed consolidated statements of operations.
| 9 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
Common equivalent shares, consisting of incremental common shares for the three and nine months ended September 30, 2017 issuable upon the exercise of stock options, warrants, and convertible debt have not been included in the diluted earnings per share calculation for the three and nine months ended September 30, 2017 or 2016 because their effect is anti-dilutive.
Recently Issued Accounting Pronouncements
Accounting Principles Not Yet Adopted
In August 2014,May 2021, the FASB issued FASB ASU2014-15, PresentationASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), which addresses issuer’s accounting for certain modifications or exchanges of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. FASB ASU 2014-15 changes to the disclosure of uncertainties about an entity’s ability to continue as a going concern. These changes require an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity’s ability to continue as a going concern. These changes became effective for the Company for the 2016 annual period. Management has evaluated the impact of the adoption of these changes and has determined there will be no material impact on the consolidated financial statements. Subsequent to adoption, this guidance will need to be applied by management at the end of each annual period and interim period therein to determine what, if any, impact there will be on the consolidated financial statements in a given reporting period.
In April 2015, the FASB issued ASU No 2015-3, Simplifying the Presentation of Debt Issuance Costs.freestanding equity-classified written call options. This update changes the presentation of debt issuance costs in the balance sheet. ASU 2015-03 requires debt issuance costs related to a recognized debt obligation to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. Amortization of debt issuance costs will continue to be reported as interest expense. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”. This ASU clarified guidance in ASC 2015-03 stating that the SEC staff would not object to a company presenting debt issuance costs related to a line-of-credit arrangement on the balance sheet as a deferred asset, regardless of whether there were any outstanding borrowings at period-end. This updateamendment is effective for annual and interim periods beginning after December 15, 2015, which required us to adopt these provisions in the first quarter of 2016. This update was applied on a retrospective basis, wherein the balance sheet of each period presented was adjusted to reflect the effects of applying the new guidance. The adoption of this guidance did not have a material impact on our consolidated financial statements.
In November 2015, the FASB issued ASU No 2015-17, Income Taxes (Topic 740). The amendments in ASU 2015-17 change the requirementsall entities, for the classification of deferred taxes on the balance sheet. Currently, GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Earlier application2021, including interim periods within those fiscal years. Early adoption is permitted for all entities aspermitted. The Company is evaluating the effects, if any, of the beginningadoption of ASU 2021-04 guidance on the Company’s financial position, results of operations and cash flows.
Newly Adopted Accounting Principles
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an interim or annual reporting period. The Company has early adopted this pronouncementEntity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. In addition, ASU 2020-06 amends the guidance for the fiscal reporting period ended December 31, 2016,derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The Amendments also affects the diluted EPS calculation for instruments that may be settled in cash or shares and has reclassified the presentation of deferred income taxes in the prior period to conform to the current year classification in the consolidated balance sheets. As a result of the Company having recognized a valuation reserve for the entire deferred tax liability balance at September 30, 2017 and December 31, 2016, there is no impact of the presentation of deferred income taxes in our financial statements.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update intends to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financialconvertible instruments. The new standard affectsamendments are effective for public entities excluding smaller reporting companies for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all entities that hold financial assets or owe financial liabilities. For public businessother entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017,2023, including interim periods within those fiscal years. ManagementEarly adoption is evaluating the impact of the adoption of these changes will have on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in “Leases (Topic 840)” and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for annual and interim reporting periodspermitted, but no earlier than fiscal years beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach.
2020, including interim periods. The Company adopted the new standard update on January 1, 2021, which did not result in a material impact on the Company’s condensed consolidated results of operations, financial position, and cash flows.
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The objective of this standard update is currently evaluatingto simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU also attempts to improve consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This standard update is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted this ASU effective January 1, 2021, and the impact of adoption was not material to the adoptionCompany’s financial position, results of this standardoperations and cash flows.
The Company has evaluated all the recent accounting pronouncements and determined that there are no other accounting pronouncements that will have a material effect on its consolidatedthe Company’s financial statements.
| 10 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
Note 23 - Revenue Recognition
Contracts with Customers
The Company adopted ASC 606, Revenue from Contracts with Customers effective January 1, 2019, using the modified retrospective method applied to those contracts which were not substantially completed as of January 1, 2019. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Company routinely plan on entering into contracts with customers that include general commercial terms and conditions, notification requirements for price increases, shipping terms and in most cases prices for the products and services that we offer. The Company’s performance obligations are established when a customer submits a purchase order notification (in writing, electronically or verbally) for goods and services, and we accept the order. The Company identified performance obligations as the delivery of the requested product or service in appropriate quantities and to the location specified in the customer’s contract and/or purchase order. The Company generally recognize revenue upon the satisfaction of these criteria when control of the product or service has been transferred to the customer at which time, the Company has an unconditional right to receive payment. The Company’s sales and sale prices are final, and our prices are not affected by contingent events that could impact the transaction price.
Revenues for our SofPulse® product is typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations.
In connection with offering products and services provided to the end user by third-party vendors, the Company reviews the relationship between us, the vendor, and the end user to assess whether revenue should be reported on a gross or net basis. In asserting whether revenue should be reported on a gross or net basis, the Company considers whether the Company acts as a principal in the transaction and control the goods and services used to fulfill the performance obligation(s) associated with the transaction.
Sources of Revenue
The Company has identified the following revenues by revenue source:
| 1. | Medical care providers |
As of September 30, 2021, and 2020, the sources of revenue were as follows:
Schedule of Source of Revenue
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Direct sales- Medical care providers, gross | $ | 7,790 | $ | 39,980 | $ | 72,789 | $ | 154,296 | ||||||||
| Total sources of revenue | $ | 7,790 | $ | 39,980 | $ | 72,789 | $ | 154,296 | ||||||||
| 11 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
Warranty
Our general product warranties do not extend beyond an assurance that the product delivered will be consistent with stated specifications and do not include separate performance obligations.
Significant Judgments in the Application of the Guidance in ASC 606
There are no significant judgments associated with the satisfaction of our performance obligations. We generally satisfy performance obligations upon shipment of the product to the customer. This is consistent with the time in which the customer obtains control of the products. Performance obligations are also generally settled quickly after the purchase order acceptance, therefore the value of unsatisfied performance obligations at the end of any reporting period is generally immaterial.
We consider variable consideration in establishing the transaction price. Forms of variable consideration applicable to our arrangements include sales returns, rebates, volume-based bonuses, and prompt pay discounts. We use historical information along with an analysis of the expected value to properly calculate and to consider the need to constrain estimates of variable consideration. Such amounts are included as a reduction to revenue from the sale of products in the periods in which the related revenue is recognized and adjusted in future periods as necessary.
Practical Expedients
Our payment terms for sales direct to distributors are substantially less than the one-year collection period that falls within the practical expedient in determination of whether a significant financing component exists.
Note 4 – Property, Plant and Equipment
The following is a summary of equipment, at cost, less accumulated depreciation at September 30, 20172021, and December 31, 2016:2020:
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Autos | $ | 64,458 | $ | 64,458 | ||||
| Medical equipment | 5,000 | 5,000 | ||||||
| Other equipment | 8,774 | 8,774 | ||||||
| 78,232 | 78,232 | |||||||
| Less accumulated depreciation | 73,478 | 62,407 | ||||||
| $ | 4,754 | $ | 15,825 | |||||
Summary of Property, Plant and Equipment
| September 30, 2021 | December 31, 2020 | |||||||
| Autos | $ | 64,458 | $ | 64,458 | ||||
| Medical equipment | 13,969 | 13,969 | ||||||
| Other equipment | 11,367 | 11,367 | ||||||
| Property, Plant and Equipment, gross | 89,794 | 89,794 | ||||||
| Less accumulated depreciation | 89,794 | 88,214 | ||||||
| Property, Plant and Equipment, net | $ | - | $ | 1,580 | ||||
Depreciation expense for the nine months ended September 30, 2021, and 2020 was $1,580 and $3,432, respectively.
| 12 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
Note 5 – Patents.
In December 2017, we acquired from Rio Grande Neurosciences, Inc. (RGN) a patent portfolio for $4,500,000. The earliest patents expire in 2024. The following is a summary of patents less accumulated amortization at September 30, 2021, and 2016December 31, 2020:
Schedule of Patents
| September 30, 2021 | December 31, 2020 | |||||||
| Patents | $ | 4,500,000 | $ | 4,500,000 | ||||
| Less accumulated amortization | 2,425,916 | 1,940,732 | ||||||
| Patents, net | $ | 2,074,084 | $ | 2,559,268 | ||||
Amortization expense associated with patents was $11,071$485,184 for the nine months ended September 30, 2021, and $11,876, respectively. Repairs and maintenance are charged2020.
The estimated future amortization expense related to expensepatents as incurred while improvements are capitalized. Upon the sale, retirement or disposal of fixed assets, the accounts are relievedSeptember 30, 2021, is as follows:
Schedule of the cost and the related accumulated depreciation with any gain or loss recorded to the consolidated statements of operations.Estimated Future Amortization Expense
| Twelve Months Ending September 30, | Amount | |||
| 2021 | $ | 646,910 | ||
| 2022 | 646,910 | |||
| 2023 | 646,910 | |||
| 2024 | 133,354 | |||
| Total | $ | 2,074,084 | ||
Note 3 - 6- Notes Payable and Long Term Loan
Notes Payable
During the nine months ended September 30, 2017,2021, the Company issued eleven Convertible Notes (“Variable Notes”)five (5) fixed rate promissory notes totaling $1,667,500$475,000 for funding of $475,000 with original terms ranging from sixof twelve months to one year withand interest rates equal to 10%,of 15%. The holders of the promissory notes can convert the outstanding unpaid principal and accrued interest at a variablefixed conversion rate, with a discount of 30% of the Company’s common stock based on the terms included in the Variable Notes. The Variable Notes contain a prepayment option, which enables the Companysubject to prepay the note subsequent to issuance at a premium of 125%.standard anti-dilution features.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
During the nine months ended September 30, 2017, an investor2021, the Company amended the terms of two of its promissory notes to accelerate the conversion feature and amend the conversion price of the instruments. The Company recorded the modification in accordance with ASC 470-50 Debt-Modifications and Extinguishments and recorded $58,407 as loss from debt extinguishment in the Company’s Variable Notes purchased from another holdercondensed consolidated statements of the Company’s Variable Notes an aggregate of $920,000 principal and $39,570 of accrued interest with terms that extended the maturities to one-year and increased the interest rate from 6% to 10% and contains a prepayment option, which enables the Company to prepay the note subsequent to issuance. As a result of this modification, the Company recognized a gain on debt extinguishment of $2,358,919 during the nine months ended September 30, 2017.operations.
During the nine months ended September 30, 2017,2021, the Company entered into a settlement agreementsettled one of its promissory notes by issuing restricted shares of the Company’s common stock with a holderfifteen percent (15%) make-whole provision. The Company recorded a gain on debt extinguishment of two $33,000 convertibleapproximately $128,000.
| 13 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
During the nine months ended September 30, 2021, the Company paid $3,000 in cash for one of its fixed rate promissory notes totaling $66,000notes.
During the nine months ended September 30, 2021, the Company converted $358,443 in principal and $11,400$99,892 in accrued but unpaid interest wherein the Company repaid in full the principal and accrued interest balance with a paymentinto shares of $90,000. In accordance with FASB ASC 470-50, Debt modifications and Extinguishments, the Company recognized a $58,115 gain on extinguishment of debt in connection with this settlement agreement.common stock.
The gross amount of all Variable Notesconvertible notes with variable conversion rates outstanding atas of September 30, 20172021 is $2,495,315.$4,770,926, of which $2,660,476 are past maturity.
Notes payable to a former related party in the aggregate amount of $170,000 $132,600 were extended.outstanding at September 30, 2021, which are past maturity date. The notes bear interest between 10% and 12% per annum. During the nine months ended September 30, 2021, the Company paid $10,400 in principal to this former related party.
As of September 30, 2017, other2021, fixed rate notes payable outstanding totaled $974,903, all$1,292,154, of which are$85,154 is past maturity.
Schedule of Notes Payable
| September 30, | December 31, | |||||||||||||||
| 2017 | 2016 | September 30, 2021 | December 31, 2020 | |||||||||||||
| Notes payable at beginning of period | $ | 3,193,956 | $ | 2,333,751 | $ | 6,835,196 | $ | 6,874,795 | ||||||||
| Notes payable issued | 1,667,500 | 1,776,895 | 475,000 | 1,364,611 | ||||||||||||
| Default interest added to note payable | - | 62,500 | ||||||||||||||
| Accrued interest payable added to note payable | 39,570 | - | ||||||||||||||
| Liquidated damages | - | 452,095 | ||||||||||||||
| Note modification | - | 25,190 | ||||||||||||||
| Loan fees added to note payable | - | 120,389 | ||||||||||||||
| Repayments of notes payable in cash | (13,400 | ) | (22,000 | ) | ||||||||||||
| Settlements on note payable | - | (55,000 | ) | (117,770 | ) | (697,253 | ) | |||||||||
| Repayments of notes payable in cash | (96,000 | ) | (241,500 | ) | ||||||||||||
| Less amounts converted to stock | (1,164,808 | ) | (682,690 | ) | (358,443 | ) | (1,282,631 | ) | ||||||||
| Notes payable at end of period | 3,640,218 | 3,193,956 | 6,820,583 | 6,835,196 | ||||||||||||
| Less debt discount | (920,773 | ) | (1,145,849 | ) | (48,927 | ) | (201,157 | ) | ||||||||
| $ | 2,719,445 | $ | 2,048,107 | $ | 6,771,656 | $ | 6,634,039 | |||||||||
| Notes payable issued to related parties | $ | 170,000 | $ | 170,000 | ||||||||||||
| Notes payable issued to a former related party | $ | 132,600 | $ | 143,000 | ||||||||||||
| Notes payable issued to non-related parties | $ | 2,549,445 | $ | 1,878,107 | $ | 6,639,056 | $ | 6,491,039 | ||||||||
The maturity dates on the notes payablenotes-payable are as follows:
Schedule of Maturity Dates of Notes Payable
| Notes to | Notes to | |||||||||||||||||||||||
| 12 months ending, | Related parties | Non-related parties | Total | Former Related party | Non-related parties | Total | ||||||||||||||||||
| �� | ||||||||||||||||||||||||
| September 30, 2018 | $ | 170,000 | $ | 3,470,218 | $ | 3,640,218 | ||||||||||||||||||
| Past due | $ | 132,600 | $ | 3,370,533 | $ | 3,503,133 | ||||||||||||||||||
| September 30, 2022 | - | 3,317,450 | 3,317,450 | |||||||||||||||||||||
| $ | 170,000 | $ | 3,470,218 | $ | 3,640,218 | $ | 132,600 | $ | 6,687,983 | $ | 6,820,583 | |||||||||||||
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
Long Term LoanNote 7 - Shareholders’ Deficit
Preferred Stock
The Company has financed the purchase of an automobile. The maturity dates on the loan are as follows:
| Twelve months ending, | ||||
| September 30, 2018 | $ | 7,355 | ||
| $ | 7,355 | |||
| Current portion | $ | 7,355 | ||
| Long term portion | $ | - | ||
Note 4 - Shareholders’ Deficit
Increase in Authorized Shares
On January 17, 2017, an increase in authorized capital stock from 250,000,000 shares to 500,000,000 shares became effective.
Series B Convertible Preferred Stock
At September 30, 2017, there are 50,000 shares of Series B Convertiblepreferred stock which have been designated as follows:
Schedule of Preferred Stock (“Series B”) which are authorized and convertible into a like amount of common shares. None of the Series B have been issued or are outstanding at September 30, 2017.
| Number of | Number of Shares Outstanding | |||||||||||||||
| Shares Authorized | at September 30, 2021 | Par Value | Liquidation Value | |||||||||||||
| Series AA | 1,000,000 | 25,000 | $ | 0.0010 | $ | - | ||||||||||
| Preferred Series B | 50,000 | 600 | $ | 0.0001 | $ | 100 | ||||||||||
| Preferred Series C | 8,000 | 738 | $ | 0.0001 | $ | 1,000 | ||||||||||
| Preferred Series D | 20,000 | 305 | $ | 0.0001 | $ | 1,000 | ||||||||||
| Undesignated | 3,922,000 | - | - | - | ||||||||||||
Common Stock
The Company has entered into consulting agreements with various consultants for service to be provided to the Company. The agreements stipulate a monthly fee and a certain number of shares that the consultant vests in over the term of the contract. The consultant is issued a prorated number of shares of common stock at the beginning of the contract, which the consultant earns over a three-month period. At the anniversary of each quarter, the consultant is issued a new allotment of common stock during the first 3 years of engagement and discretionary bonuses. In accordance with ASC 505-50 – Equity-Based Payment to Non-Employees, the common stock shares issued to the consultant are valued upon their vesting, with interim estimates of value as appropriate during the vesting period. During the nine months ended September 30, 2017, the Company issued 3,598,996 shares of common stock with a value of $195,555 related to these consulting agreements.
During the nine months ended September 30, 2017, the Company issued pursuant to two private placement offerings 32,200,069 shares of common stock and the same number of warrants for cash of $727,750 and conversion of notes and accrued interest in the amount of $66,367. The Company also issued 106,110,372 shares of common stock for the conversion of notes and accrued interest of $1,108,321, which resulted in a loss on debt extinguishment of $269,255 during the nine months ended September 30, 2017.
Also, during the nine months ended September 30, 2017, the Company issued 126,618 shares of common stock valued at $7,530 related to the extension of outstanding notes and lock-up agreements, 6,125,000 shares of common stock valued at $202,681 for partial repayment of a $175,000 accrued liability in connection with a variable note settlement agreement entered into in December 2016, and 1,565,816 shares of common stock valued at $86,994 for settlement of the principal and interest outstanding on two notes payable.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
Series AA Preferred Shares
On February 22, 2013, the Board of Directors of the Company authorized an amendment to the Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”), in the form of a Certificate of Designation that authorized the issuance of up to one million (1,000,000)() shares of a new series of preferred stock, par value $0.0001$ per share, designated “Series AA Super Voting Preferred Stock,” for which the board of directors established the rights, preferences and limitations thereof.
Each holder of outstanding shares of Series AA Super Voting Preferred Stock shall be entitled to one hundred thousand (100,000) votes for each share of Series AA Super Voting Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company. During the quarter ended The Series AA Super Voting Preferred Stockholders will receive no dividends nor any value on liquidation. As of September 30, 2017, the Company issued 4,0002021, there were shares of Series AA Preferred stock outstanding.
Series B Convertible Preferred Stock
On February 7, 2017, the Company filed a certificate of designation for shares of Series B Convertible Preferred Stock to an officerdesignated as Series B (“Series B”) which are authorized and directorconvertible, at the option of the Company for $4.holder, commencing six months from the date of issuance into common shares and warrants. For each share of Series B, the holder, on conversion, shall receive the stated value divided by % of the market price on the date of purchase of Series B and a three-year warrant exercisable into up to a like amount of common shares with an exercise price of % of the market price as defined in the Certificate of Designation. Dividends shall be paid only if dividends on the Company’s issued and outstanding Common Stock are paid, and the amount paid to the Series B holder will be as though the conversion shares had been issued. The Series B holders have no voting rights. Upon liquidation, the holder of Series B, shall be entitled to receive an amount equal to the stated value, $100 per share, plus any accrued and unpaid dividends thereon before any distribution is made to Series C Secured Redeemable Preferred Stock or common stockholders. As of September 30, 2017, there were 5,0002021, shares of Series AAB are outstanding.
Series C Convertible Redeemable Preferred Stock outstanding.
WarrantsOn December 22, 2017, the Company filed a certificate of designation for shares of Series C Secured Redeemable Preferred Stock (“Series C”). Each share of the C Preferred is entitled to receive a $ quarterly dividend commencing March 31, 2018, and each quarter thereafter and is to be redeemed for the stated value, $ per share, plus accrued dividends in cash (i) at the Company’s option, commencing one year from issuance and (ii) mandatorily as of December 31, 2019. Management determined that the Series C should be classified as liability per the guidance in ASC 480 Distinguishing Liabilities from Equity as of December 31, 2019. On January 29, 2020, the Company filed the amended and restated certificate of designation fort its Series C Secured Redeemable Preferred Stock. The amendment changed the rights of the Series C by (a) removing the requirement to redeem the Series C, (b) removing the obligation to pay dividends on the Series C, (c) Allowing the holders of shares of Series C to convert the stated value of their shares into common stock of the Company at 75% of the closing price of such common stock on the day prior to the conversion. The C Preferred does not have any rights to vote with the common stock.
| 15 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
Upon liquidation, the holder of Series C, shall be entitled to receive an amount equal to the stated value, $1,000 per share, plus any accrued and unpaid dividends thereon before any distribution is made to common stockholders but after distributions are made to holders of Series B.
During the nine months ended September 30, 2017, in conjunction with the sale of common stock2021, and issuance of notes,2020, the Company issued threeconverted and five-year common stock purchase warrants to acquire up to 32,200,069 shares of Series C into and shares of common stock. These warrantsAs of September 30, 2021, there are shares of Series C outstanding.
Series D Convertible Preferred Stock
On November 11, 2019, the Company filed a certificate of designation for shares of Series D Convertible Preferred Stock designated as Series D (“Series D”), which are authorized and convertible, at the option of the holder, at any time from the date of issuance, into shares of common shares. On or prior to August 1, 2020, for each share of Series D, the holder, on conversion, shall receive a number of common shares equal to 0.01% of the Company’s issued and outstanding shares on conversion date and for conversion on or after August 2, 2020, the holder shall receive conversion shares as though the conversion date was August 1, 2020, with no further adjustments for issuances by the Company of common stock after August 1, 2020, except for stock split or reverse stock splits of the common stock. Management classified the Series D in permanent equity as of September 30, 2021.
The Series D holders have exerciseno voting rights. Upon liquidation, the holder of Series D, shall be entitled to receive an amount equal to the stated value, $1,000 per share, plus any accrued and unpaid dividends thereon before any distribution is made to common stockholders. The Company did not issue any shares of Series D in the nine months ended September 30, 2021. As of September 30, 2021, there are shares of Series D outstanding.
| 16 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
Common Stock
Equity Purchase Line Agreement
On May 18, 2020, the Company and Cavalry Fund I LP (the “investor”) entered into an Equity Line Purchase Agreement (“ELPA”) pursuant to which the investor committed to purchase, subject to certain restrictions and conditions, up to $10,000,000 (the “Commitment”) worth of the Company’s common stock, over a period of 24 months from the effectiveness of the registration statement registering the resale of shares purchased by the investor pursuant to the ELPA.
The Company agreed to issue shares of its common stock (the “commitment shares”) to the investor having a market value of 5% of the commitment ($ and shares) based on the market price of the shares at the execution of the ELPA to be delivered in three tranches of shares on: (i) the execution of the ELPA; (ii) thirty days after the effectiveness of the registration statement to be filed under the RRA (the “registration right agreement” or the “registration statement”), and (iii) 90 trading days after the effectiveness of the registration statement with the balance of the commitment shares to be issued pro-rata over the first $ of puts in accordance with a formula set forth in the ELPA.
Under the ELPA the Company has the right to submit a regular purchase notice to the investor as often as every business day. The payment for the shares covered by each put notice will generally occur on the day following the put notice. The ELPA contains provisions which allow for the Company to make additional puts beyond the regular purchase amount at greater discounts to the market price of the common stock as forth in the ELPA.
The ELPA requires the Company to apply at least 50% of the proceeds of puts to the payment of certain variable rate convertible notes issued by the Company. The Company does not anticipate that it will raise any funds under the ELPA.
Activity during the nine months ended September 30, 2017, the Company issued five-year common stock purchase warrants to acquire up to 1,100,678 shares of common stock valued at $71,113 related to consulting services received by the Company. These warrants have exercise prices ranging from $0.0961 to $0.2669 per share. The balance of all warrants outstanding as of September 30, 2017 is as follows:2021
| Outstanding Warrants | ||||||||
| Weighted Average | ||||||||
| Exercise Price | ||||||||
| Shares | Per Share | |||||||
| Outstanding at January 1, 2017 | 9,494,940 | $ | 0.33 | |||||
| Granted | 33,300,747 | $ | 0.24 | |||||
| Cancelled | - | $ | - | |||||
| Exercised | - | $ | - | |||||
| Outstanding at September 30, 2017 | 42,795,687 | $ | 0.26 | |||||
| Exercisable at September 30, 2017 | 42,795,687 | $ | 0.26 | |||||
Stock Options
During the nine months ended September 30, 2017,2021, the Company grantedissued shares of common stock optionsfor the conversion of principal notes and accrued interest in the amount of $458,335.
During the nine months ended September 30, 2021, the Company issued shares of common stock labeled as commitment shares in connection with the issuance of promissory notes.
During the nine months ended September 30, 2021, the Company issued shares of common stock pursuant to independent contractors exercisable into up to 25,272,305securities purchase agreement for total consideration of $.
During the nine months ended September 30, 2021, the Company issued shares of common stock with exercise prices ranging from $0.0269a value of $33,333, related to $0.054 per share, lives ranging from threethe conversion of Series C.
During the nine months ended September 30, 2021, the Company issued shares of common stock with a value of $142,424, related to ten years, and cashless exercise rights andthe settlement of debts, of which shares of common stock were valued at $1,139,403 usingissued with a fair value of $84,697 to a former related party.
During the Black Scholes option pricing model. Thenine months ended September 30, 2021, the Company issued shares of common stock options vested on grant and were expensed in fullconnection with the consulting agreement.
Activity during the nine months ended September 30, 2017.2020
During the nine months ended September 30, 2020, pursuant to the execution of the ELPA, the Company issued shares of common stock with a value of $97,918.
During the nine months ended September 30, 2020, the Company issued shares of common stock for the conversion of notes and accrued interest in the amount of $1,381,650.
During the nine months ended September 30, 2020, the Company issued shares of common stock with a value of $1,400,934, related to the conversion of Series C.
During the nine months ended September 30, 2020, the Company issued shares of common stock to Series C with a value of $8,152 to convert into shares of common stock.
| 17 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
In addition, duringDuring the nine months ended September 30, 2017,2020, the Company issued shares of common stock optionswith a value of $39,500 related to independent contractors exercisable into upservices.
During the nine months ended September 30, 2020, the Company issued shares with a value of $58,855 to 67,931,064one investor to exchange one variable convertible note with remaining principal of $283,000 past maturity for a fixed rate convertible note with principal of $525,000 and maturing one year from issuance. The Company recorded a loss on debt extinguishment of $151,496 for the fair value of the shares issued in accordance with guidance in ASC 470-50 Debt-Modifications and Extinguishments.
During the nine months ended September 30, 2020, the Company issued shares of common stock in exchange for the conversion of $1,467,311 of deferred compensation due$ cash pursuant to the independent contractors. TheseSecurities Purchase Agreement.
During the nine months ended September 30, 2020, the Company issued shares of common stock for total value of $165,000 in exchange for stock options have an exerciseregarding the ambiguity of price adjustment in the event of $0.0216 a reverse split that the Company completed on December 20, 2019.
During the nine months ended September 30, 2020, the Company modified the terms of its promissory note with one investor, which extended the maturity date of its promissory note and the issuance of restricted stock with a fair value of $. The recording of this transaction resulted in a loss on debt extinguishment of $55,000 per share, a three-year life and cashless exercise rights. These options vested on grant. ASC 470-60Troubled Debt Restructurings.
Stock Options
Schedule of Stock Options Outstanding
| Weighted Average | Weighted Average | Aggregate | Weighted Average | Weighted Average Remaining | Aggregate | |||||||||||||||||||||||||||
| Exercise Price | Remaining Contractual | Intrinsic | Exercise Price | Contractual | Intrinsic | |||||||||||||||||||||||||||
| Options | Per Share | Term (years) | Value | Options | Per Share | Term (years) | Value | |||||||||||||||||||||||||
| Outstanding at January 1, 2017 | - | $ | - | |||||||||||||||||||||||||||||
| Outstanding at January 1, 2021 | 3,014,080 | $ | 0.37 | - | ||||||||||||||||||||||||||||
| Granted | 93,203,369 | $ | 0.029 | - | $ | - | ||||||||||||||||||||||||||
| Cancelled | - | $ | - | (350 | ) | $ | 47.00 | |||||||||||||||||||||||||
| Exercised | - | $ | - | - | $ | - | ||||||||||||||||||||||||||
| Outstanding at September 30, 2017 | 93,203,369 | $ | 0.029 | 4.29 | $ | 2,674,937 | ||||||||||||||||||||||||||
| Outstanding at September 30, 2021 | 3,013,730 | $ | 0.37 | $ | ||||||||||||||||||||||||||||
| Exercisable at September 30, 2017 | 93,203,369 | $ | 0.029 | 4.29 | $ | 2,674,937 | ||||||||||||||||||||||||||
| Exercisable at September 30, 2021 | 1,263,730 | $ | 0.67 | $ | ||||||||||||||||||||||||||||
The following assumptions were used at September 30, 2017 to value the stock options using the Black Scholes option pricing model.
Note 5 – Related Party Transactions
One officer and executive of the Company has entered into note payable agreement with the Company. The balance of notes payable from related parties at September 30, 2017 is $170,000.
As of September 30, 2017 and December 31, 2016, the balance of two executive officers and the operations manager deferredShare-based compensation is approximately $1,155,794 and $1,861,327, respectively. Duringexpense for the nine months ended September 30, 2017,2021, totaled approximately $.
The total unrecognized compensation expense amounts to approximately $137,000 and should be recognized evenly over 1.65 years.
On June 11, 2020, the Board of Directors approved the issuance of non-incentive stock options to officers, directors, and key consultants. The key terms and conditions of the award have not been mutually understood and agreed upon, and as a result, the Company has not recognized stock compensation for such award for the nine months ended September 30, 2021.
Warrants
A summary of the status of the warrants granted under these individuals convertedagreements at September 30, 2021, and changes during the nine months then ended is presented below:
Schedule of Warrants Outstanding
| Outstanding Warrants | ||||||||||||
| Weighted Average | Weighted Average Remaining | |||||||||||
| Exercise Price | Contractual | |||||||||||
| Shares | Per Share | Term (years) | ||||||||||
| Outstanding at January 1, 2021 | 39,295 | $ | 200.72 | |||||||||
| Granted | - | $ | - | - | ||||||||
| Cancelled | (13,180 | ) | $ | 449.15 | - | |||||||
| Exercised | - | $ | - | |||||||||
| Outstanding at September 30, 2021 | 26,115 | $ | 76.76 | |||||||||
| Exercisable at September 30, 2021 | 26,115 | $ | 76.76 | |||||||||
| 18 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
Note 8 – Related Party and former related parties Transactions.
One executive officer of the Company has agreed to defer a totalportion of $660,000his compensation until cash flow improves. As of September 30, 2021, the balance of the deferred compensation was $443,289, which reflects $225,000 accrual of deferred compensation into three-year stock options exercisable into upand approximately $119,179 cash repayment of deferred compensation during the nine months ended September 30, 2021.
One former executive of the Company has agreed to 30,555,555 sharesdefer a portion of common stock at an exercise pricehis compensation until cash flow improves. As of $0.0216 per share.September 30, 2021, the balance of his deferred compensation was $632,257. No activity occurred during the nine months ended September 30, 2021.
From time-to-time executive officers and the operations managerofficer of the Company advance monies to the Company to cover costs. The balance of short-term advances due to one officer of the Company at September 30, 2021, was $6,529 and is included in the Company’s accounts payable balance as of September 30, 2021. During the nine months ended September 30, 2017, officers2021, the Company’s executive officer advanced $12,650an aggregate amount of funds$13,405 for corporate expenses and notes repayment, of which $13,405 was repaid back as of September 30, 2021.
As of September 30, 2021, notes payable remain outstanding to the Company of which $11,500 were repaid during the period. The balance of short-term advances due to executive officersformer President of the Company, atin the amount of $132,600. As of September 30, 2017 is $6,973.2021, accrued interests on these notes payable totaled $64,852, and are included in accrued expenses on the condensed consolidated balance sheet.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
During the quarter ended September 30, 2017, 4,000 shares of Series AA Preferred Stock was issued to an officer and director of the Company for $4.
Note 69 – Fair Value Measurements
The Company has issued Variable Debentures which contained variable conversion rates based on unknown future prices of the Company’s common stock. This results in a conversion feature. The Company measures the conversion feature using the Black Scholes option pricing model using the following assumptions:
Schedule of Conversion Feature Using Black Scholes Option Pricing Model
| Nine months ended September 30, | ||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | 2021 | 2020 | |||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
| Expected term | .01 months - 1 year | 1 month - 1 year | .01 months - 1 years | 1 month - 2.2 years | 1 – 4 months | 1 – 6 months | ||||||||||||||||||
| Exercise price | $0.0130-$0.0182 | $0.0690-$0.1051 | $0.0085-$0.0385 | $0.0645-$0.28 | $0.012-$0.030 | $0.05-$0.76 | ||||||||||||||||||
| Expected volatility | 189%-200% | 255%-276% | 189%-201% | 220%-276% | 177%-206% | 157%-249% | ||||||||||||||||||
| Expected dividends | None | None | None | None | NaN | NaN | ||||||||||||||||||
| Risk-free interest rate | 1.05% to 1.31% | 0.52% to 0.59% | 1.03% to 1.31% | 0.45% to 1.06% | 0.06% to 0.13% | 0.03% to 1.54% | ||||||||||||||||||
| Forfeitures | None | None | None | None | NaN | NaN | ||||||||||||||||||
The time period over which the Company will be required to evaluate the fair value of the conversion feature is eight to twenty-four months or conversion.
The assumptions used in determining fair value represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change, including changes in the market value of the Company’s common stock, managements’ assessment, or significant fluctuations in the volatility of the trading market for the Company’s common stock, the Company’s fair value estimates could be materially different in the future.
The Company computes the fair value of the derivative liability at each reporting period and the change in the fair value is recorded as non-cash expense or non-cash income. The key component in the value of the derivative liability is the Company’s stock price, which is subject to significant fluctuation and is not under its control. The resulting effect on net loss is therefore subject to significant fluctuation and will continue to be so until the Company’s Variable Debentures, which the convertible feature is associated with, are converted into common stock or paid in full with cash. Assuming all other fair value inputs remain constant, the Company will record non-cash expense when its stock price increases and non-cash income when its stock price decreases.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
The following table presents changes in the liabilities with significant unobservable inputs (level 3) for the nine months ended September 30, 2017:2021:
| Derivative | ||||
| Liability | ||||
| Balance December 31, 2016 | $ | 1,927,752 | ||
| Issuance of convertible debt | 5,781,056 | |||
| Settlements by debt extinguishment | (7,437,183 | ) | ||
| Change in estimated fair value | 6,945,434 | |||
| Balance September 30, 2017 | $ | 7,217,059 | ||
Schedule of Fair Value of Derivative Liability
| Derivative | ||||
| Liability | ||||
| Balance December 31, 2020 | $ | 4,202,597 | ||
| Extinguishment | (133,386 | ) | ||
| Debt conversion | (585,857 | ) | ||
| Change in estimated fair value | 2,962,795 | |||
| Balance September 30, 2021 | $ | 6,446,149 | ||
Accounting guidance on fair value measurements and disclosures defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system, and defines required disclosures. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts business.
| 20 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
The Company'sCompany’s balance sheet contains derivative and warrant liabilities that are recorded at fair value on a recurring basis. The three-level valuation hierarchy for disclosure of fair value is as follows:
Level 1: uses quoted market prices in active markets for identical assets or liabilities.
Level 2: uses observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: uses unobservable inputs that are not corroborated by market data.
The fair value of the Company’s recorded derivative liability is determined based on unobservable inputs that are not corroborated by market data, which require a Level 3 classification. A Black Scholes option pricing model was used to determine the fair value. The Company records derivative liability on the condensed consolidated balance sheets at fair value with changes in fair value recorded in the condensed consolidated statements of operation.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
The following table presents balances in the liabilities with significant unobservable inputs (Level 3) atas of September 30, 2017:2021:
Schedule of Liabilities Significant Unobservable Inputs
| Fair Value Measurements Using | Fair Value Measurements Using | |||||||||||||||||||||||||||||||
| Quoted Prices in | Significant Other | Significant | Quoted Prices in | |||||||||||||||||||||||||||||
| Active Markets for | Observable | Unobservable | Active Markets for | Significant Other | Significant | |||||||||||||||||||||||||||
| Identical Assets | Inputs | Inputs | Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||||||||||||||
| As of September 30, 2017 | ||||||||||||||||||||||||||||||||
| As of September 30, 2021 | ||||||||||||||||||||||||||||||||
| Derivative liability | $ | - | $ | - | $ | 7,217,059 | $ | 7,217,059 | $ | - | $ | - | $ | 6,446,149 | $ | 6,446,149 | ||||||||||||||||
| Total | $ | - | $ | - | $ | 7,217,059 | $ | 7,217,059 | $ | - | $ | - | $ | 6,446,149 | $ | 6,446,149 | ||||||||||||||||
Note 710 – Commitments and Contingencies
Legal Matters
The Company may become involvedis a defendant in variousa case brought by Auctus Fund, LLC seeking to enforce a variable rate convertible note dated in August 2019, which was in the original amount of $275,250 and claiming damages in excess of $500,000, including other unspecified damages and attorney fees. The Company is vigorously defending the action and has filed an answer with counterclaims. While the matter is in its early stages and there are always uncertainties in litigation, management does not believe that the litigation will have a result significantly adverse to the Company. As of September 30, 2021, the balance of the variable rate convertible note is approximately $164,000, excluding approximately $31,000 in accrued interest.
The Company is subject to certain legal proceedings, which it considers routine to its business activities. As of September 30, 2021, the Company believes, after consultation with legal counsel, that the ultimate outcome of such legal proceedings, whether individually or in the normal courseaggregate, is not likely to have a material adverse effect on the Company’s financial position, results of business.operations or liquidity.
OnNote 11 – Concentrations.
Sales
During the nine months ended September 19, 2017, the Company entered into30, 2021, we had two significant customers, which accounted for approximately 61% of sales.
Supplier
We also have a Settlement Agreement with Kodiak Capital Group, LLCsingle source for $80,000 relativeour bioelectric medical devices, which account for 100% of our sales. The interruption of products provided by this supplier would adversely affect our business and financial condition unless an alternative source of products could be found.
| 21 |
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to the 2015 EPA Agreement.Condensed Consolidated Financial Statements (continued)
Accounts Receivable
At September 30, 2021, we had one customer which accounted for approximately 64% of our account receivable balances.
Note 812 – Subsequent Events
Subsequent to September 30, 2017,2021, an aggregate of 74,026 shares of restricted common stock were issued for services.
Subsequent to September 30, 2017, the Company issued 10,160,435 shares of its restricted common stock and 9,697,473 warrants pursuant to a Private Placement Memorandum and private offerings for $429,990 in cash and $30,000 of converted notes.
Subsequent to September 30, 2017, an aggregate of 10,320,197 shares of restricted common stock were issued on the conversion of $160,000 $35,153 of principal and $7,600 $260 of accrued interest pursuant to one Variable Note.fixed promissory notes.
Subsequent to September 30, 2017, an2021, the Company executed two convertible notes for aggregate principal of 252,676 shares$175,000, carrying coupon of restricted common stock were issued pursuant to leak out agreements.15%, with due date one year from issuance date, convertible six months from issuance date at a fixed conversion rate.
Subsequent to September 30, 2017,2021, the Company cancelled 196,078agreed to issue 1,225,000 commitment shares of restricted common stock priced at $12,500 previously issued under a subscriptionpursuant to securities purchase agreement and 196,078 warrants to purchaseexecuted in conjunction with the Company’s common stock.
Subsequent totwo convertible notes executed post September 30, 2017,2021.
The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company received $195,000 of funding in connection with $210,000 of convertible notes issued.determined that there were no other reportable subsequent events to be disclosed besides those noted above.
| 22 |
Subsequent to September 30, 2017, the Company issued a final tranche of 600,000 shares as full repayment on the $175,000 accrued liability in connection with a variable note settlement agreement entered into in December 2016.
As a result of these issuances the total number of shares outstanding is 305,274,764.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Notice Regarding Forward Looking Statements
The information contained in Item 2 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” and variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.
Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Overview
Endonovo Therapeutics, Inc. (the(Endonovo or the “Company” or “ETI”) operatesis an innovative biotechnology company that has developed a bio-electronic approach to regenerative medicine. Endonovo is a growth stage company whose stock is publicly traded (OTCQB: ENDV).
The Company develops, manufactures and distributes evolutionary medical devices focused on the rapid healing of wounds and reduction of pain, edema and inflammation in two business segments: (1) intellectual property licensingthe human body. The Company’s non-invasive bioelectric medical devices are designed to target inflammation, cardiovascular diseases, chronic kidney disease, and commercialization;central nervous system disorders (“CNS” disorders).
The Company’s non-invasive Electroceutical® therapeutics device, SofPulse®, using pulsed short-wave radiofrequency at 27.12 MHz has been FDA-Cleared and (2) biomedical researchCE Marked for the palliative treatment of soft tissue injuries and development whichpost-operative plain and edema, and has included developmentCMS National Coverage for the treatment of its proprietarychronic wounds. The Company’s current portfolio of pre-clinical stage Electroceutical® therapeutics devices address chronic kidney disease, liver disease non-alcoholic steatohepatitis (NASH), cardiovascular and peripheral artery disease (PAD) and ischemic stroke.
Endonovo’s core mission is to transform the field of medicine by developing safe, wearable, non-invasive electrocuetical device.bioelectric medical devices that deliver the Company’s Electroceutical® Therapy. Endonovo’s bioelectric Electroceutical® devices harnesses bioelectricity to restore key electrochemical processes that initiate anti-inflammatory processes and growth factors in the body necessary for healing to rapidly occur.
| 23 |
Our present primary focus is the development, patenting and regulatory approval of our biomedical proprietary technology.
Going Concern
Our independent registered auditors included an explanatory paragraph in their opinion on our consolidated financial statements as of and for the fiscal year ended December 31, 20162020, that states that our ongoing losses and lack of resources causes substantial doubt about our ability to continue as a going concern.
The World Health Organization declared the Coronavirus outbreak a pandemic on March 11, 2020, and in the United States various emergency actions have been taken on the National, State and Local levels. The effects of this pandemic on the Company’s business are uncertain.
Critical Accounting Policies
A summary of our significant accounting policies is included in Note 1 of the “Notes to the Consolidated Financial Statements,” contained in our Form 10-K for the year ended December 31, 2020. Management believes that the consistent application of these policies enables us to provide users of the financial statements with useful and Estimates
We preparereliable information about our operating results and financial condition. The summary condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). In doing so, we have, which require us to make estimates and assumptions that affectassumptions. We did not experience any significant changes during the nine months ended September 30, 2021, in any of our reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changesCritical Accounting Policies from those contained in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss further below.
Use of estimates
In the opinion of management, the accompanying condensed consolidated balance sheets and related interim statements of operations, cash flows, and shareholders' deficits include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. The significant estimates were madeForm 10-K for the fair value of common stock issued for services, with notes payable arrangements in connection with note extension agreements, and as repayment for outstanding debts, in estimating the useful life used for depreciation and amortization of our long-lived assets, in the valuation of the derivative liability, and the valuation of deferred income tax assets. Actual results and outcomes may differ from management's estimates and assumptions.
Recently Issued Accounting Pronouncements
In August 2014, the FASB issued FASB ASU2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. FASB ASU 2014-15 changes to the disclosure of uncertainties about an entity’s ability to continue as a going concern. These changes require an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity’s ability to continue as a going concern. These changes became effective for the Company for the 2016 annual period. Management has evaluated the impact of the adoption of these changes and has determined there will be no material impact on the consolidated financial statements. Subsequent to adoption, this guidance will need to be applied by management at the end of each annual period and interim period therein to determine what, if any, impact there will be on the consolidated financial statements in a given reporting period.
In April 2015, the FASB issued ASU No 2015-3, Simplifying the Presentation of Debt Issuance Costs. This update changes the presentation of debt issuance costs in the balance sheet. ASU 2015-03 requires debt issuance costs related to a recognized debt obligation to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. Amortization of debt issuance costs will continue to be reported as interest expense. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”. This ASU clarified guidance in ASC 2015-03 stating that the SEC staff would not object to a company presenting debt issuance costs related to a line-of-credit arrangement on the balance sheet as a deferred asset, regardless of whether there were any outstanding borrowings at period-end. This update is effective for annual and interim periods beginning after December 15, 2015, which required us to adopt these provisions in the first quarter of 2016. This update was applied on a retrospective basis, wherein the balance sheet of each period presented was adjusted to reflect the effects of applying the new guidance. The adoption of this guidance did not have a material impact on our consolidated financial statements.
In November 2015, the FASB issued ASU No 2015-17, Income Taxes (Topic 740). The amendments in ASU 2015-17 change the requirements for the classification of deferred taxes on the balance sheet. Currently, GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company has early adopted this pronouncement for the fiscal reporting period ended December 31, 2016, and has reclassified the presentation2020.
New Accounting Pronouncements
See Note 1 of deferred income taxes in the prior periodNotes to conform to the current year classification in the consolidated balance sheets. As a resultCondensed Consolidated Financial Statements for further discussion of the Company having recognized a valuation reservenew accounting standards that have been adopted or are being evaluated for the entire deferred tax liability balance at September 30, 2017 and December 31, 2016, there is no impact of the presentation of deferred income taxes in our financial statements.future adoption.
In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update intends to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is evaluating the impact of the adoption of these changes will have on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in “Leases (Topic 840)” and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach.
The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
Results of Operations
ThreeNine Months ended September 30, 20172021, and 20162020.
| Three Months Ended September 30, | Favorable | Nine Months Ended September 30, | Favorable | |||||||||||||||||||||||||||||
| 2017 | 2016 | (Unfavorable) | % | 2021 | 2020 | (Unfavorable) | % | |||||||||||||||||||||||||
| Revenue | $ | 72,789 | $ | 154,296 | $ | (81,507 | ) | -52.8 | % | |||||||||||||||||||||||
| Cost of revenue | 6,124 | 18,320 | 12,196 | 66.5 | % | |||||||||||||||||||||||||||
| Gross profit | 66,665 | 135,976 | (69,311 | ) | -50.9 | % | ||||||||||||||||||||||||||
| Operating expenses | $ | 1,035,628 | $ | 1,310,748 | $ | 275,120 | -21.0 | % | 1,919,418 | 2,364,213 | 444,795 | 18.9 | % | |||||||||||||||||||
| Loss from operations | (1,035,628 | ) | (1,310,748 | ) | 275,120 | -21.0 | % | (1,852,753 | ) | (2,228,237 | ) | 375,484 | 16.9 | % | ||||||||||||||||||
| Other income (expense) | (5,636,476 | ) | (908,093 | ) | (4,728,383 | ) | 520.7 | % | ||||||||||||||||||||||||
| Other (expense) income | (3,648,471 | ) | 3,862,963 | (7,511,434 | ) | 194.5 | % | |||||||||||||||||||||||||
| Net income (loss) | $ | (6,672,104 | ) | $ | (2,218,841 | ) | $ | (4,453,263 | ) | 200.7 | % | |||||||||||||||||||||
| Net loss | $ | (5,501,224 | ) | $ | 1,634,726 | $ | (7,135,950 | ) | 436.5 | % | ||||||||||||||||||||||
Operating ExpensesRevenue
Our operating expenses forRevenue of the threeCompany’s SofPulse® product during the nine months ended September 30, 2017 were2021, was $72,789, a decrease of $81,507, or approximately $1,035,62853%, compared to $1,310,748$154,296 for the corresponding period of the previous year. The operating expenses were comprised primarily from consulting and professional fees for the development of our intellectual property and expenses related to being a public company. A significant portion of these fees were paid for with the issuance of restricted shares of common stock. During the threenine months ended September 30, 2017, 576,660 shares of common stock were issued2020.
Revenues for consulting services valuedour SofPulse® product is typically recognized at $15,720the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations. Revenue has been negatively impacted by the COVID-19 contagious disease outbreak in March 2020. We anticipate that revenue will increase in future periods as compared to 4,513,514 shares of common stock being issued for consulting services valued at $663,519, during the corresponding periodroll out of the previous year.SofPulse® product continues.
Other Income (Expense)Cost of Revenue
Other income (expense) forCost of revenue during the quarternine months ended September 30, 20172021, was expense$6,124, a decrease of $5,636,476$12,196 or 66.5% compared to expense of $908,093$18,320 for the quarternine months ended September 30, 2016.2020. Cost of revenue is recognized on those sales recorded as gross for which we are the principal in the transaction as opposed to net sales which reflect no cost of revenue. It is anticipated that cost of revenue will increase in future quarters as the roll out of the SofPulse® product continues.
Operating Expenses
Operating expenses decreased by $444,795 or 18.9%, to $1,919,418 for the nine months ended September 30, 2021, compared to $2,364,213 for the nine months ended September 30, 2020. This change was due primarily to a decrease in consulting fees of approximately $107,000 a decrease in stock-based compensation by approximately $244,000, a decrease in payroll expense by approximately $88,000.
Other Expense/Income
Other expense for the nine months ended September 30, 2021, was $3,648,471 compared an income of $3,862,963 for the nine months ended September 30, 2020. This change was due primarily to a change in valuation of our derivative liabilities and net of approximately $8.9 million offset by a decrease of approximately $0.9 million in interest expense resultingand a decrease of approximately $0.6 million in loss from the amortizationdebt extinguishment. We anticipate continued large fluctuations in other income/expense following quarterly re-evaluation of the discounts on notes payable. In addition, we had a loss on extinguishment of debt of $58,197 during the quarterderivative liabilities.
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Three Months ended September 30, 2017 compared to a loss2021, and 2020.
Three Months Ended September 30, | Favorable | |||||||||||||||
| 2021 | 2020 | (Unfavorable) | % | |||||||||||||
| Revenue | $ | 7,790 | $ | 39,980 | $ | (32,190 | ) | -80.5 | % | |||||||
| Cost of revenue | 3,103 | 760 | 2,343 | 308.2 | % | |||||||||||
| Gross profit | 4,687 | 39,220 | (34,533 | ) | -88.0 | % | ||||||||||
| Operating expenses | 696,943 | 986,019 | 289,076 | 29.4 | % | |||||||||||
| Loss from operations | (692,256 | ) | (946,799 | ) | 254,543 | 26.9 | % | |||||||||
| Other income (expense) | (831,418 | ) | (122,242 | ) | (709,176 | ) | -580.2 | % | ||||||||
| Net income (loss) | $ | (1,523,674 | ) | $ | (1,069,041 | ) | $ | (454,633 | ) | 42.5 | % | |||||
Revenue
Revenue of $42,507the Company’s SofPulse® product during the quarterthree months ended September 30, 2016.2021, was $7,790, a decrease of $32,190, or 80.5%, compared to $39,980 for the three months ended September 30, 2020. Revenues for our SofPulse® product is typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations. Revenue has been negatively impacted by the COVID-19 contagious disease outbreak in March 2020. We anticipate that revenue will continue to increase in future periods as the roll out of the SofPulse® product continues.
Cost of Revenue
Cost of revenue during the three months ended September 30, 2021, was $3,103, an increase of $2,343 or 308.2% compared to $760 for the three months ended September 30, 2020. Cost of revenue is recognized on those sales recorded as gross for which we are the principal in the transaction as opposed to net sales which reflect no cost of revenue. It is anticipated that cost of revenue will increase in future quarters as the roll out of the SofPulse® product continues.
Operating Expenses
Operating expenses decreased by $289,076 or 29.4%, to $696,943 for the three months ended September 30, 2021, compared to $986,019 for the three months ended September 30, 2020. This change was due primarily to a decrease in stock-based compensation of approximately $230,000 and consulting fees by approximately $72,000.
Other Expense
Other expense for the three months ended September 30, 2021, was $831,418 compared to $122,242 for the three months ended September 30, 2020. This change was due primarily to a change in valuation of our derivative liabilities of approximately $962,000 coupled with a decrease in interest expense of approximately $207,000. We anticipate continued large fluctuations in other income (expense) as a result of quarterly re-evaluation of these derivative liabilities.
Nine months ended September 30, 2017 and 2016
| Nine Months Ended September 30, | Favorable | |||||||||||||||
| 2017 | 2016 | (Unfavorable) | % | |||||||||||||
| Operating expenses | $ | 3,770,929 | $ | 4,778,109 | $ | 1,007,180 | 21.1 | % | ||||||||
| Loss from operations | (3,770,929 | ) | (4,778,109 | ) | 1,007,180 | 21.1 | % | |||||||||
| Other income (expense) | (8,808,162 | ) | 202,268 | (9,010,430 | ) | NM | ||||||||||
| Net loss | $ | (12,579,091 | ) | $ | (4,575,841 | ) | $ | (8,003,250 | ) | -174.9 | % | |||||
Operating Expenses
Our operating expenses for the nine months ended September 30, 2017 were approximately $3,770,929 compared to $4,778,109 for the corresponding period of the previous year. The operating expenses were comprised primarily from consulting and professional fees for the development of our intellectual property and expenses related to being a public company. A significant portion of these fees were paid for with the issuance of restricted shares of common stock. During the nine months ended September 30, 2017, 3,598,996 shares of common stock were issued for consulting services valued at $199,555 as compared to 9,346,760 shares of common stock being issued for consulting services valued at $2,291,373, during the corresponding period of the previous year. Also, during the nine months ended September 30, 2107 the company issued stock options valued at $1,139,403 to independent contractors.
Other Income (Expense)
Other income (expense) for the nine months ended September 30, 2017 was expense of $8,808,162 compared to income of $202,268 for the nine months ended September 30, 2016. This change was due primarily to a change in valuation of our derivative liabilities and net of interest expense resulting from the amortization of the discounts on notes payable. In addition, we had income on extinguishment of debt of $2,175,459 during the nine months ended September 30, 2017 compared to a loss of $435,625 during the nine months ended September 30, 2016. We anticipate continued large fluctuations in other income (expense) as a result of quarterly re-evaluation of these derivative liabilities.
Liquidity and Capital Resources
| As of | Favorable | As of | ||||||||||||||||||||||
| September 30, 2017 | December 31, 2016 | (Unfavorable) | September 30, 2021 | December 31, 2020 | Favorable (Unfavorable) | |||||||||||||||||||
| Working Capital | ||||||||||||||||||||||||
| Current assets | $ | 155,479 | $ | 302,854 | $ | (147,375 | ) | $ | 62,549 | $ | 46,187 | $ | (16,362 | ) | ||||||||||
| Current liabilities | 13,189,069 | 8,721,324 | (4,467,745 | ) | 20,275,204 | 16,825,821 | 3,449,383 | |||||||||||||||||
| Working capital deficit | $ | (13,033,590 | ) | $ | (8,418,470 | ) | $ | (4,615,120 | ) | $ | (20,212,655 | ) | $ | (16,779,634 | ) | $ | (3,433,021 | ) | ||||||
| Long-term debt | $ | 155,000 | $ | 159,221 | $ | 4,221 | $ | 79,825 | $ | 155,000 | $ | (75,175 | ) | |||||||||||
| Stockholders' deficit | $ | (13,183,836 | ) | $ | (8,561,866 | ) | $ | (4,621,970 | ) | |||||||||||||||
| Stockholders’ deficit | $ | (18,218,396 | ) | $ | (14,373,786 | ) | $ | (3,844,610 | ) | |||||||||||||||
| Nine Months Ended September 30, | Favorable | Nine Months Ended September 30, | Favorable | |||||||||||||||||||||
| 2017 | 2016 | (Unfavorable) | 2021 | 2020 | (Unfavorable) | |||||||||||||||||||
| Statements of Cash Flows Select Information | ||||||||||||||||||||||||
| Net cash provided (used) by: | ||||||||||||||||||||||||
| Operating activities | $ | (2,189,196 | ) | $ | (1,803,684 | ) | $ | (385,512 | ) | $ | (595,288 | ) | $ | (548,734 | ) | $ | (46,554 | ) | ||||||
| Investing activities | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Financing activities | $ | 2,198,142 | $ | 1,856,886 | $ | 341,256 | $ | 587,600 | $ | 532,424 | $ | 55,176 | ||||||||||||
| As of | Favorable | |||||||||||
| September 30, 2017 | December 31, 2016 | (Unfavorable) | ||||||||||
| Balance Sheet Select Information | ||||||||||||
| Cash | $ | 64,479 | $ | 55,533 | $ | 8,946 | ||||||
| Accounts payable and accrued expenses | $ | 3,238,237 | $ | 4,727,247 | $ | 1,489,010 | ||||||
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| As of | Favorable | |||||||||||
| September 30, 2021 | December 31, 2020 | (Unfavorable) | ||||||||||
| Balance Sheet Select Information | ||||||||||||
| Cash | $ | 5,732 | $ | 13,420 | $ | (7,688 | ) | |||||
| Accounts payable and accrued expenses | $ | 7,057,399 | $ | 5,989,185 | $ | (1,068,214 | ) | |||||
Since inceptionJanuary 1, 2021, and through September 30, 2017,2021, the Company has raised approximately $7.8$0.6 million in equity and debt transactions. These funds have been used for the operations of the Company to acquire and the development of its intellectual property portfolio. These activities include attending trade shows andfund on-going corporate development.operations. Our accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve monthtwelve-month period following the date of these condensed consolidated financial statements. Our cash on hand at September 30, 2021 was less than $6,000. The Company has incurred substantial losses since inception. Its current liabilities exceed its current assets and available cash is not sufficient to fund expected future operations. The Company is contemplating raising additional capital through debt and equity securities in order to continue the funding of its operations.operations and to acquire a profitable business. However, there is no assurance that the Company can raise enoughsufficient funds or generate sufficient revenues to pay its obligations as they become due, which raises substantial doubt about our ability to continue as a going concern. To reduce the risk of not being able to continue as a going concern, management has implemented its business plan to materialize revenues from potential, future, license agreements and has initiated a private placement offering to raise capital through the sale of its common stock. In addition, management has a commitment from a current lender for a total of $2.7 million in the form of convertible notes. As of September 30, 2017, the Company has received cash funding of $1,562,000 for $1,667,500 of convertible notes under this commitment. This commitment is subject to the Company not taking any variable financing from any other investor or lender. Although, uncertainty exists as to whether the Company will be able to generate enough cash from operations to fund the Company’s working capital needs or raise sufficient capital to meet the Company’s obligations as they become due, no adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty. Our cash on hand at September 30, 2017 was approximately $64,479. This will be insufficient to fund operations if additional capital is not raised. The Company raised an aggregate of approximately $2,302,000 through the sale of equity and debt securities during the nine months ended September 30, 2017.
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The Company is not aware of any recently issued accounting pronouncements that when adopted will have a material effect on the Company’s financial position or result of its operation.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a Smaller Reporting Company and are not required to provide the information under this item.
Item 4. Controls and Procedures.
Disclosure of controls and procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As required by the SEC Rule 13a-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.
In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses which have caused management to conclude that as of September 30, 20172021, our disclosure controls and procedures were not effective at the reasonable assurance level:
1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the quarter ended September 30, 2017.2021. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
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2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiationauthorization of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. The recording of transactions function is maintained by a third-party consulting firm whereas authorization and custody remains under the Company’s Chief Executive Officer’s responsibility. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Changes in internal controls over financial reporting.
There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. Notwithstanding the foregoing, a consultant has commenced litigation against us, which is in the early stages. We anticipate that these matters will be settled, however, if a settlement cannot be reached, we will vigorously defend these matters and we do not believe that there will be any material adverse effect as a result thereof, but there is always uncertainty in any litigation and a result cannot be guaranteed.
We are a Smaller Reporting Company (as defined in Rule 12b-2 of the Exchange Act) and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
| Number of | Number of | Number of | ||||||||||||||
| Common Shares | Common Shares | Source of | Common Shares | Source of | ||||||||||||
| Issued | Issued | Payment | Amount | Issued | Payment | Amount | ||||||||||
| 576,660 | Services | $ | 15,720 | |||||||||||||
| 12,500 | Note extension | $ | 386 | 25,690,651 | Conversion of notes | $ | 1,076,203 | |||||||||
| 12,655,161 | Cash | $ | 255,000 | 1,111,111 | Conversion of Preferred Series C | 33,333 | ||||||||||
| 23,024,976 | Conversion of notes | $ | 660,743 | 7,000,000 | Issuance for cash | 126,000 | ||||||||||
| 3,625,000 | Settlement of Liabilities | $ | 103,730 | 4,020,986 | Settlement of debt | 142,424 | ||||||||||
| 2,500,000 | Shares for services | 95,250 | ||||||||||||||
| 4,333,668 | Commitment shares | 155,282 | ||||||||||||||
The above issuances of securities during the threenine months ended September 30, 20172021, were exempt from registration pursuant to Section 4(2), and/or Regulation D promulgated under the Securities Act. These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these stockholders had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.
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Item 3. Defaults upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable
None
Exhibit Number | Exhibit Title | |
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| The following materials from the Company’s Quarterly report for the period ended September 30, 2021, formatted in Extensible Business Reporting Language (XBRL). | ||
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| Cover Page Interactive Data File (embedded within the Inline XBRL | ||
In accordance with SEC Release 33-8238, ExhibitExhibits 32.1 and 32.2 are being furnished and not filed.
* Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: November | Endonovo Therapeutics, Inc. | |||
| By: | /s/ Alan Collier | |||
| Alan Collier | ||||
Chief Executive Officer (Duly Authorized Officer, Principal Executive Officer and Principal Financial Officer) | ||||
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