UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X]ANNUAL REPORT PURSUANT TO SECTI ONSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31 2017, 2022.

OR

[  ]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 001-36763

MEDOVEX CORP.H-CYTE, INC

(Exact Name of Registrant as Specified in Its Charter)

Nevada46-3312262
(State or Other Jurisdiction of(IRS Employer
of Incorporation or Organization)Identification Number)
3060 Royal Boulevard S 2202 N West Shore Blvd. Ste 150200
Alpharetta, GeorgiaTampa, Florida3002233607
(Address of Principal Executive Offices)(Zip Code)

(844)633-6839

(Registrant’s Telephone Number, Including Area Code)

Securities registered under section 12(b) of the Exchange Act: Common stock, par value $0.001 per share

Securities registered under section 12(g) of the Exchange Act: Not applicable

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

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 Website,website, 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

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

Large accelerated filer [  ]Accelerated filer [  ]
Non-accelerated filer [  ]Smaller Reporting Company [X]
(Do not check if smaller reporting company)Emerging growth Company [X]

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the fi ling reflect the correction of an error to previously issued fi nancial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based upon the closing price of common stock on the last business day of the most recently completed second fiscal quarter, June 30, 2017, was $11,568,161. The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based upon the closing price of common stock on March 26, 2018 was approximately $10,155,300. Shares of voting stock held by each executive officer, director and 10% stockholders have been excluded from this calculation. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 26, 2018, 21,933,013May 9, 2023, 628,122 shares of the registrant’s common stock were outstanding.

Documents incorporated by reference: None.None.

 

 

 

TABLE OF CONTENTS

Page No.
PART I
ITEM 1.PART IBUSINESS4
ITEM 1.1A.BUSINESSRISK FACTORS17
ITEM 1A.RISK FACTORS7
ITEM 1B.UNRESOLVED STAFF COMMENTS7
ITEM 2.PROPERTIES78
ITEM 3.LEGAL PROCEEDINGS78
ITEM 4.MINE SAFETY DISCLOSURE78
PART II
ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES8
ITEM 6.SELECTED FINANCIAL DATA98
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS9
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK1916
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA1917
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE2018
ITEM 9ACONTROLS AND PROCEDURES2018
ITEM 9B.OTHER INFORMATION2019
PART III
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE2120
ITEM 11.EXECUTIVE COMPENSATION2923
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS3024
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE3225
ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES3327
PART IV
ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES34
SIGNATURES AND POWER OF ATTORNEY35
EXHIBIT INDEX3628

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FORWARD-LOOKING INFORMATION

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or ourthe Company’s future financial performance. We haveH-CYTE has attempted to identify forward-looking statements by using terminology including “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause ourthe Company’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believeH-CYTE believes that the expectations reflected in the forward-looking statements are reasonable, weit cannot guarantee future results, levels of activity, performance, or achievements. OurThe Company’s expectations are as of the date this Annual Report is filed, and we doit does not intend to update any of the forward-looking statements after the date this Annual Report is filed to confirm these statements to actual results, unless required by law.

This Annual Report also contains estimates and other statistical data made by independent parties and by usH-CYTE relating to market size and growth and other industry data. This data involves a number ofseveral assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We haveThe Company has not independently verified the statistical and other industry data generated by independent parties and contained in this Annual Report and, accordingly, weit cannot guarantee their accuracy or completeness, though we doit does generally believe the data to be reliable. In addition, projections, assumptions, and estimates of ourH-CYTE’s future performance and the future performance of the industries in which we operateit operates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors. OurH-CYTE’s actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including, but not limited to, the possibility that weit may fail to preserve ourits expertise in medical devicetherapy and product research and development; that existing and potential distribution partners may opt to work with, or favor the products of, competitors if ourits competitors offer more favorable products or pricing terms; that weit may be unable to maintain or grow sources of revenue; that changes in the distribution network composition may lead to decreases in query volumes; that weit may be unable to attain and maintain profitability; that weit may be unable to attract and retain key personnel; that weit may not be able to effectively manage, or to increase, ourits relationships with international customers; that weit may have unexpected increases in costs and expenses; or that one or more of the other risks described below ineffect the section entitled “Risk Factors” and elsewhere in this Annual Report may occur.current COVID-19 pandemic will have on the Company as further discussed herein. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.H-CYTE.

3

 

PART I

ITEM 1.BUSINESS

Overview

Overview

MedoveX was incorporated in NevadaH-CYTE, Inc (“the Company”) has evolved from focusing on July 30, 2013 as Spinez Corp. MedoveX istreating chronic lung conditions after the parent company of Debride Inc., (“Debride”), which was incorporated under the laws of Florida on October 1, 2012 but did not commence operations until February 1, 2013. Spinez Corp. changed its name to MedoveX Corp. and effected a 2-for-1 reverse splitclosure of its stock in March 2014.

lung treatment clinics due to COVID-19. The Company is currently focusing on acquiring and developing early-stage companies or their technologies in the businessareas of designing and marketing proprietarytherapeutics, medical devices, for commercial useand diagnostics. The goal is to develop these companies and incubate their technologies to meaningful clinical inflection points.

On June 3, 2022, the Company closed its clinic in Scottsdale, Arizona. The Company has now closed all of its clinical operations in the United Statesautologous infusion therapy business which delivered treatments for patients with chronic respiratory and Europe.pulmonary disorders. The Company received CE markingwill continue to pursue Food and Drug Administration (“FDA”) approval of the device that was utilized in June 2017 forthe treatment provided at the clinics. The Company also has a continued interest in the commercialization of the DenerveX Systemdevice through a joint venture. The Company has implemented the transition into a biologics and ittherapeutic device incubator company to bring new technologies to market.

The consolidated results for H-CYTE include the following wholly-owned subsidiaries: H-CYTE Management, LLC, Medovex Corp, Cognitive Health Institute, LLC, and Lung Institute Tampa, LLC and the results include Lung Institute Dallas, LLC (“LI Dallas”), Lung Institute Nashville, LLC (“LI Nashville”), Lung Institute Pittsburgh, LLC (“LI Pittsburgh”), and Lung Institute Scottsdale, LLC (“LI Scottsdale”), as Variable Interest Entities (“VIEs”). Additionally, H-CYTE Management, LLC was the operator and manager of the various Lung Health Institute (LHI) clinics: LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale. The LI Dallas and LI Pittsburgh clinics did not reopen in 2020 after the temporary closure of all LI clinics due to COVID-19. These two clinics will remain permanently closed. During the first quarter of 2022, the Company decided to close the LI Tampa and LI Nashville clinics. During the second quarter of 2022, the Company closed the LI Scottsdale clinic. All LHI clinics are closed as of December 31, 2022.

On June 10, 2022, the Company amended (the “Amendment”) its Articles of Incorporation to effectuate a one-for-one thousand reverse stock split (the “Reverse Split”) of its common stock. The Reverse Split was approved by FINRA on June 10, 2022 and effectuated on June 13, 2022. Pursuant to the Amendment, the Company also reduced the authorized shares of common stock to 500,000,000. As a result of the Reverse Split, as of December 31, 2022, the Company has 618,506 shares of common stock outstanding and 438,776,170 shares of Series A Preferred Stock outstanding. As a result of the Reverse Stock Split, the Series A Preferred Stock conversion ratio is now commercially available throughoutone thousand shares of Series A Preferred Stock converts into one share of common stock. Accordingly, the European Union438,776,170 outstanding shares of Series A Preferred Stock are now convertible into an aggregate of 438,776 shares of common stock.

On September 7, 2022, the Company acquired all of the membership interests, with common stock, of Jantibody LLC (“Jantibody”), a Nevada limited liability company. Jantibody is focused on the development of novel proprietary immunotherapies targeted towards ovarian cancer, pancreatic cancer, and mesothelioma (see Note 8).

On December 22, 2022, the Company acquired all the membership interests, with common stock, in Scion Solutions, LLC (“Scion”). Scion is a life sciences company that has developed a new technology in regenerative medicine specifically for limb salvage. Their proprietary product SkinDisc (patent pending) is a combination of stem cells and several other countriesmolecular components that accept CE marking. stimulate tissue regeneration (see Note 8).

Impact of COVID-19

COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020 and the Company continues to monitor the impact on its operations of the COVID-19 pandemic and its aftermath. The Company believes the effect of the COVID-19 pandemic and certain public and governmental responses to it have negatively affected its results since the pandemic’s inception.

During the COVID-19 pandemic and its aftermath, the Company experienced material reductions in demand and net revenues at its lung treatment centers. This reduction in demand led to the Company shifting its focus from treating chronic lung disease to acquiring and developing early-stage companies or their technologies in the areas of therapeutics, medical devices, and diagnostics.

4

Autologous Infusion Therapy (“Infusion Division”)

The Company’s Infusion Division developed and implemented innovative treatment options in autologous cellular therapy (PRP-PBMC) to treat chronic lung disorders. During the first salequarter of 2022, the clinics in Tampa and Nashville closed. During the second quarter of 2022, the clinic in Scottsdale closed. All clinical operations in the autologous infusion therapy division which delivered treatments for patients with chronic respiratory and pulmonary disorders have now closed.

Biotech Development (“Biotech Division”)

During the year ended December 31, 2021, the Company completed a review of the DenerveX System occurred in July 2017. The Company plansR&D status regarding the exclusive product supply and services agreements with Rion, LLC (“Rion”) to seek approval for the DenerveX System from thedevelop and distribute (post U.S. Food & Drug Administration, the “FDA”, approval) a biologic combining its PRP-PBMC (“FDA”PRP”) intechnology with Rion’s exosomes (“EV”) technology for the United States.

The DenerveX Device

Our first acquisition was the DenerveX device. We believe that the DenerveX device can be used to encompass several medical applications, including pain relief.

The Company acquired the DenerveX patent on January 31, 2013 from Scott Haufe, M.D.treatment of chronic obstructive pulmonary disease (“Dr. Haufe”COPD”), a director of the Company, in exchange for 750,108 shares of common stock in the Company and a 1% royalty on all sales of any product sold based on the patent. In September 2013, we entered into a Co-Development Agreement with James Andrews, M.D. (“Dr. Andrews”), a director of the Company, whereby Dr. Andrews committed to further evaluate the DenerveX device and to seek to make modifications and improvements to such technology. In exchange for such services, the Company agreed to pay Dr. Andrews a royalty equal to two (2%) percent of the DenerveX net sales during the five (5) year term of the Co-Development Agreement. Upon the termination of the term of the Co-Development Agreement, which has a minimum term of five (5) years, then the royalty payable to Dr. Andrews shall be reduced to one (1%) percent of DenerveX net sales after such termination of products covered by any U.S. patent on which Dr. Andrews is listed as a co-inventor; if any such patents are obtained. Such one (1%) percent royalty shall continue during the effectiveness of such patent. Pursuant to the Co-Development Agreement, Dr. Andrews agreed to assign any modifications or improvements to the DenerveX to the Company subject to the royalty rights described above.

We are marketing the product as a disposable, single-use kit which includes all components of the DenerveX device product. In addition to the DenerveX device itself, we have developed a dedicated Electro Surgical Generator, the DenerveX Pro-40, to power the DenerveX device.

The generator is provided to customers agreeing to purchase the DenerveX device and cannot be used for any other purpose.

We accepted a proposal from Devicix, a Minneapolis, Minnesota third party design and development firm, in November 2013, to develop a prototype device. This proposal included a 5-phase development plan, culminating in the production ready prototype that could be used for validation purposes. We have recently completed the final stages of the build and test phase of the device, culminating in receiving CE marking to market the product in Europe. The DenerveX Kit and Pro-40 generator is now in commercial production. We anticipate very minimal, if any, additional build and test related expenses, which consists of product design verification activities, in the future as we launch the DenerveX System in Europe. Through December 31, 2017, we have paid approximately $1,849,000 to Devicix.

In November 2014, we selected Nortech Systems Inc. (“Nortech”), a Minneapolis, Minnesota based FDA registered contract manufacturer, to produce test DenerveX devices from the prototype supplied by Devicix for use in final development and non-clinical testing. The agreement with Nortech includes agreed upon per unit prices for delivery of the devices. Actual work on development of the final units began in November 2014. Through December 31, 2017, we have paid approximately $890,000 to Nortech. We are now in commercial production.

Also in November 2014, we engaged Bovie Medical Corporation (“Bovie”), a Delaware Corporation, to develop the Electro Surgical Generator and provide post production support services. Per our agreement with Bovie, we are invoiced based on deliverables produced by Bovie, which was originally supposed to amount to $295,000 upon completion of all the deliverables. Through December 31, 2017, we have paid approximately $422,000 to Bovie for production services. The original $295,000 agreement was a base number along the pathway of development. Additional requirements were incurred as the research and development process progressed and as a result certain prices increased and additional costs were incurred to further customize the DenerveX System.

. The Company has completeddetermined a single entity biologic from an alternative commercial source will be a more viable solution. The Company has decided to move away from Rion’s PRP technology and is progressing towards alternate biologics and therapeutic devices to meet the final stagesneeds of the development and verificationbusiness.

As of December 31, 2022, the Company has closed all of the DenerveX DeviceLHI clinics and has moved away from the DenerveX Pro-40 power generatorInfusion Division as a system, and the DenerveX System is presently being manufactured and sold in the jurisdictions where it has been approved for sale.

Streamline, Inc.Divestiture

In May 2016, the Boardpart of Directors authorized management to seek buyers for Streamline, Inc., (“Streamline”), the Company’s wholly owned subsidiary acquired in March 2015.its future plans. The Company sold all Streamline related assets on December 7, 2016 (the “Closing”). This transaction provided funds needed to complete the development and launch of the Company’s primary product, the DenerveX System, and the decision to sell the Streamline assets helped raise part of the necessary funds required for continuing operations of the Company in a non-dilutive manner to existing shareholders.

The transaction resulted in the immediate receipt of $500,000 in cash, and a $150,000 receivable to the Company due on or before January 1, 2018. The Company subsequently received the $150,000 per the terms of the asset purchase agreement on January 2, 2018.

The terms of the agreementhas also required that for each of the calendar years ending December 31, 2018 and December 31, 2019 (each such calendar year, a “Contingent Period”), a contingent payment in cash (each, a “Contingent Payment”) equal to five percent (5%) of the total net sales received by the acquiring party from the sale of “IV suspension system” products in excess of 100 units during each Contingent Period. Each such Contingent Payment is payable to the Company by the acquiring party by no later than March 31st of the subsequent year; provided, however,decided that the total aggregate amount of all Contingent Payments owed by the acquiring partyBiotech Division will begin to the Companytransform into a medical biosciences incubator division focusing on bringing new biologics and therapeutic device technologies to market for all Contingent Periods will not exceed $850,000. The Company is yet to receive any Contingent Payments.various health conditions.

Competition

Developing and commercializing new productsFDA approved drugs and therapies is highly competitive. The market is characterized by extensive research and clinical efforts and rapid technological change. We faceThe Company faces intense competition worldwide from medical device,pharmaceutical, biomedical technology, and medical productstherapy, and combination products companies, including major medical productspharmaceutical companies. WeThe Company may be unable to respond to technological advances through the development and introduction of new products. Most of ourthe Company’s existing and potential competitors have substantially greater financial, sales and marketing, sales,manufacturing and distribution, manufacturing and technological resources. These competitors may also be in the process of seeking FDA or(or other regulatory approvals, orapprovals) and patent protection for new products. Our competitors may commercialize new products in advance of our products. Our productsThe Company’s biologics and device product lines also face competition from numerous existing products and procedures, which currently are considered part of the standard of care. We believeThe Company believes that the principal competitive factors in ourits markets are:

determining and progressing suitable biological therapies for specific disease states and the quality of outcomes for medical conditions;
acceptance by surgeonsphysicians and the medical device market generally;community;
ease of use and reliability;
technical leadership and superiority;
effective marketing and distribution;
speed to market; and
product price and qualification for insurance coverage and reimbursement.

5

We

The Company will also compete in the marketplace to recruit and retain qualified scientific, management and sales personnel, as well as in acquiring technologies and licenses which it believes will be complementary to ourits products or advantageous to ourits business.

We areThe Company is aware that several of several companies that compete orits competitors are developing technologies in ourits current and future products areas. With regardThere are numerous autologous cellular therapy providers who make unsubstantiated claims that they are able to treat chronic lung disease. Most of these competitors are small clinics with little brand recognition. The landscape is changing as pharma and biologics companies, as well as academia, begin to develop therapies for multiple diseases using regenerative medicine through the DenerveX System, we believemore stringent regulatory pathway of a Biologics License Application (BLA).

Customers

The Company’s infusion division customer base consisted of individuals who were suffering from chronic lung disease that our principal competitors include device manufacturers Cosman Medical Inc., Stryker Corporation and Spembly Medical Systems. We may also face competition from developing, but potentially untested technologies such as Zyga’s GLYDER device. In order to compete effectively, our products will have to achieve widespread market acceptance, receive adequate insurance coverage and reimbursement, be cost effective and be simultaneously safe and effective.are searching for alternative or adjunct forms of treatment outside of traditional pharmaceutical care which has not been successful for them in the past.

Customers

Government Regulations

Healthcare providers, physicians and third-party payors

Governmental authorities in the United States and elsewhere play a primary role in the recommendation and prescription of any products for which we obtain marketing approval.

We sell to local distributors in the countries where we currently sell the DenerveX System with the exception of Germany, where we sell directly to hospitals and providers.

Intellectual Property

A key element of our success depends on our ability to identify and create proprietary medical device technologies. In order to proactively protect those proprietary technologies, we intend to continue to develop and enforce our intellectual property rights in patents, trademarks and copyrights, as available through registration in the United States and internationally, as well as through the use of trade secrets, domain names and contractual agreements such as confidentiality agreements and proprietary information agreements.

Currently, our intellectual property rights include the intellectual property acquired from Debride, Inc., which includes the (“U.S. Patent 8,167,879 B2 (the “Patent”). The Patent was originally filed in 2009 and was issued on May 1, 2012. We intend to leverage the Patent to the fullest extent possible through market development and prosecution of our rights under the Patent.

In addition, we have filed 33 additional US and International patents, of which 21 are pending, 8 are pending published, and 4 have been granted. These patents cover a total of 885 claims both in the United States and Internationally.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the United States, a patent’s term may be shortened if a patent is terminally disclaimed over another patent or as a result of delays in patent prosecution by the patentee, and a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in granting a patent.

We intend to continually re-assess and refine our intellectual property strategy in order to fortify our position in our market space in the United States and internationally. To that end, we are prepared to file additional patent applications should our intellectual property strategy require such filings and/or where we seek to adapt to competition or seize business opportunities.

Many biotechnology companies and academic institutions are competing with us in the medical device field and filing patent applications potentially relevant to our business. Internally, we have established business procedures designed to maintain the confidentiality of our proprietary information, including the use of confidentiality agreements with employees, independent contractors, consultants and companies with which we conduct business. Also, we generally require employees to assign patents and other intellectual property to us as a condition of employment with us.

In order to contend with the possibility of third party intellectual property conflicts, we review and assess the third-party intellectual property landscape for competitive and other developments that may inform or impact our intellectual property development and commercialization strategies. We may find it necessary or prudent to obtain licenses from third party intellectual property holders. Where licenses are readily available at reasonable cost, such licenses are considered a normal cost of doing business. In other instances, however, where a third party holds relevant property and is a direct competitor, a license might not be available on commercially reasonable terms or available at all. We will attempt to manage the risk that such third party intellectual property may pose by conducting, among other measures, freedom-to-operate studies to guide our early-stage research away from areas where we are likely to encounter obstacles in the form of third party intellectual property.

Government Regulations

Government authorities in the United States, at the federal, state, and local level,levels) and in other countriesabroad extensively regulate, among other things, the research and development, testing, manufacture, quality control, clinical research, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing, and export and import of products such as those we are developing. Any product that we develop must be approved by the FDA before they may be legally marketed in the United States and by the appropriate foreign regulatory agency before they may be legally marketed in foreign countries.

European Union and Other Country Approvals

The Company received CE marking in June 2017 for the DenerveX System. It can now be sold throughout the European Union and countries that accept CE Mark.

Aside from the European Union, we may seek regulatory approval for commercialization of the DenerveX System from Columbia, Peru, Argentina, Mexico, Turkey, Israel, New Zealand, Australia and other countries. The documentation required to accompany the CE Mark to obtain regulatory approval in the aforementioned countries may include copies of the ISO 13485 certification, the SGS certificate of approval and a statement of Good Manufacturing Practices (“GMP”).

FDA Regulation

The DenerveX System and any other product we may develop must be approved or cleared by the FDA before it is marketed in the United States. Before and after approval or clearance in the United States, our products are subject to extensive regulation by the FDA under the Federal Food, Drug, and Cosmetic Act and/or the Public Health Service Act, as well as by other regulatory bodies.

FDA regulations govern, among other things, the development, testing, manufacturing, labeling, safety, storage, record-keeping, market clearance or approval, advertising and promotion, import and export, marketing and sales, and distribution of medical devices and products.

In the United States,U.S., the FDA subjects medicalpharmaceutical and biologic products to rigorous review. If we dothe Company does not comply with applicable requirements, weit may be fined, the government may refuse to approve ourits marketing applications or to allow usit to manufacture or market ourits products, and wethe Company may be criminally prosecuted. Failure to comply with the law could result in, among other things, warning letters, civil penalties, delays in approving or refusal to approve a product, product recall, product seizure, interruption of production, operating restrictions, suspension or withdrawal of product approval, injunctions, or criminal prosecution.

FDA Approval or Clearance of Medical Devices

In the United States, medical devices are subject to varying degrees of regulatory control and are classified in one of three classes depending on the extent of controls the FDA determines are necessary to reasonably ensure their safety and efficacy:

Class I: general controls, such as labeling and adherence to quality system regulations;
Class II: special controls, pre-market notification (often referred to as a 510(k) application), specific controls such as performance standards, patient registries, post market surveillance, additional controls such as labeling and adherence to quality system regulations; and
Class III: special controls and approval of a pre-market approval (“PMA”) application.

In general, the higher the classification, the greater the time and cost to obtain approval to market. There are no “standardized” requirements for approval, even within each class. For example, the FDA could grant 510(k) status, but require a human clinical trial, a typical requirement of a PMA. They could also initially assign a device Class III status, but end up approving a device as a 510(k) device if certain requirements are met. The range of the number and expense of the various requirements is significant. The quickest and least expensive pathway would be 510(k) clearance with a review of existing data. The longest and most expensive path would be a PMA with extensive randomized human clinical trials. We cannot predict how the FDA will classify the DenerveX device, nor predict what requirements will be placed upon us to obtain market approval or clearance, or even if they will allow marketing of the DenerveX device at all. However, we believe the pathway that will be required by the FDA will be somewhere between the two extremes described above.

We intend to apply to the FDA for 510(k) clearance for our DenerveX device. However, it is very possible the FDA will deny this request and require the more expensive de novo classification process or possibly the PMA process. It is possible that the company may choose to directly pursue the de novo classification process without filing a 510K which could reduce the overall FDA review time. The Company has budgeted based on the assumption that the PMA process will be required.

To request marketing authorization by means of a 510(k) clearance, we must submit a pre-market notification demonstrating that the proposed device is substantially equivalent to another currently legally marketed medical device, has the same intended use, and is as safe and effective as a currently legally marketed device and does not raise different questions of safety and effectiveness than does a currently legally marketed device.

510(k) submissions generally include, among other things, a description of the device and its manufacturing, device labeling, medical devices to which the device is substantially equivalent, safety and biocompatibility information, and the results of performance testing.

In some cases, a 510(k) submission must include data from human clinical studies. We believe that other medical devices which have been approved by the FDA have many aspects that are substantially similar to the DenerveX device, which may make obtaining 510(k) clearance possible. Marketing may commence only when the FDA issues a clearance letter finding substantial equivalence.

After a device receives 510(k) clearance, any product modification that could significantly affect the safety or effectiveness of the product, or that would constitute a significant change in intended use, requires a new 510(k) clearance or, if the device would no longer be substantially equivalent, would require PMA. In addition, any additional claims the Company wished to make at a later date, such as the permanent relief of pain, may require a PMA. If the FDA determines that the product does not qualify for 510(k) clearance, they will issue a Not Substantially Equivalent letter, at which point the Company must submit and the FDA must approve a PMA or a de Novo classification before marketing can begin.

During the review of a 510(k) submission, the FDA may request more information or additional studies and may decide that the indications for which we seek approval or clearance should be limited. In addition, laws and regulations and the interpretation of those laws and regulations by the FDA may change in the future. We cannot foresee what effect, if any, such changes may have on us.

Clinical Trials of Medical Devices

One or more clinical trials may be necessary to support an FDA submission. Clinical studies of unapproved or un-cleared medical devices or devices being studied for uses for which they are not approved or cleared (investigational devices) must be conducted in compliance with FDA requirements. If an investigational device could pose a significant risk to patients, the sponsor company must submit an Investigational Device Exemption, or “IDE” application to the FDA prior to initiation of the clinical study. An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device on humans and that the testing protocol is scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin. Clinical studies of investigational devices may not begin until an institutional review board (“IRB”) has approved the study.

During any study, the sponsor must comply with the FDA’s IDE requirements. These requirements include investigator selection, trial monitoring, adverse event reporting, and record keeping. The investigators must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of investigational devices, and comply with reporting and record keeping requirements. We, the FDA, or the IRB at each institution at which a clinical trial is being conducted, may suspend a clinical trial at any time for various reasons, including a belief that the subjects are being exposed to an unacceptable risk. During the approval or clearance process, the FDA typically inspects the records relating to the conduct of one or more investigational sites participating in the study supporting the application.

Post-Approval Regulation of Medical Devices

After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:

the FDA Quality Systems Regulation (“QSR”), which governs, among other things, how manufacturers design, test, manufacture, exercise quality control over, and document manufacturing of their products;
labeling and claims regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; and
the Medical Device Reporting regulation, which requires reporting to the FDA of certain adverse experiences associated with use of the product.

We will continue to be subject to inspection by the FDA to determine our compliance with regulatory requirements.

56

Manufacturing cGMP Requirements

 

Manufacturers of medical devices are required to comply with FDA manufacturing requirements contained in the FDA’s current

Good Manufacturing Practices (“cGMP”GMP”) set forth in the quality system regulations promulgated under section 520 of the Food, Drug and Cosmetic Act. cGMP regulations require, among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation. Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, and civil and criminal penalties. Adverse experiences with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes or in product withdrawal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following the approval.

International Regulation

We are subject to regulations and product registration requirements in many foreign countries in which we may seek to sell our products, including in the areas of product standards, packaging requirements, labeling requirements, import and export restrictions and tariff regulations, duties and tax requirements. The time required to obtain clearance required by foreign countries may be longer or shorter than that required for FDA clearance, and requirements for licensing a product in a foreign country may differ significantly from FDA requirements.

European Good Manufacturing Practices

In the European Union, the manufacture of medical devices is subject to good manufacturing practice (“GMP”), as set forth in the relevant laws and guidelines of the European Union and its member states. Compliance with GMP is generally assessed by the competent regulatory authorities. Typically, quality system evaluation is performed by a Notified Body, which also recommends to the relevant competent authority for the European Community CE Marking of a device. The Competent Authority may conduct inspections of relevant facilities, and review manufacturing procedures, operating systems and personnel qualifications. In addition to obtaining approval for each product, in many cases each device manufacturing facility must be audited on a periodic basis by the Notified Body. Further inspections may occur over the life of the product.

Our third-party manufacturers have ISO certification which is generally one of the requirements for approval under the guidelines established in the European Union.

United States Anti-Kickback and False Claims Laws

In the United States,U. S., there are Federal and stateState anti-kickback laws that prohibit the payment or receipt of kickbacks, bribes or other remuneration intended to induce the purchase or recommendation of healthcare products and services. Violations of these laws can lead to civil and criminal penalties, including exclusion from participation in Federal healthcare programs. These laws are potentially applicable to manufacturers of products regulated by the FDA as pharmaceuticals, biologics, medical devices, and hospitals, physicians, and other potential purchasers of such products. Other provisions of Federal and stateState laws provide civil and criminal penalties for presenting, or causing to be presented, to third-party payers for reimbursement, claims that are false or fraudulent, or which are for items or services that were not provided as claimed. In addition, certain states have implemented regulations requiring medical device and pharmaceutical companies to report all gifts and payments of over $50 to medical practitioners. This does not apply to instances involving clinical trials.

Although we intendthe Company intends to structure ourits future business relationships with clinical investigators and purchasers of ourits products to comply with these and other applicable laws, it is possible that some of ourthe Company’s business practices in the future could be subject to scrutiny and challengechallenged by Federal or stateState enforcement officials under these laws.

Research Productand Development and Technical Operations Expense

Research and development costs and expenses consist primarily of fees paid to external service providers, laboratory testing, supplies, costs for facilities and equipment, and other costs for research and development activities. Research and development expenses are recorded in operating expenses in the period in which they are incurred. Estimates have been used in determining the expense liability of certain costs where services have been performed but not yet invoiced.

We monitor levels of performance under each significant contract for external service providers for activities through communications with the service providers to reflect the actual amount expended.Employees

Employees

As of December 31, 2017, weApril 30, 2023, the Company had 13 total employees, 12 of which weretwo full-time employees. None of ourits employees are represented by a union and we believe our employee relations to be good.union.

Available Information

OurThe Company’s website,www.MedoveX.com,www.ir.hcyte.com, provides access, without charge, to ourits annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”). The information provided on ourthe Company’s website is not part of this report and is therefore not incorporated by reference unless such information is otherwise specifically referenced elsewhere in this report.

Materials filed by the Company with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website atwww.sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file electronically with the SEC.

ITEM 1A.RISK FACTORS

Not applicable to smaller reporting companies.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

Not applicable to smaller reporting companies.

7

 

ITEM 2.PROPERTIES

The Company pays TAG Aviation,did not renew its corporate office space lease in Tampa, FL which expired on March 31, 2021. On June 3, 2022, the Company closed its clinic in Scottsdale, Arizona. The Company has now closed all of its clinical operations in the autologous infusion therapy business which delivered treatments for patients with chronic respiratory and pulmonary disorders.

The Company’s corporate staff will continue to work remotely. The Company leases a company owned by CEO Jarrett Gorlin, for executiveshared office space in Atlanta, GA at a rate of $2,147 per month plus related utilities. The rental rate is 90% of the amount billed to TAG Aviation by the owner of the property.Tampa, FL which it uses as its legal address.

The Company has a commercial building lease agreement with Sugar Oak Kimball Royal, LLC. The thirty-six month lease, having commenced on August 1, 2015, provides for the lease by the Company of approximately 2,358 square feet of space in Alpharetta, GA. Base annual rent is initially set at approximately $2,750 per month.

We believe our existing facilities are suitable for Company operations.

ITEM 3.LEGAL PROCEEDINGS

The Company is involved in a lawsuit with Sinclair Broadcast Group, Inc. (“Sinclair”) which was filed on September 8, 2020, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. Sinclair has obtained a legal judgment for breach of contract for advertising services in the amount of approximately $72,000 plus interest and costs. The Company has retained legal counsel for guidance in this matter. The amount is recorded in accounts payable as of December 31, 2022.

The Company is involved in a lawsuit with ITN Networks, LLC (“ITN”) which was filed on July 22, 2021, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. ITN has obtained a legal judgment for breach of contract for advertising services in the amount of approximately $45,000 plus interest and costs. The Company has retained legal counsel for guidance in this matter. The amount is recorded in accounts payable as of December 31, 2022.

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock was approved for quotation on the OTCQB exchange on November 16th, 2017, following the delisting from the Nasdaq Capital Market on November 15th, 2017. The following table sets forth the range of high and low sales prices of the common stock for each period indicated:

Market and Market Prices of Common Stock (per common share)

  2017 
By Quarter High  Low 
First $1.58  $1.04 
Second  1.48   0.84 
Third  1.26   0.84 
Fourth  1.19   0.47 

  2016 
By Quarter High  Low 
First $1.51  $0.85 
Second  2.25   1.01 
Third  1.70   1.25 
Fourth  1.73   1.33 

On March 26, 2018,May 8, 2023, the price per share of the Company’s common stock had a high of $0.53$1.95 per share, a low of $1.95 per share, and a low of $0.53 per share.closed at $1.95. The Company had approximately 178264 holders of record of common stock as of March 26, 2018.May 8, 2023.

Dividends

We haveThe Company has not declared or paid any cash dividends on ourits common stock and presently intend to retain ourintends on retaining future earnings, if any, to fund the development and growth of our business and, therefore, dothe business. Therefore, the Company does not anticipate paying any cash dividends in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

The Company has authorized 2,650 options to be available under the Equity Compensation Plan (the “Plan”). As of December 31, 2017, we have granted2022, the Company had an outstanding aggregate of 1,314,059135 options to purchase common stock under the Plan at a weighted average price of $1.51$3,076 per share to certain employees, consultants, and our outside directors.

Recent SalesOn April 1, 2021, the Board of Unregistered Securities; UsesDirectors of Proceeds from Registered Securities

On February 9, 2017, we conducted a private placement offeringthe Company approved and granted to selected accredited investorscertain directors and officers of unitsthe Company an aggregate of our securities (each, a “Unit” and collectively,54,750 stock options of which 4,750 were immediately vested on the “Units”).date of grant. Each Unit had a purchaseoption granted has an exercise price of $100,000 and consisted of (i) 96,154 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $1.04$70.00 per share and (ii) a warrant to purchase 48,077 sharesan expiration date of common stock. Each warrant is exercisable for a period of five (5)ten years from the date of issuance at an exercise price of $1.50 per share, subject to adjustment. At the closing, we issued an aggregate of 3,071,634 shares of our common stock, 9,399 shares of our Series A Preferred Stock and warrants to purchase up to 2,005,769 shares for total gross proceeds of $3,022,000. In addition, we converted an additional $1,150,000 of debt into our securities on the same terms as the offering. In connection with the closing of the offering, we issued to Laidlaw & Company (UK) Ltd., who acted as placement agent of the offering, five-year warrants to purchase up to 405,577 shares of our common stock at an exercise price of $1.50 per share. The forgoing securities were issued in reliance upon the exception from registration pursuant to Section 4(a)(2) under the Securities Act, as amended, and Regulation D promulgated thereunder.

On July 14, 2017, we entered into a securities purchase agreement with selected accredited investors Pursuant to the terms of the securities purchase agreement, we sold an aggregate of 2,956,043 shares of common stock and warrants to purchase up to 1,478,022 shares of our common stock for total gross proceeds of $2,690,686. The warrants are exercisable for a period of five (5) years commencing on the six (6) month anniversary from the date of issuance at an exercise price of $1.15 per share. The warrants are exercisable on a cashless basis in the event that the underlying sharesgrant. These options are not subject to an effective registration statement.

On February 26, 2018, we entered into a securities purchase agreement with selected accredited investors. Pursuant to the terms of the securities purchase agreement, we sold an aggregate of 770,000 shares of our common stock and warrants to purchase up to 385,000 shares of our common stock for total gross proceeds of $308,000. The warrants are exercisable for a period of five (5) years beginning on the six (6) month anniversary from the date of issuance at an exercise price of $0.75 per share. The warrants are exercisable on a cashless basis in the event that the underlying shares are not subject to an effective registration statement.

In the July 2017 offering and the February 2018 offering, the shares offered were registeredincluded in the Company’s registration statement on Form S-3 (Reg. NO.217411) andcurrent stock option plan as they were granted outside of the Warrants were issued in reliance upon the exemption from registration pursuant to Section 4(a)(2) under the Securities Act, as amended, and Regulation D, promulgated thereunder.Plan (see Note 5).

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

ITEM 6.SELECTED FINANCIAL DATA

Not required for smaller reporting company.

8

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

Overview

MedoveX Corp. (the “Company” or “MedoveX”H-CYTE, Inc (“the Company”), was incorporated in Nevada has evolved from focusing on July 30, 2013 as SpineZ Corp. (“SpineZ”) and changedtreating chronic lung conditions after the closure of its namelung treatment clinics due to MedoveX Corp. on March 20, 2014. MedoveX is the parent company of Debride Inc. (“Debride”), which was incorporated under the laws of the State of Florida on October 1, 2012.COVID-19. The Company is currently focusing on acquiring and developing early-stage companies or their technologies in the businessareas of designing and marketing proprietarytherapeutics, medical devices, and diagnostics. The goal is to develop these companies and incubate their technologies to meaningful clinical inflection points.

On June 3, 2022, the Company closed its clinic in Scottsdale, Arizona. The Company has now closed all of its clinical operations in the autologous infusion therapy business which delivered treatments for commercial usepatients with chronic respiratory and pulmonary disorders. The Company will continue to pursue Food and Drug Administration (“FDA”) approval of the device that was utilized in the treatment provided at the clinics. The Company also has a continued interest in the commercialization of the DenerveX device through a joint venture. The Company has implemented the transition into a biologics and therapeutic device incubator company to bring new technologies to market.

The consolidated results for H-CYTE include the following wholly-owned subsidiaries: H-CYTE Management, LLC, Medovex Corp, Cognitive Health Institute, LLC, and Lung Institute Tampa, LLC and the results include Lung Institute Dallas, LLC (“LI Dallas”), Lung Institute Nashville, LLC (“LI Nashville”), Lung Institute Pittsburgh, LLC (“LI Pittsburgh”), and Lung Institute Scottsdale, LLC (“LI Scottsdale”), as Variable Interest Entities (“VIEs”). Additionally, H-CYTE Management, LLC was the operator and manager of the various Lung Health Institute (LHI) clinics: LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale prior to their closure. All LHI clinics are closed as of December 31, 2022.

On June 10, 2022, the Company amended (the “Amendment”) its Articles of Incorporation to effectuate a one-for-one thousand reverse stock split (the “Reverse Split”) of its common stock. The Reverse Split was approved by FINRA on June 10, 2022 and effectuated on June 13, 2022. Pursuant to the Amendment, the Company also reduced the authorized shares of common stock to 500,000,000. As a result of the Reverse Split, as of December 31, 2022, the Company has 618,506 shares of common stock outstanding and 438,776,170 shares of Series A Preferred Stock outstanding. As a result of the Reverse Stock Split, the Series A Preferred Stock conversion ratio is now one thousand shares of Series A Preferred Stock converts into one share of common stock. Accordingly, the 438,776,170 outstanding shares of Series A Preferred Stock are now convertible into an aggregate of 438,776 shares of common stock.

On September 7, 2022, the Company acquired all of the membership interests of Jantibody LLC (“Jantibody”), a Nevada limited liability company. Jantibody is focused on the development of novel proprietary immunotherapies targeted towards ovarian cancer, pancreatic cancer, and mesothelioma (see Note 8).

On December 22, 2022, the Company acquired all of the membership interests in Scion Solutions, LLC (“Scion”). Scion is a life sciences company that has developed a new technology in regenerative medicine specifically for limb salvage. Their proprietary product SkinDisc (patent pending) is a combination of stem cells and several other molecular components that stimulate tissue regeneration (see Note 8).

Impact of COVID-19

COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020 and the Company continues to monitor the impact on its operations of the COVID-19 pandemic and its aftermath. The Company believes the effect of the COVID-19 pandemic and certain public and governmental responses to it have negatively affected its results since the pandemic’s inception.

During the COVID-19 pandemic and its aftermath, the Company experienced material reductions in demand and net revenues at its lung treatment centers. This reduction in demand led to the Company shifting its focus from treating chronic lung disease to acquiring and developing early-stage companies or their technologies in the areas of therapeutics, medical devices, and diagnostics.

9

Results of Operations – For the years ended December 31, 2022 and 2021

H-CYTE, Inc

Statement of Operations

  2022  2021  Change  Change % 
Revenues $453,460  $1,611,518  $(1,158,058)  -72%
                 
Gross Profit  335,859   906,813   (570,954)  -63%
                 
Operating Expenses  5,441,632   6,192,417   (750,839)  -12%
                 
Operating Loss  (5,105,773)  (5,285,604)  179,831   3%
                 
Other (Expense) Income  (5,193,807)  486,297   (5,680,104)  -1168%
                 
Net Loss $(10,299,580) $(4,799,307) $(5,500,273)  -115%
                 
Net Loss attributable to common stockholders $(10,299,580) $(4,799,307) $(5,500,273)  -115%
                 
Loss per share - Basic and diluted $(35.06) $(32.93)        
                 
Weighted average outstanding shares - basic and diluted (1)  293,788   145,736         

(1)The number of outstanding shares of common stock have been adjusted for all periods presented to reflect a one-for-one thousand reverse stock split that became effective on June 13, 2022. The amounts in common stock and additional paid-in capital were adjusted as of the effective date of the one-for-one thousand reverse stock split. See Note 1 for additional information.

Revenue and Gross Profit

The Company recorded revenue of approximately $453,000 and $1,612,000 for the years ended December 31, 2022, and 2021, respectively. The Company has closed all of the LHI Clinics as of December 31, 2022 which was the Company’s only current source of revenue. The Company has continued to transform itself into a biologics and therapeutic device incubator company to bring new technologies to market.

For the years ended December 31, 2022 and 2021, the Company generated a gross profit totaling approximately $336,000 and $907,000, respectively.

Operating Expenses

Salaries and Related Costs

For the years ended December 31, 2022 and 2021, the Company incurred approximately $1,054,000 and $2,214,000 in salaries and related costs, respectively. The decrease in salaries and related costs, as compared to the prior year, is due to the adjustments to the Company’s corporate structure by reducing expenses in marketing, sales, and operations due to decreased patient volume and closing of the LHI clinics. As of December 31, 2022, due to lack of financial resources, the Company has incurred $294,000 in unpaid salaries and wages.

Other General and Administrative

For the years ended December 31, 2022 and 2021, the Company incurred approximately $1,392,000 and $2,700,000 in other general and administrative costs, respectively. The Company adjusted its corporate structure by reducing expenses in marketing, sales, and operations due to decreased patient volume and closing of the LHI clinics.

Other Income/Expense

For the years ended December 31, 2022 and 2021, interest expense was approximately $368,000 and $177,000 respectively. The increase was related to the Company issuing additional convertible notes in 2022 compared to 2021. For the year ended December 31, 2021 the Company received forgiveness of the PPP loan in the amount of approximately $699,000.

For the year ended December 31, 2022, the Company incurred approximately $3,133,000 in inducement expense related to the warrant inducement (see Note 9). For the year ended December 31, 2022, the Company incurred approximately $377,000 in warrant expense related to the securities purchase agreements. For the year ended December 31, 2022, the Company incurred approximately $2,196,000, related to the loss on extinguishment of convertible notes payable (see Note 4).

Liquidity, Going Concern, and Sources of Liquidity

The Company had a negative cash balance of approximately $4,000 as of December 31, 2022, which is included in current liabilities, and cash on hand of approximately $3,000 as of May 8, 2023. The Company’s cash is insufficient to fund its operations over the next year and the Company is currently working to obtain additional debt or equity financing to help support working capital needs.

The Company has historically incurred losses from operations and expects to continue acquisitions and generate negative cash flows as the Company implements its updated strategic business plan. The Company will need to raise cash from debt and equity offerings to continue its operations. There can be no assurance that the Company will be successful in doing so.

Going Concern

The Company incurred net losses of approximately $10,300,000 and $4,799,000 for the years ended December 31, 2022 and 2021, respectively. The Company has historically incurred losses from operations and expects to continue to generate negative cash flows as it implements its plan around the Biosciences Division. The consolidated financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) as applicable to a going concern.

COVID-19 has adversely affected the Company’s financial condition and Europe. The Company received CE marking in June 2017 for the DenerveX System and it is now commercially available throughout the European Union and several other countries that accept CE marking. The Company’s first saleresults of the DenerveX System occurred in July 2017. The Company plans to seek approval for the DenerveX System from the Food & Drug Administration (“FDA”) in the United States.

The DenerveX System

Our first acquisition was the DenerveX device. We believe that the DenerveX device can be used to encompass several medical applications, including pain relief.

The Company acquired the DenerveX patent on January 31, 2013 from Scott Haufe, M.D. (“Dr. Haufe”), a director ofoperations. Accordingly, the Company in exchange for 750,108 shares of common stock incannot predict the Company and a 1% royalty on all sales of any product sold based on the patent. In September 2013, we entered into a Co-Development Agreement with James Andrews, M.D. (“Dr. Andrews”), a director of the Company, whereby Dr. Andrews committedextent to further evaluate the DenerveX device and to seek to make modifications and improvements to such technology. In exchange for such services, the Company agreed to pay Dr. Andrews a royalty equal to two (2%) percent of the DenerveX net sales during the five (5) year term of the Co-Development Agreement. Upon the termination of the term of the Co-Development Agreement, which has a minimum term of five (5) years, then the royalty payable to Dr. Andrews shall be reduced to one (1%) percent of DenerveX net sales after such termination of products covered by any U.S. patent on which Dr. Andrews is listed as a co-inventor; if any such patents are obtained. Such one (1%) percent royalty shall continue during the effectiveness of such patent. Pursuant to the Co-Development Agreement, Dr. Andrews agreed to assign any modifications or improvements to the DenerveX to the Company subject to the royalty rights described above.

We are marketing the product as a disposable, single-use kit which includes all components of the DenerveX device product. In addition to the DenerveX device itself, we have developed a dedicated Electro Surgical Generator, the DenerveX Pro-40, to power the DenerveX device.

The generator is provided to customers agreeing to purchase the DenerveX device and cannot be used for any other purpose.

We accepted a proposal from Devicix, a Minneapolis, Minnesota third party design and development firm, in November 2013, to develop a prototype device. This proposal included a 5-phase development plan, culminating in the production ready prototype that could be used for validation purposes. We have recently completed the final stages of the build and test phase of the device, culminating in receiving CE marking to market the product in Europe. The DenerveX Kit and Pro-40 generator is now in commercial production.

We anticipate very minimal, if any, additional build and test related expenses, which consists of product design verification activities, in the future as we launch the DenerveX System in Europe. Through December 31, 2017, we have paid approximately $1,849,000 to Devicix.

In November 2014, we selected Nortech Systems Inc. (“Nortech”), a Minneapolis, Minnesota based FDA registered contract manufacturer, to produce test DenerveX devices from the prototype supplied by Devicix for use in final development and non-clinical testing. The agreement with Nortech includes agreed upon per unit prices for delivery of the devices. Actual work on development of the final units began in November 2014. Through December 31, 2017, we have paid approximately $890,000 to Nortech. We are now in commercial production.

Also in November 2014, we engaged Bovie Medical Corporation (“Bovie”), a Delaware Corporation, to develop the Electro Surgical Generator and provide post production support services. Per our agreement with Bovie, we are invoiced based on deliverables produced by Bovie, which was originally supposed to amount to $295,000 upon completion of all the deliverables. Through December 31, 2017, we have paid approximately $422,000 to Bovie for production services. The original $295,000 agreement was a base number along the pathway of development. Additional requirements were incurred as the research and development process progressed and as a result certain prices increased and additional costs were incurred to further customize the DenerveX System. We are also in commercial production of the generator.

The Company has completed the final stages of the development and verification of the DenerveX Device and the DenerveX Pro-40 power generator as a system, and the DenerveX System is presently being manufactured and sold.

Regulatory Approval

The Company received CE marking in June 2017 for the DenerveX System. It can now be sold throughout the European Union and countries that accept CE Mark. In the future, the Company will seek marketing clearance from the FDA for commercialization of the DenerveX System in the US.

Aside from the European Union, we may seek regulatory approval for commercialization of the DenerveX System from Columbia, Peru, Argentina, Mexico, Turkey, Israel, New Zealand, Australia and other countries. The documentation required to accompany the CE Mark to obtain regulatory approval in the aforementioned countries may include copies of the ISO 13485 certification, the SGS certificate of approval and a statement of Good Manufacturing Practices (“GMP”).

Streamline, Inc.Divestiture

In May 2016, the Board of Directors authorized management to seek buyers for Streamline, Inc., (“Streamline”), the Company’s wholly owned subsidiary acquired in March 2015. The Company sold all Streamline related assets on December 7, 2016 (the “Closing”).

This transaction provided funds needed to complete the development and launch of the Company’s primary product, the DenerveX System, and the decision to sell the Streamline assets helped raise part of the necessary funds required for continuing operations of the Company in a non-dilutive manner to existing shareholders.

The transaction resulted in the immediate receipt of $500,000 in cash, and a $150,000 note receivable to the Company due on or before January 1, 2018. The Company subsequently received the $150,000 per the terms of the asset purchase agreement on January 2, 2018.

The terms of the agreement also required that for each of the calendar years ending December 31, 2018 and December 31, 2019 (each such calendar year, a “Contingent Period”), a contingent payment in cash (each, a “Contingent Payment”) equal to five percent (5%) of the total net sales received by the acquiring party from the sale of “IV suspension system” products in excess of 100 units during each Contingent Period. Each such Contingent Payment is payable to the Company by the acquiring party by no later than March 31st of the subsequent year; provided, however, that the total aggregate amount of all Contingent Payments owed by the acquiring party to the Company for all Contingent Periods will not exceed $850,000.

Critical Accounting Policies and Estimates

Our discussion and analysis of ourits financial condition and results of operations are basedwill be affected.

10

There can be no assurance that the Company will be able to raise additional funds or that the terms and conditions of any future financing will be workable or acceptable to the Company or its shareholders. If the Company is unable to fund its acquisitions and operations from existing cash on ourhand, operating cash flows, additional borrowings, or raising equity capital, the Company may not continue operations. The consolidated financial statements which we have prepared in accordancedo not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Sources of Liquidity

With the Company historically having experienced losses, the primary source of liquidity has been raising capital through debt and equity offerings, as described below.

Debt

Convertible Notes Payable

On April 1, 2021, the Company, entered into a Secured Convertible Note Purchase Agreement (the “April 2021 Note Purchase Agreement”) with United States generally accepted accounting principles. The preparation of these consolidated financial statements requires usfive (5) related party investors (the “Holders”). Pursuant to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dateterms of the financial statements, as well asApril 2021 Note Purchase Agreement, the reported amounts of revenues and expenses during the reporting periods.

On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detailCompany sold promissory notes in the notesaggregate principal amount of $2,575,000 maturing on June 17, 2022 with an annual interest rate of 8%. The Notes are convertible into shares of Common Stock at a discount of 20% to our consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.

Fair Value Measurements

We measure certain non-financial assets at fair value on a non-recurring basis. These non-recurring valuations include evaluating assetsprice paid for such as long-lived assets and non-amortizing intangible assets for impairment; allocating value to assets in an acquired asset group; and applying accounting for business combinations.

We use the fair value measurement framework to value these assets and report the fair valuesNew Securities in the periods in which they are recorded or written down.

The fair value measurement framework includes a fair value hierarchynext round of financing that prioritizes observable and unobservable inputs used to measure fair values in their broad levels. These levels from highest to lowest priority aremeets the definition of Qualified Financing as follows:

● Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted on active markets, but corroborated by market data; and
Level 3: Unobservable inputs or valuation techniques that are used when little or no market data is available.

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include: estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. We may also engage external advisors to assist us in determining fair value, as appropriate.

Although we believe that the recorded fair value of our financial instruments is appropriate at December 31, 2017, these fair values may not be indicative of net realizable value or reflective of future fair values.

Goodwill and Impairment of Long-Lived Assets

Goodwill is the excess of the purchase price over the fair value of net assets of acquired businesses. Goodwill is tested for impairment annually or whenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired. The test for impairment requires us to make several estimates about fair value. Our estimates associated with the goodwill impairment test are considered critical due to the amount of goodwill recorded on our consolidated balance sheets and the judgment required in determining fair value.

Other intangible assets include trademarks and purchased technology. Intangible assets with a definite life are amortized on a straight-line basis, as appropriate, with estimated useful lives ranging from five to seven years, and are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable.

Definite-lived intangible assets are tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable.

Income Taxes

The Company uses the liability method of accounting for income taxes, which requires recognition of temporary differences between financial statement and income tax bases of assets and liabilities, measured by enacted tax rates. A valuation allowance is recorded to reduce deferred tax assets when necessary.

We file income tax returnsdefined in the U.S. federal jurisdiction and certain state jurisdictions.April 2021 Note Purchase Agreement. The tax years that could be subject to auditNotes are 2014, 2015 and 2016.

Revenue Recognition and Sales Returns, Discounts and Allowances

We recognize revenue in accordance with generally accepted accounting principles as outlined insecured by the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue From Contracts with Customers, which the Company elected to early adopt. ASC 606 requires that five basic criteria be met before revenue can be recognized: (i) identify the contract with the customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied a performance obligation.

The Company sells the DenerveX System through a combination of direct sales and independent distributors in international markets. The Company recognizes revenue when title to the goods and risk of loss transfers to customers, provided there are no material remaining performance obligations requiredassets of the Company or any mattersunder a security agreement with the Holders. The lead investor of customer acceptance. We only record revenue when collectability is reasonably assured.

Revenue recognition occurs at the time product is shipped to customers fromApril 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $1,500,000 of the third-party distribution warehouse located in Berlin, Germany. Our stocking distributors, who sell the products to their customers or sub-distributors, contractually take titletotal amount to the productsCompany. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and assume all risks of ownership at the time of shipment. Our stocking distributors are obligated to pay us the contractually agreed upon invoice price within specified terms regardless of when, if ever, they sell the products.

Our direct customers do not have any contractual rights of return or exchange other than for defective product. A portionrelated party of the Company’s revenue is generated from inventory maintained at hospitals or physician’s offices.Company. An additional affiliate of FWHC, LLC provided an additional $25,000 as part of the April 2021 Note Purchase Agreement.

TheOn October 14, 2021, the Company records estimated sales returns, discounts and allowances as a reduction of net salesentered into the Second Closing Bring Down Agreement (the “October 2021 Note Purchase Agreement”) whereby the five (5) related party investors who had entered into the April 2021 Note Purchase Agreement purchased new notes in the same period revenue is recognized.Company in the aggregate principal amount of $750,000. The company does not have any estimated sales returns or allowancesNotes are due and payable on June 17, 2022 and bear interest at an annual rate of 8%. The Notes are convertible into shares of Common Stock at a discount of 20% to the price paid for such New Securities in the next financing that meets the definition of a Qualified Financing as of December 31, 2017.defined in the Note Purchase Agreement. The Company recorded $52 in sales discounts at December 31, 2017.

Translation of Foreign Currencies

The Company’s revenues and expenses transacted in foreign currenciesNotes are translated as they occur at exchange rates in effect at the time of each transaction. Realized gains and losses on foreign currency transactions are recorded as a component of other income or expense, net on the Company’s consolidated statements of operations. As the Company commenced salessecured by all of the DenerveX System in July 2017, the Company recorded an immaterial amount in foreign currency exchange for the year ended December 31, 2017.

Assets and liabilitiesassets of the Company denominated in foreign currencies are translated atunder a security agreement with the exchange rate in effect asHolders. The lead investor of the balance sheet date and are recorded as a separate component of accumulated other comprehensive income or loss in the shareholders’ equity sectionOctober 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $437,000 of the Company’s consolidated balance sheet. Astotal amount to the Company. FWHC Bridge, LLC is an affiliated entity of December 31, 2017,FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $7,000 as part of the October 2021 Note Purchase Agreement.

On February 22, 2022, the Company recordedentered into a Debt Conversion Agreement (the “Amendment Agreement”) which i) provided for an immaterial amount in unrealized foreign currency translation, As such, we did not present this as a separate componentadditional round of accumulated other comprehensive income inconvertible debt financing (“Tranche 2 Notes”) of up to $500,000 and ii) amended the shareholders’ equity sectionconversion price on the convertible notes issued April 1, 2021 and October 8, 2021 (Tranche 1 Notes”) from 80% of the Company’s consolidated balance sheet.price paid in a Qualified Financing (proceeds of at least $15 million), to the lesser of (x) $0.002 and (y) the price paid in a Qualified Financing (proceeds of at least $10 million). The Amendment Agreement also provides the following Milestone Payments:

3)$1,000,000 after filing a premarket notification pursuant to Section 510(k) of the Food, Drug and Cosmetic Act, of its intent to market its PRP cellular therapy
4)Following the closing of a Qualified financing, 25% of all proceeds raised in excess of $10 million (not to exceed $1 million)

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Stock-Based Compensation

A summaryThe Milestone Payments are not to exceed $2 million, and the Amendment Agreement also specifies that a Qualified Financing will not occur prior to the closing of significant assumptions usedthe acquisition of Jantibody, LLC.

The Company evaluated the Amendment Agreement under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that probability of having to estimatepay a Milestone payment was minimal and the change in the fair value of the equity awards grantedconversion feature was not material. Since the Amendment did not cause a material change in 2017cash flows, extinguishment accounting was not applicable.

On April 29, 2022, the Company entered into an Amended and 2016 follows:Restated Note Conversion Agreement (the “Note Conversion Agreement”) with certain holders of its Tranche 1 Notes (i) providing for a conversion price equal to the lesser of (x) $0.002 per share (pre-split) and (y) the price per share paid by the investors in a Qualified Financing for such New Securities purchased for cash and not through conversion of Notes (as such terms are defined in the Note Conversion Agreement), in each case subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization, (ii) automatic conversion upon the occurrence of a Qualified Financing, and (iii) amendment of the maturity date from March 31, 2022 to June 17, 2022 (the “New Notes”). Upon the effectiveness of the Company’s 1,000-1 reverse split, the conversion price adjusted to the lesser of (a) the price in Qualified Financing or (b) $2.00 per share. The New Notes also provided the investors with Royalty Payments equal to 15% of all net sales generated by the Company with respect to the sale of products or services associated with the 510(k) Notification related to the Company’s autologous cellular therapy (PRP-PBMC) to treat chronic lung disorder. The Royalty Payments are in lieu of the Milestone payments but are perpetual and there is no limit to the aggregate amount of Royalty Payments that may be paid.

Stock-based compensation expense for the years ended December 31, 2017 and 2016 includes both common stock and stock options grantedDue to certain employees, consultants, and directors and has been recorded as general and administrative expenses. We follow thechanges in key provisions of the ASC Topic 718,Compensation- Stock Compensation which requiresTranche 1 Notes, the measurementCompany analyzed the before and recognition of compensation expense for all stock-based payment awards made to employees and non-employee directors, including employee stock options.

Stock compensation expense based onafter cash flows between the fair value on the grant date estimated in accordance with the provisions of ASC 718 is generally recognized as an expense over the requisite service period.

The stock grant prices and the option prices were set at the estimated(i) fair value of the common stock onNew Notes and (ii) reacquisition price of the Tranche 1 Notes prior to the (A) change in the maturity date from March 31, 2022 to June 17, 2022, (B) change in the conversion price to the lesser of grant using(x) $2.00 and (y) the market approach. Under the market approach,price paid in a Qualified Financing, and (C) the fair value of the common stock was determinedpotential Royalty Payments, to be the valuedetermine whether these changes resulted in a modification or extinguishment of the stockTranche 1 Notes.

The Company used a discounted cash flow method with Monte Carlo Simulation to value the Royalty Payments. Future Royalty Payments were estimated based on management’s best estimate of future cash flows under various scenarios which were discounted to present value using a risk-adjusted rate of 70%.

Based on the datebefore and after cash flows of each note, the change was considered significantly different. Consequently, the New Notes were accounted for as a debt extinguishment of the grant.

We utilizeTranche 1 Notes and a new debt issuance of the Black-Scholes valuation method to recognize compensation expense over the vesting period for stock options. The expected life represents the period that our stock option-based compensation awards are expected to be outstanding.

We use a simplified method provided in Securities and Exchange Commission release,Staff Accounting Bulletin No. 110, which averages an award’s weighted average vesting period and contractual term for “plain vanilla” share options. The expected volatility was estimated by analyzing the historic volatility of similar public biotech companies.

New Notes. The Company uses, and will continue to userecorded approximately a $2,200,000 loss upon extinguishment of debt in the future, the historic volatility of similar biotech companies until we have either a sufficient amount of historical information regarding the volatility of our own share price or other traded financial instruments are available to derive an implied volatility to support an estimate of expected volatility. No dividend payouts were assumed as we have not historically paid, and do not anticipate paying, dividends in the foreseeable future.

The risk-free rate of return reflects the weighted average interest rate offered for US treasury rates over the expected term of the options.

The significant assumptions used to estimate the fair value of the stock option-based equity awards granted in 2017 are;

Grant date February 3  March 28 
Fair value of options granted $0.5775  $0.6856 
Expected term (years)  6   6 
Risk-free interest rate  2.10%  2.11%
Volatility  52.31%  51.86%
Dividend yield  None   None 

During 2017, the Company granted options to purchase 189,159 shares of common stock, and 465,389 shares of common stock were granted. Total equity awards granted in 2017 was 654,548.

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RESULTS OF OPERATIONS

Overview

We started operations late in 2013. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the ramp-up in sales of our prototype product in Europe, approval of the product by the Food & Drug Administration (“FDA”) in the United States, and the rate of adoption of our product by medical professionals. The Company received CE marking in June 2017 for the DenerveX System and it is now commercially available throughout the European Union and several other countries that accept CE marking. The Company’s first sale of the DenerveX System occurred in July 2017. On December 7, 2016, we sold Streamline after the Board authorized management to find a buyer in May 2016. Due to these factors, we believe that period to period comparisons of our results of operations are not a good indication of our future performance.

The following table sets forth our results of operation for the yearsnine months ended December 31, 2017 and 2016:

  2017      2016 
       
Revenues $207,396  $ 
Less: Discounts Allowed  (52)   
Cost of Goods Sold  (162,837)   
Gross Profit  44,507    
         
Operating Expenses:        
General and administrative  4,721,893   4,872,626 
Sales and marketing  865,377   391,698 
Research and development  491,076   1,126,535 
Depreciation and amortization  27,100   11,267 
Impairment of goodwill     6,455,645 
Total operating expenses  6,105,446   12,857,771 
         
Operating Loss  (6,060,939)  (12,857,771)
         
Other Income  957    
         
Other Expenses:        
Interest expense  395,332   455,304 
Total Other Expenses  395,332   455,304 
         
Loss from Continuing Operations  (6,455,314)  (13,313,075)
         
Discontinued Operations        
Loss from discontinued operations  1,163   477,497 
Impairment loss     1,584,048 
Disposal loss     852,864 
Total Loss from Discontinued Operations  (1,163)  (2,914,409)
         
Net Loss $(6,456,477) $(16,227,484)

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Revenue; Cost of Revenue and Gross Profit

The Company’s first sale2022, which was comprised of the DenerveX System occurredfollowing:

Carrying value of Tranche 1 Notes $3,580,738 
Less: Fair value of New Notes  (4,079,838)
Less: Fair value of Royalty Payments  (1,697,000)
Loss on Extinguishment $(2,196,100)

The Note Conversion Agreement also provided for the consummation of a Tranche 2 Financing (the “Tranche 2 Notes”) subject to (i) the aggregate principal amount of indebtedness represented by the Tranche 2 Notes being capped at $500,000 and (ii) Tranche 2 Notes’ being an unsecured obligation of the Company and expressly subordinate in July 2017.all respects to all indebtedness of the Company under the Notes and including language in which the holders of such Tranche 2 Notes acknowledge, confirm and agree to the foregoing subordination terms. Pursuant to the terms of the Note Conversion Agreement, the Investors have agreed not to sell any capital stock of the Company for a period of 12 months following the Qualified Financing. The Company recorded revenue for the year ended December 31, 2017 of $207,396.

The Company sells the DenerveX System through a combination of direct sales and independent distributors in international markets. The Company recognizes revenue at the time product is shipped to customers from the third-party distribution warehouse in Berlin, Germany. We believe this action satisfies the performance obligation as outlined in new revenue recognition standards.

The DenerveX Device is manufactured by Nortech in Minneapolis, MN and subsequently shipped to the third-party warehouse in packages of five units per one package. Our independent distributors then order the DenerveX Devices as single units at specified prices as outlined in their distribution agreements. The international distribution agreements also specify the pricing for which the independent distributor is to sell the DenerveX Device to their end-user customers.

The Pro-40 Generator is manufactured in Bulgaria and shipped to the third-party warehouse as single units. The generators are typically provided for use to customers at no cost, however, demo units can be purchased by customers for which the Company records revenue.

Our independent distribution customers place initial purchase orders for minimum stocking quantities of both the DenerveX Devices and Pro-40 Generators as agreed upon per their signed international distribution agreements. Subsequent stocking orders are required to be placed initially at specified dates and quantities based upon projected end-user sales volumes. Stocking orders thereafter are required to be placed quarterly based off actual end-user sales volumes.

Cost of sales as a percentage of revenue was approximately 79% resulting in a gross profit margin of approximately 21%.

Operating Expenses

We classify our operating expenses into four categories: research & development, sales & marketing, general & administrative expense and depreciation and amortization expense.

Research and Development Costs and Expenses

Research and development costs and expenses consist primarily of fees paid to external service providers, laboratory supplies, costs for facilities and equipment, and other costs for research and development activities.

Research and development expenses are recorded in operating expenses in the period in which they are incurred. Estimates have been used in determining the liability of certain costs where services have been performed but not yet invoiced.

We monitor levels of performance under each significant contract for external service providers, including the extent of patient enrollment and other activities through communicationscurrently working with the service providers to reflectnoteholders on the actual amount expended.

Advertising

During 2017, the Company incurred approximately $332,000 in advertising expenses compared to approximately $224,000 in 2016. Advertising expenses consists primarily of fees paid to vendors for tradeshows and consultants in correlation with the launchextension of the DenerveX in Europe.

General and Administrative Expenses

During 2017, the Company incurred approximately $1,850,000 in personnel costs, compared to approximately $1,780,000 in 2016. Professional fees were approximately $1,651,000 in 2017 and $1,453,000 in 2016 which consisted primarily of professional costs related to the developmentmaturity of the DenerveX System. Travel expenses were approximately $299,000 during 2017 and $226,000 in 2016.outstanding notes.

We anticipate that our general and administrative expenses will continue at a comparable rate in the future to support clinical trials, commercialization of our product candidate and continued costs of operating as a public company.

Depreciation & Amortization

Depreciation and amortization expense are recorded in the period in which they are incurred. During 2017, the Company recognized approximately $27,100 in depreciation expense, compared to approximately $11,300 in 2016.

No amortization expense was recognized during 2017. During 2016, the Company recognized approximately $190,000 in amortization expense from amortizing the intangible assets acquired in the Streamline acquisition prior to Streamline being classified as held for Sale in May 2016 when the recognition of amortization expense ceased. Amortization expense is included in the total loss from discontinued operations at December 31, 2016.

Liquidity and Capital Resources

Since our inception, we have incurred losses and anticipate that we will continue to incur losses in the foreseeable future.

While we expect our research and development costs for the DenerveX System to diminish, we also anticipate increased expenditures for clinical trials to obtain FDA approval of the DenerveX System as well as expenses related to the commercial launch of the DenerveX system. We will need additional cash to fully fund these activities.

Our independent registered public accounting firm has included an explanatory paragraph with respect to our ability to continue as a going concern in its report on our consolidated financial statements as of and for the years ended December 31, 2017 and 2016.

The presence of the going concern explanatory paragraph suggests that we may not have sufficient liquidity or minimum cash levels to operate the business.

Sources of Liquidity

Equity

On FebruaryJune 9, 2017,2022, the Company entered into a Unitsecurities purchase agreement for a total of $272,500 with two accredited investors. The notes issued are convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The notes bear interest at 10% and are due one year from issuance. For the first six months, the Company has the right to prepay the notes at a premium of between 25% and 35% depending on when it is repaid.

The Company also issued a promissory note for $100,000, on June 9, 2022, to another accredited investor. This note bears interest at 15% (no matter when repaid) and converts at a discount of 25% of the price of a public offering or a 25% discount to the VWAP of the five (5) days prior to conversion.

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The embedded features in the convertible notes were analyzed under Accounting Standards Codification 815-“Derivatives and Hedging” (ASC 815) to determine if they required bifurcation as derivative instruments. To be a derivative, one of the criteria is that the embedded component must be net-settleable. While the Company’s Common Stock was traded on an exchange at the time of the transaction, the underlying shares are not readily convertible into cash since there is insufficient daily trading volume for the holders to convert the convertible notes into Common Stock without significantly affecting the share price. Accordingly, the embedded derivatives, including the embedded conversion feature, did not meet the definition of a derivative, and therefore, did not require bifurcation from the host instrument. Certain default put provisions, including a default put and default interest, were not considered to be clearly and closely related to the host instrument but the Company concluded that the value of these provisions was de minimus at inception. The Company will reconsider the value of these provisions each reporting period to determine if the value becomes material to the financial statements.

On August 8, 2022, the Company entered into a securities purchase agreement for a total of $65,000 with an accredited investor. The note issued is convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The note bears interest at 10% and is due one year from issuance. For the first six (6) months, the Company has the right to prepay the notes at a premium of between 25% and 40% depending on when it is repaid.

On February 24, 2023, the Company and certain investors entered into a Securities Purchase Agreement with selected accredited investors(the “SPA”), whereby the Company hadsold and issued to the rightcertain investors an aggregate of three hundred thousand dollars ($300,000) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”). In connection with the aforementioned Notes, the Company also issued to sell inthe investors a private placementwarrant to purchase (the “Purchase Warrant”) a minimumcertain number of $3,000,000 and upshares of Common Stock, which are equal to a maximum20% of $5,000,000the shares of Units. Each Unit hadCommon Stock issuable upon conversion of the Note, based on a purchase price of $100,000$2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and consistedthe sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company has the option to extend this offering to June 30, 2023.

The Notes have a maturity date of the earlier of (i) 96,154one year from issuance; or (ii) upon the closing of a qualified offering. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the SPA, the Company also issued a Common Stock Purchase Warrant to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial exercise date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company, dated February 24, 2023. The Company issued Warrants to purchase an aggregate of 30,000 shares of Common Stock. The exercise price per share of the Common Stock under this Warrant is $2.00.

On February 28, 2023, the Company entered into a securities purchase agreement for a total of $128,250 with an accredited investor. The notes issued are convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The notes bear interest at 10% and are due one year from issuance. For the first six months, the Company has the right to prepay the notes at a premium of between 25% and 40% depending on when it is repaid.

On March 27, 2023, H-Cyte, Inc., (the “Company”) and three related party investors entered into a Securities Purchase Agreement (the “SPA”), whereby, the Company sold and issued to the certain investors, an aggregate of one hundred twenty five thousand dollars ($125,000) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value $0.001 per share at a purchase price(“Common Stock”). On April 12, 2023, the Company and an additional investor entered into the SPA, whereby, the Company sold and issued an aggregate of $1.04 per share, and (ii)thirty five thousand dollars ($35,000) of the Company’s Notes. In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase 48,077(the “Purchase Warrant”) a certain number of shares of common stock. Each warrant hasCommon Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an initial exercise price of $1.50$2.00 per share. Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company has the option to extend this offering to June 30, 2023.

The March 27, 2023 Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. The April 12, 2023 Note has a maturity date 60 days from issuance. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the SPA, the Company also issued a Common Stock Purchase Warrant to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial exercise date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company. The Company issued Warrants to purchase an aggregate of 13,500 shares of Common Stock. The exercise price per share andof the Common Stock under this Warrant is exercisable$2.00.

Other Obligations

During the year ending December 31, 2022, Michael Yurkowsky, CEO, advanced the Company approximately $40,000 as a non-interest-bearing note with no established repayment terms. The balance owed is approximately $35,000 as of December 31, 2022.

Equity

In January 2022, the Company offered certain warrant holders the opportunity to receive an additional warrant to purchase the Company’s Common Stock at $14.00 per share, for a period of five (5) years from issuance for the dateexercise of issuance. Investorseach existing warrant originally issued in April 2020 prior to March 31, 2021. As of December 31, 2022, the Company had the option to request shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) in lieu of common stock, on a basis of one share of preferred stock for every one hundred shares of common stock.

The offering resulted in gross proceeds of $3,022,000 and resulted in the issuance ofeleven warrant holders exercise an aggregate of 1,631,73083,579 warrants at $14.00 per share resulting in cash proceeds of $1,170,110 to the Company.

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The Company filed a Registration Statement on Form S-1 registering the resale of the shares of common stock 12,740 shares of Series A Preferred Stock and warrants to purchase 2,005,761 shares of common stock. The placement agent collected an aggregate of approximately $350,000 in total fees related to the offering and warrants to purchase an aggregate of 405,577 shares of common stock at a price of $1.50 per share.

Each share of Series A Preferred Stock may be converted into shares of fully paid and non-assessable shares of common stock at a rate of one hundred sharesissuable upon exercise of the Company’s common stock for every share of Series A Preferred Stock.warrants issued in the April 2020 financing. The registration statement was declared effective on February 14, 2022.

On July 14, 2017,September 29, 2022, the Company entered into a Securitiessecurities purchase agreement with two accredited investors for the sale of shares of Common Stock and warrants (the “Purchase Agreement”). Pursuant to the Purchase Agreement, with selected accredited investors whereby the Company sold an aggregate of 2,956,043112,500 shares of common stock and 1,478,022 warrants to purchase common stock. The Offering resulted in $2,690,686 in56,250 shares of Common Stock exercisable at $2.50 per share for gross proceeds of approximately $225,000. All of the shares described in this Current Report on Form 8-K are being offered and issued to accredited investors in reliance upon exemptions from the registration requirements under Section 4(a)(2) under the Securities Act of 1933, as amended (“Securities Act”), and Rule 506 of Regulation D promulgated thereunder.

On November 14, 2022, pursuant to the Company. The placement agent collected $188,000 in total fees related toPurchase Agreement, the offering. The common stock shares wereCompany sold at $0.91 per share which was the closing price of the Company’s common stock on July 13, 2017, the day prior to the agreement. Each warrant has an exercise price of $1.15 and is exercisable for a period of five years commencing six months from the date of issuance.

Debt

On February 9, 2017, the Company’s $1,150,000 short-term note payable was converted into an aggregate of 165,86515,000 shares of common stock and 9,399 shares of Series A Preferred Stock, eliminating the Company’s debt obligation. The debt was converted into shares at $1.04 per share. The share price of which the debt was converted was the offering price of the Company’s stock in the February private placement. Each share of Series A Preferred Stock may be converted into shares of fully paid and non-assessable shares of common stock at a rate of one hundred shares of the Company’s common stock for every share of Series A Preferred Stock.

As consideration for converting the debt, the noteholders’ agreed to receive common stock in lieu of the 200,000 warrants to purchase common stock that were issued7,250 shares of Common Stock exercisable at $2.50 per share for gross proceeds of $30,000.

Appointment of New Board Members and Officers.

On January 17, 2022, Mr. Richard Rosenblum was appointed as a member of the Board.

On January 17, 2022, Mr. Matthew Anderer was appointed as a member of the Board.

Consulting Agreements

The Company entered into a consulting agreement with Tanya Rhodes of Rhodes & Associates, Inc, effective June 15, 2020, to serve as the Chief Science Officer of the Company. The agreement has a minimum term of six months with an average fee of $21,000 per month plus expenses which increases 5% per month on January 1 of each calendar year unless an alternative retainer amount is negotiated and agreed upon by both parties. The Company extended the contract on January 1, 2021, resulting in conjunction with the short-term loan.

monthly expenses of $22,500 plus expenses for services rendered. As of January 1, 2022, Ms. Rhodes is continuing to receive $22,500 and is engaged on a result, the 200,000 warrants associated with the related debt as noted above were cancelled, andmonth-to-month basis. Due to lack of financial resources, the Company issued an aggregatewas unable to pay Ms. Rhodes for her services totaling $95.175, which has been accrued as part of 200,000 shares of common stock to the noteholders’. The closing price of the Company’s stock on February 9, 2017, the day the shares were issued, was $1.04 per share. The fair value of the common stock issued was approximately $208,000.

The Company is exploring other fundraising options presently, however, since we believe that the likelihood of obtaining traditional debt financing at our stage of development is low, our source of funds in the foreseeable future will likely be from the sale of capital stock or a type of structured capital arrangement involving either equity or a combination of debt with an equity component.

Cash Flows

Net cash used in operating activities was approximately $5,590,000 during the year ended December 31, 2017, compared to approximately $5,427,000 in 2016. Net cash used in investing activities was approximately $17,000 during the year ended December 31, 2017, compared to net cash provided by investing activities of approximately $415,000 during the year ended December 31, 2016. Net cash provided by financing activities was approximately $4,959,000 during the year ended December 31, 2017, compared to approximately $4,335,000 in 2016.

The Company had approximately $245,000 and $893,000 of cash on hand at December 31, 2017 and 2016, respectively.

Results of Continued Operations

Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

The Company’s first sale of the DenerveX System occurred in July 2017. The Company recorded $207,396 and $162,837, respectively, in revenue and cost of goods soldaccrued liabilities for the year ended December 31, 2017. 2022.

The Company did not record any revenue for the year ended December 31, 2016.

Total operating expenses decreased approximately $6,753,000, or 52%,entered into a consulting agreement with Alpha IR Group on March 1, 2022, to approximately $6,105,000 for the year ended December 31, 2017, as compared to approximately $12,858,000 for the year ended December 31, 2016.

Prior year comparison of the results of operating expenses are not a good comparison to current year as the results of continuing operations for the prior year ended December 31, 2016 includes a write down of $6,455,645 in goodwill recorded in connection with the disposal of Streamline Inc. in December 2016.

Excluding impairment charges, total operating expenses incurred during 2017 were more comparableprovide investor relations to the total operating expenses incurred during 2016. Total operating expenses decreased approximately $277,000, or 4%, to approximately $6,105,000Company. The agreement is for the year ended December 31, 2017, as compared to approximately $6,402,000 for the year ended December 31, 2016.

Resultstwelve months with an average service fee of Discontinued Operations

Streamline’s results of operations have been classified as discontinued operations for all periods presented. Our discontinued operations generated net losses of approximately $1,000 and $2,914,000 for the years ended December 31, 2017 and 2016, respectively.

Funding Requirements

We anticipate our cash expenditures will remain consistent as diminishing research and development costs will be offset by the cost of clinical trials to obtain FDA approval and moving forward with the recent commercialization of the DenerveX System. We expect future cash flow expenditures to increase if the FDA requires a de novo regulatory path, instead of a 510(k) approval. We also continue to incur similar costs as we continue to operate as a publicly traded entity.

To the extent our available cash is insufficient to satisfy our long-term operating requirements, we will need to seek additional sources of funds from the sale of equity or debt securities or through a credit facility, or we will need to modify our current business plan. There can be no assurances that we will be able to obtain additional financing on commercially reasonable terms, if at all.

The sale of additional equity or convertible debt securities would likely result in dilution to our current stockholders.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4) during the periods presented, investments in special-purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic leases.

Contractual Obligations and Commercial Commitments

The Company has long term contractual obligations for the two promissory notes issued to the Bank of North Dakota New Venture Capital Program and North Dakota Development Fund. Both notes were assumed in conjunction with the consummation of the Streamline acquisition on March 25, 2015 and require combined monthly payments of $5,661 through August 2019.

The Company rents commercial office space in Alpharetta, GA. Base annual rent was initially set at $2,750 per month and the lease term ends July 31, 2018.

The Company also currently reimburses its CEO, Jarrett Gorlin, for the lease of executive office space at a cost of $2,147$9,750 per month, which it believes is at fair market value.

The Company has consulting agreements with three sales, marketing, and distribution consultantsincluded in Europe who provide consulting services for aggregate compensation amounting to approximately €27,500 (approximately $33,000) per month. The consulting agreements, while subject to modifications, commenced at separate dates and will also terminate at separate dates through April 30, 2019.

The Company has a non-exclusive distribution center agreement through June 2019 with a logistics service provider in Berlin, Germany, pursuant to which they manage and coordinate the DenerveX System products whichAccounts Payable. During 2023, the Company exports to the EU. The Company payspaused this service for a fixed monthly fee of €2,900 (approximately $3,500) for all accounting, customs declarations and office support, and a variable monthly fee ranging from €1,900 to €6,900 (approximately $2,300 to $8,300), based off volume of shipments, for logistics, warehousing and customer support services.three month period.

Nasdaq DelistingIndemnification

As a result of the Company’s ongoing non-compliance with Nasdaq’s minimum stockholders’ equity requirement, on November 14, 2017, the Company received notification from Nasdaq that the listing qualification department had determined to delist the Company’s shares from the Nasdaq Stock Market. As reported in the Form 8-K dated November 14, 2017, Nasdaq completed the delisting and the Company’s shares were suspended from trading on the Nasdaq Stock Market on November 16, 2017. The Company did not appeal the Panel’s decision and is now listed with OTC Markets Inc., currently trading on the OTCQB exchange.

Changes in Board of Directors and Certain Officers

On August 16, 2017 the Company received a resignation letter from Mr. Steve Gorlin from his position as a director and Co-Chairman of the Board of Directors of the Company. There were no disagreements between Mr. Gorlin and the Company.

On August 16, 2017, the Board appointed Mr. Jesse Crowne to fill Mr. Gorlin’s vacancy and to serve as a director and Co-Chairman of the Company’s Board of Directors.

On August 16, 2017, Jeffery Wright resigned from his position as Chief Financial Officer of the Company. The resignation is not in connection with any known disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Wright remains with the Company as its Controller which is deemed to be an executive officer position.

On August 16, 2017, the Board appointed Charles Farrahar to serve as the Company’s Chief Financial Officer.

On February 2, 2018, the Company received a resignation letter from Mr. Patrick Kullmann from his position as Chief Operating Officer of the Company. There were no disagreements between Mr. Kullmann and the Company. Mr. Kullmann will continue to work with the Company in an advisory capacity through July 31, 2018.

Indemnification

We have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving, at our request, in such capacity, to the maximum extent permitted under the laws of the State of Nevada.

The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited. However, we maintain directors and officers insurance coverage that may contribute, up to certain limits, a portion of any future amounts paid for indemnification of directors and officers. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal. Historically, we have not incurred any losses or recorded any liabilities related to performance under these types of indemnities.

Additionally, in the normal course of business, we have made certain guarantees, indemnities, and commitments under which we may be required to make payments in relation to certain transactions. These indemnities include intellectual property and other indemnities to our customers and distribution network partners in connection with the sales of our products and therapies, and indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease.

It is not possible to determine the maximum potential loss under these guarantees, indemnities, and commitmentcommitments due to our limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision.

14

 

Critical Accounting Policies and Estimates

The Company’s discussion and analysis of its financial condition and results of operations are based on its consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods.

On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. The Company bases its estimates on historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.

Fair Value Measurements

The Company measures certain non-financial assets, liabilities, and equity issuances at fair value on a non-recurring basis. These non-recurring valuations include evaluating assets such as long-lived assets and non-amortizing intangible assets for impairment; allocating value to assets in an acquired asset group; and applying accounting for business combinations.

The Company classifies its stock warrants as either liability or equity instruments in accordance with ASC 480, “Distinguishing Liabilities from Equity” (ASC 480) and ASC 815, “Derivatives and Hedging” (ASC 815), depending on the specific terms of the warrant agreement.

The Company uses the fair value measurement framework to value these assets and report the fair values in the periods in which they are recorded, adjusted above, or written down.

The fair value measurement framework includes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair values in their broad levels. These levels from highest to lowest priority are as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted on active markets, but corroborated by market data; and
Level 3: Unobservable inputs or valuation techniques that are used when little or no market data is available.

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist in determining fair value, as appropriate.

The Company evaluates its financial instruments subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. Although the Company believes that the recorded fair value of our financial instruments is appropriate at December 31, 2022, these fair values may not be indicative of net realizable value or reflective of future fair values.

Revenue Recognition

The Company recognizes revenue in accordance with U.S. GAAP as outlined in the FASB ASC 606, Revenue From Contracts with Customers, which requires that five steps be completed to determine when revenue can be recognized: (i) identify the contract with the customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfies a performance obligation. The Company records revenue under ASC 606 as services are performed for the customer.

15

The Company uses a standard pricing model for the types of cellular therapy treatments that is offered to its patients. The transaction price accounts for medical, surgical, facility, and office services rendered by the Company for consented procedures and is recorded as revenue. The Company recognizes revenue when the terms of a contract with a patient are satisfied.

The Company offers two types of cellular therapy treatments to their patients:

1)The first type of treatment includes medical services rendered typically over a two-day period in which the patient receives cellular therapy. For this treatment type, revenue is recognized in full at time of service.
2)The Company also offers a four-day treatment in which medical services are rendered typically over a two-day period and then again, approximately three months later, medical services are rendered for an additional two days of treatment. Payment is collected in full for both service periods at the time the first treatment is rendered. Revenue is recognized when services are performed based on the estimated standalone selling price of each service.

The Company’s policy is to not offer refunds to patients. However, in limited instances the Company may make exceptions to this policy for extenuating circumstances. These instances are evaluated on a case-by-case basis and may result in a patient refund. Management performed an analysis of its customer refund history for refunds issued related to prior year’s revenue. Management used the results of this historical refund analysis to record a reserve for anticipated future refunds related to recognized revenue, which is not significant at December 31, 2022 and 2021. The Company has now closed all of its clinical operations in the autologous infusion therapy business which delivered treatments for patients with chronic respiratory and pulmonary disorders.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4) during the periods presented, investments in special-purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic leases.

Recently Adopted Accounting Standards

In May 2014,December 2019, the FASB issued ASU 2014-09, “Revenue Recognition - Revenue2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which amends the approaches and methodologies in accounting for income taxes during interim periods and makes changes to certain income tax classifications. The new standard allows exceptions to the use of the incremental approach for intra-period tax allocation, when there is a loss from Contracts with Customers” (ASU 2014-09) that requires companiescontinuing operations and income or a gain from other items, and to recognize revenuethe general methodology for calculating income taxes in an interim period, when a customer obtains control rather thanyear-to date loss exceeds the anticipated loss for the year. The standard also requires franchise or similar taxes partially based on income to be reported as income tax and the effects of enacted changes in tax laws or rates to be included in the annual effective tax rate computation from the date of enactment. Lastly, in any future acquisition, the Company would be required to evaluate when companies have transferred substantially all risksthe step-up in the tax basis of goodwill is part of the business combination and rewards ofwhen it should be considered a good or service. This update is effective for annual reporting periods beginning on or after December 15, 2017 and interim periods therein and requires expanded disclosures.separate transaction. The Company adopted ASU 2019-12, as required, on January 1, 2021 and the amendments of ASU 2014-09 effective quarter ended September 30, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

In July 2015,August 2020, the FASB issued ASU 2015-11, “Inventory (Topic 330),” which requires inventory measured using any method other than last-in, first-out or2020-06. Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity. The ASU simplifies the retail inventory methodaccounting for certain financial instruments with characteristics of liabilities and equity. Specifically, ASU 2020-06 revises the requirements to be subsequently measured atseparately account for conversion features as a derivative under ASC Topic 815 and it removes the lower of cost or net realizable value, rather than the lower of cost or market. ASU No. 2015-11 is effectiverequirement to account for fiscal years beginning after December 15, 2016, including interim periods within those years.beneficial conversion features on such instruments. The Company adopted the amendmentschose early adoption of ASU 2015-112020-06 effective January 1, 2017. The adoption of this standard2021, related to the April 2021 and October 2021 Note Purchase Agreements. Thus, the Notes did not haverequire consideration for a material impact on our consolidated financial statements.

In November 2015, FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. ASU 2015-17 simplifiesbeneficial conversion feature under ASC 470-20 and the presentation of deferred taxes by requiring deferred tax assets and liabilities be classifiedNotes were accounted for solely as noncurrentdebt on the balance sheet. ASU 2015-17 is effective for public companies for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Jumpstart Our Business Startups Act of 2012

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.

We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

16

 

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TOTABLE OF CONTENTS FOR THE FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID 215)F-2F-1
Consolidated Balance Sheets as of December 31, 20172022 and December 31, 20162021F-3F-2
Consolidated Statements of Operations for the years ended December 31, 20172022 and 20162021F-4F-3
Consolidated StatementStatements of Stockholders’ Equity (Deficit)Deficit for the yearyears ended December 31, 20172022 and 20162021F-5F-4
Consolidated Statements of Cash Flows for the years ended December 31, 20172022 and 20162021F-6F-5
Notes to Consolidated Financial Statements F-7F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

17

 

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of H-CYTE, Inc.

MedoveX Corp. and Subsidiaries

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of MedoveX Corp and SubsidiariesH-CYTE, Inc. (the “Company”) as of December 31, 20172022 and 2016,2021, and the related consolidated statements of operations, changes in stockholders’ equity (deficit)deficit and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172022 and 2016,2021, and the results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 153 to the consolidated financial statements, the Company has negative working capital, has an accumulated deficit, and has incurreda history of significant operating losses and has a working capital deficit. These factorshistory of negative operating cash flow that raise substantial doubt about the Company’sits ability to continue as a going concern. Management’s plans in regard to this matterthese matters are also discusseddescribed in Note 15.3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Frazier & Deeter, LLC

Tampa, Florida

May 10, 2023

We have served as the Company’s auditor since 2015.2018.

F-1

 

/s/ Frazier & Deeter, LLC

Frazier & Deeter, LLC

Atlanta, Georgia
March 30, 2018

MEDOVEX CORP.H-CYTE, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

  December 31, 2017  December 31, 2016 
Assets        
Current Assets        
Cash $245,026  $892,814 
Accounts receivable  157,069    
Other receivables  86,888    
Inventory  294,714    
Prepaid expenses  204,532   364,822 
Short-term receivable  150,000    
Total Current Assets  1,138,229   1,257,636 
Long Term Receivable     150,000 
Property and Equipment, net of accumulated depreciation  87,173   97,590 
Deposits  2,751   2,751 
Total Assets $1,228,153  $1,507,977 
Liabilities and Stockholders’ Equity (Deficit)        
Current Liabilities        
Interest payable $69,222  $69,222 
Accounts payable  196,171   225,725 
Accounts payable to related parties  12,319    
Accrued liabilities  64,000   459,800 
Notes payable, current portion  132,294   126,086 
Short-term note payable, net of debt discount     970,240 
Unearned revenue  1,048    
Total Current Liabilities  475,054   1,851,073 
Long-Term Liabilities        
Notes payable, net of current portion  38,990   103,742 
Deferred rent  688   1,179 
Total Long-Term Liabilities  39,678   104,921 
Total Liabilities  514,732   1,955,994 
Stockholders’ Equity (Deficit)        
        
Preferred stock - $.001 par value: 500,000 shares authorized, 12,740 shares issued and outstanding at December 31,2017, no shares issued issued and outstanding at December 31, 2016  13    
Common stock - $.001 par value: 49,500,000 shares authorized, 21,163,013 and 14,855,181 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively  21,163   14,855 
Additional paid-in capital  33,509,648   25,898,054 
Accumulated deficit  (32,817,403)  (26,360,926)
Total Stockholders’ Equity (Deficit)  713,421   (448,017)
Total Liabilities and Stockholders’ Equity (Deficit) $1,228,153  $1,507,977 

   December 31, 2022   December 31, 2021 
  December 31, 2022  December 31, 2021 
Assets        
         
Current Assets        
Cash $-  $95,172 
Accounts receivable  -   13,500 
Patient financing receivable, current portion  29,464   43,900 
Prepaid expenses  54,381   44,884 
Total Current Assets  83,845   197,456 
         
Property and equipment, net  20,394   38,374 
Patient financing receivable, net of current portion  14,436   67,163 
Other assets  18,682   18,412 
Total assets $137,357  $321,405 
         
Liabilities and Stockholders’ Deficit        
         
Current Liabilities        
Accounts payable $971,492  $585,291 
Accrued liabilities  1,418,368   164,680 
Other current liabilities  139,330   28,246 
Notes payable, current portion  104,468   69,455 
Convertible notes payable, related parties  3,325,000   3,325,000 
Convertible notes payable  430,095   - 
PPP Loan, current portion  -   66,275 
Deferred revenue  -   414,025 
Lease liability, current portion  63,291   94,805 
Anti-dilution share contingent consideration liability  501,531   - 
Interest payable, related parties  400,042   98,055 
Interest payable  123,276   75,048 
Total Current Liabilities  7,476,893   4,920,880 
         
Long-term Liabilities        
Royalty liability  1,697,000   - 
Milestone payment contingent consideration liability  320,850   - 
Lease liability, net of current portion  -   62,768 
Total Long-term Liabilities  2,017,850   62,768 
         
Total Liabilities  9,494,743   4,983,648 
         
Stockholders’ Equity (Deficit)        
Preferred Stock - $.001 par value:  1,000,000,000 shares authorized; Series A Preferred Stock - $.001 par value: 800,000,000 shares authorized, 438,776,170 and 501,887,532 shares issued and outstanding at December 31, 2022 and 2021, respectively.  438,773   501,887 
Common stock - $.001 par value: 500,000,000 shares authorized, 618,506 and 166,394 shares issued and outstanding at December 31, 2022 and 2021, respectively. (1)  618   164,199 
Additional paid-in capital  49,531,216   43,700,084 
Accumulated deficit  (59,327,993)  (49,028,413)
Total Stockholders’ Deficit  (9,357,386)  (4,662,243)
         
Total Liabilities and Stockholders’ Deficit $137,357  $321,405 

(1)The number of outstanding shares of common stock have been adjusted for all periods presented to reflect a one-for-one thousand reverse stock split that became effective on June 13, 2022. The amounts in common stock and additional paid-in capital were adjusted as of the effective date of the one-for-one thousand reverse stock split. See Note 1 for additional information.

See accompanying notes to consolidated financial statementsstatements.

F-2

MEDOVEX CORP.

H-CYTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

  

For the year ended

December 31,

 
  2017  2016 
Revenues $207,396  $ 
Less: Discounts allowed  (52)   
Cost of Goods Sold  (162,837)   
Gross Profit  44,507    
         
Operating Expenses        
General and administrative  4,721,893   4,872,626 
Sales & Marketing  865,377   391,698 
Research and development  491,076   1,126,535 
Depreciation and amortization  27,100   11,267 
Impairment of goodwill     6,455,645 
Total Operating Expenses  6,105,446   12,857,771 
         
Operating Loss  (6,060,939)  (12,857,771)
         
Other Income  957    
         
Other Expenses        
Interest expense  395,332   455,304 
Total Other Expenses  395,322   455,304 
         
Loss from Continuing Operations  (6,455,314)  (13,313,075)
         
Discontinued Operations        
Loss from discontinued operations  1,163   477,497 
Impairment loss     1,584,048 
Disposal loss     852,864 
Total Loss from Discontinued Operations  (1,163)  (2,914,409)
Net Loss $(6,456,477) $(16,227,484)
         
Loss per share – Basic and Diluted        
Continued Operations  $(0.34) $(1.00)
Discontinued Operations     (0.22)
Net Loss per share $(0.34) $(1.22)
         
Weighted average outstanding shares used to compute basic and diluted net loss per share  19,142,795   13,250,789 

  2022  2021 
  December 31, 
  2022  2021 
Revenues $453,460  $1,611,518 
Cost of Sales  (117,601)  (704,705)
Gross Profit  335,859   906,813 
         
Operating Expenses        
Salaries and related costs  1,053,542   2,213,862 
Share based compensation  585,712   1,184,903 
Loss on disposal of property and equipment  9,610   92,803 
Other general and administrative  1,754,564   2,700,849 
Acquired in-process research and development  2,038,204   - 
Total Operating Expenses  5,441,632   6,192,417 
         
Operating Loss  (5,105,773)  (5,285,604)
         
Other (Expense) Income        
Forgiveness of PPP loan  -   698,820 
Inducement expense  (3,133,055)  - 
Loss on extinguishment of convertible notes payable  (2,196,100)  - 
Interest income  507,944   - 
Interest expense  (368,139)  (176,836)
Other income (expense)  (4,457)  (35,687)
Total Other (Expense) Income  (5,193,807)  486,297 
         
Net Loss $(10,299,580) $(4,799,307)
         
Net Loss attributable to common stockholders $(10,299,580) $(4,799,307)
         
Loss per share - Basic and Diluted (1)  (35.06)  (32.93)
Weighted average outstanding shares - basic and diluted (1)  293,778   145,736 

(1)The number of outstanding shares of common stock have been adjusted for all periods presented to reflect a one-for-one thousand reverse stock split that became effective on June 13, 2022. The amounts in common stock and additional paid-in capital were adjusted as of the effective date of the one-for-one thousand reverse stock split. See Note 1 for additional information.

See accompanying notes to consolidated financial statementsstatements.

F-3

MEDOVEX CORP.H-CYTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)DEFICIT

For

  Shares  Amount  Shares  Amount  Capital  Deficit  Deficit 
  Preferred Series A Stock  Common Stock  Additional Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Deficit 
Balances - December 31, 2020  538,109,409  $538,109   129,354  $127,159  $42,515,999  $(44,229,106) $(1,047,839)
Conversion of Series A Preferred Stock to Common Stock  (36,221,875)  (36,222)  36,222   36,222   -   -  $- 
Share based compensation  -   -   -   -   1,184,903   -   1,184,903 
Issuance of Common Stock pursuant to cashless exercise of warrant  -   -   818   818   (818)  -   - 
Net Loss  -   -   -   -   -   (4,799,307)  (4,799,307)
Balances - December 31, 2021  501,887,534  $501,887   166,394  $164,199  $43,700,084  $(49,028,413) $(4,662,243)
Balances  501,887,534  $501,887   166,394  $164,199  $43,700,084  $(49,028,413) $(4,662,243)

  Shares  Amount  Shares  Amount  Capital   Deficit  Deficit 
  Preferred Series A Stock  Common Stock  Additional Paid-in   Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital   Deficit  Deficit 
Balances - December 31, 2021  501,887,534 $501,887  166,394 $164,199 $43,700,084   $(49,028,413) $(4,662,243)
Balance  501,887,534  $501,887   166,394  $164,199  $43,700,084  $(49,028,413) $(4,662,243)
Conversion of Series A Preferred Stock to Common Stock  (63,111,364)  (63,114)  63,114   7,364   55,750    -   - 
Issuance of Common Stock pursuant to securities purchase agreement  -   -   127,500   128   254,871    -   254,999 
Adjustment for 1-for-1000 reverse stock split (1)              (254,831)  254,831    -   - 
Issuance of Common Stock pursuant to Jantibody acquisition  -   -   52,023   52   29,505    -   29,557 
Inducement expense  -   -   -   -   3,133,055    -   3,133,055 
Warrant expense  -   -   -   -   376,934    -   376,934 
Exercised warrants to Common Stock  -   -   83,579   83,580   1,086,530    -   1,170,110 
Share based compensation  -   -   -   -   585,712    -   585,712 
Issuance of anti-dilution Common Stock pursuant to Jantibody acquisition  -   -   2,743   3   (3)   -   - 
Issuance of Common Stock pursuant to SkinDisc acquistion  -   -   123,153   123   53,947    -   54,070 
Net loss  -   -   -   -   -    (10,299,580)  (10,299,580)
Balances - December 31, 2022  438,776,170  $438,773   618,506  $618  $49,531,216   $(59,327,993) $(9,357,386)
Balance  438,776,170  $438,773   618,506  $618  $49,531,216   $(59,327,993) $(9,357,386)

(1)The number of outstanding shares of common stock have been adjusted for all periods presented to reflect a one-for-one thousand reverse stock split that became effective on June 13, 2022. The amounts in common stock and additional paid-in capital were adjusted as of the effective date of the one-for-one thousand reverse stock split. See Note 1 for additional information.

See accompanying notes to consolidated financial statements.

F-4

H-CYTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

  2022  2021 
  For the year ended December 31, 
  2022  2021 
Cash Flows from Operating Activities        
Net loss $(10,299,580) $(4,799,307)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  14,215   15,829 
Amortization of debt premium  (499,100)  - 
Inducement expense  3,133,055   - 
Share based compensation expense  585,712   1,184,903 
Loss on debt extinguishment  2,196,100   - 
Gain on extinguishment of debt - PPP Loan  -   (698,820)
Loss on impairment of ROU Asset  -   139,884 
Warrant expense  376,934   - 
Bad debt expense  67,595   14,399 
Loss on disposal of property and equipment  9,610   92,803 
Expense of acquired in-process research and development  2,038,204   - 
Changes in operating assets and liabilities:        
Accounts receivable  (54,095)  (27,900)
Accounts payable  364,601   (421,677)
Accrued liabilities  239,623   (111,735)
Other current liabilities  (80,198)  (126,566)
Patient financing receivable  67,163   (111,063)
Other assets  (270)  22,123 
Prepaid expenses  (9,497)  60,379 
Deferred revenue  (414,025)  (220,124)
Interest payable, related parties  301,987   98,055 
Interest payable  48,228   79,007 
Net Cash Used in Operating Activities  (1,913,738)  (4,809,810)
         
Cash Flows from Investing Activities        
Purchase of property and equipment  -   (7,830)
Cash acquired in asset acquisition  469   - 
Net Cash Provided By (Used in) Investing Activities  469   (7,830)
         
Cash Flows from Financing Activities        
Proceeds from notes payable  92,513   - 
Proceeds from convertible notes payable, related parties  -   1,969,174 
Proceeds from convertible notes payable  437,500   1,355,826 
Proceeds from warrants exercised  1,170,110   - 
Proceeds from issuance of common stock  254,999   - 
Payment on notes payable  (57,500)  - 
Payment on convertible note financing costs  (13,250)  - 
Payment on PPP Loan  (66,275)  (52,833)
Net Cash Provided by Financing Activities  1,818,097   3,272,167 
         
Net Change in Cash  (95,172)  (1,545,473)
         
Cash - Beginning of year  95,172   1,640,645 
         
Cash - End of year $-  $95,172 
         
Supplementary Cash Flow Information        
Cash paid for interest $12,080  $8,370 
         
Non Cash Investing & Financing Activity        
Conversion of Series A Preferred Stock to Common Stock $63,114  $36,222 
Conversion of warrants to Common Stock $-  $818 
Issuance of common stock pursuant to Jantibody $29,557  $- 
Issuance of warrants pursuant to inducement agreements $3,133,055  $- 
Issuance of warrants pursuant to securities purchase agreement $376,934  $- 
Issuance of Common Stock pursuant to SkinDisc acquisition $54,070  $- 
Issuance of anti-dilution Common Stock pursuant to Jantibody acquisition $3  $-

See accompanying notes to consolidated financial statements.

F-5

Notes to consolidated financial statements

Note 1 - Description of the Company

DESCRIPTION OF THE COMPANY

H-CYTE, Inc (“the Company”) has evolved from focusing on treating chronic lung conditions after the closure of its lung treatment clinics due to COVID-19. The Company is currently focusing on acquiring and developing early-stage companies or their technologies in the areas of therapeutics, medical devices, and diagnostics. The goal is to develop these companies and incubate their technologies to meaningful clinical inflection points.

On June 3, 2022, the Company closed its clinic in Scottsdale, Arizona. The Company has now closed all of its clinical operations in the autologous infusion therapy business which delivered treatments for patients with chronic respiratory and pulmonary disorders. The Company will continue to pursue Food and Drug Administration (“FDA”) approval of the device that was utilized in the treatment provided at the clinics. The Company also has a continued interest in the commercialization of the DenerveX device through a joint venture. The Company has implemented the transition into a biologics and therapeutic device incubator company to bring new technologies to market.

The consolidated results for H-CYTE include the following wholly-owned subsidiaries: H-CYTE Management, LLC, Medovex Corp, Cognitive Health Institute, LLC, and Lung Institute Tampa, LLC and the results include Lung Institute Dallas, LLC (“LI Dallas”), Lung Institute Nashville, LLC (“LI Nashville”), Lung Institute Pittsburgh, LLC (“LI Pittsburgh”), and Lung Institute Scottsdale, LLC (“LI Scottsdale”), as Variable Interest Entities (“VIEs”). Additionally, H-CYTE Management, LLC was the operator and manager of the various Lung Health Institute (LHI) clinics: LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale prior to their closure. All LHI clinics are closed as of December 31, 2022.

On June 10, 2022, the Company amended (the “Amendment”) its Articles of Incorporation to effectuate a one-for-one thousand reverse stock split (the “Reverse Split”) of its common stock. The Reverse Split was approved by FINRA on June 10, 2022 and effectuated on June 13, 2022. Pursuant to the Amendment, the Company also reduced the authorized shares of common stock to 500,000,000. As a result of the Reverse Split, as of December 31, 2022, the Company has 618,506 shares of common stock outstanding and 438,776,170 shares of Series A Preferred Stock outstanding. As a result of the Reverse Stock Split, the Series A Preferred Stock conversion ratio is now one thousand shares of Series A Preferred Stock converts into one share of common stock. Accordingly, the 438,776,170 outstanding shares of Series A Preferred Stock are now convertible into an aggregate of 438,776 shares of common stock.

On September 7, 2022, the Company acquired all of the membership interests of Jantibody LLC (“Jantibody”), a Nevada limited liability company. Jantibody is focused on the development of novel proprietary immunotherapies targeted towards ovarian cancer, pancreatic cancer, and mesothelioma (see Note 8).

On December 22, 2022, the Company acquired all of the membership interests in Scion Solutions, LLC (“Scion”). Scion is a life sciences company that has developed a new technology in regenerative medicine specifically for limb salvage. Their proprietary product SkinDisc (patent pending) is a combination of stem cells and several other molecular components that stimulate tissue regeneration. (see Note 8).

F-6

Autologous Infusion Therapy (“Infusion Division”)

The Company’s Infusion Division develops and implements innovative treatment options in autologous cellular therapy (PRP-PBMC) to treat chronic lung disorders. Committed to an individualized patient-centric approach, this division consistently provides oversight and management of the highest quality care to the LHI clinics located in Tampa, Nashville, and Scottsdale, while producing positive medical outcomes following the strictest CDC guidelines. During the first quarter of 2022, the Company decided to close the clinics in Tampa and Nashville. During the second quarter of 2022, the Company closed its clinic in Scottsdale. The Company has now closed all clinical operations in the autologous infusion therapy division which delivered treatments for patients with chronic respiratory and pulmonary disorders.

Biotech Development (“Biotech Division”)

During the year ended December 31, 2017 and 2016

  Common Stock  Preferred Stock  

Due

From

  

Additional

Paid-in
  Accumulated  

Total Stockholders’

Equity
 
  Shares  Amount  Shares  Amount  Stockholder  Capital  Deficit  (Deficit) 
Balance – December 31, 2015  11,256,175  $11,256     $  $(20,000) $20,164,911  $(10,133,442) $10,022,725 
Conversion of promissory note on January 25, 2016  552,041   552            1,071,961      1,072,513 
Warrant price modification on January 25, 2016                 18,050      18,050 
Warrant price modification on February 16, 2016                 7,670      7,670 
Receivable portion of note of convertible debt              20,000         20,000 
Issuance of common stock pursuant to a private placement completed in April 2016  1,211,703   1,212            800,435      801,647 
Issuance of warrants pursuant to a private placement completed in April 2016                 374,623      374,623 
Issuance of common stock in exchange for consulting services in April 2016  37,500   38            47,962      48,000 
Issuance of common stock pursuant to a private placement completed in August 2016  1,083,333   1,083            975,526      976,609 
Issuance of warrants pursuant to a private placement completed in August 2016                 323,391      323,391 
Issuance of common stock in exchange for consulting services in August 2016  60,000   60            76,740      76,800 
Issuance of warrants pursuant to a term loan completed in September 2016                 135,971      135,971 
Issuance of common stock in exchange for consulting services in September 2016  83,000   83            124,417      124,500 
Issuance of common stock pursuant to a private placement completed in December 2016  571,429   571            999,429      1,000,000 
Stock based compensation                 776,968      776,968 
Net loss                    (16,227,484)  (16,227,484 
Balance – December 31, 2016  14,855,181  $14,855     $  $  $25,898,054  $(26,360,926) $(448,017)
Issuance of common stock in exchange for BOD fees in January 2017  173,912   174            239,826      240,000 
Issuance of common stock pursuant to a private placement completed in February 2017  1,631,730   1,632            1,207,032      1,208,664 
Issuance of preferred stock pursuant to a private placement completed in February 2017        12,740   13      943,673      943,686 
Issuance of warrants pursuant to a private placement completed in February 2017                 465,709      465,709 
Issuance of common stock pursuant to the conversion of a short term note in February 2017  165,865   166            145,753      145,919 
Issuance of preferred stock pursuant to the conversion of a short term note in February 2017        9,399   9      826,865      826,874 
Issuance of warrants pursuant to the conversion of a short term note in February 2017                 177,207      177,207 
Issuance of common stock pursuant to warrant cancellations in February 2017  200,000   200            207,800      208,000 
Issuance of common stock pursuant to preferred stock conversion in March 2017  414,663   415   (4,147)  (4)     (411)      
Issuance of common stock pursuant to preferred stock conversion in April 2017  525,240   525   (5,252)  (5)     (520)      
Issuance of common stock pursuant to a private placement completed in July 2017  2,956,043   2,956            2,019,670      2,022,626 
Issuance of warrants pursuant to a private placement completed in July 2017                 446,561      446,561 
Issuance of common stock in exchange for BOD Fees in October 2017  115,389   115            134,885      135,000 
Issuance of common stock in exchange for consulting services in October 2017  74,990   75            80,925      81,000 
Issuance of common stock in exchange for consulting services in December 2017  50,000   50            33,450      33,500 
Stock based compensation                 683,169      683,169 
Net loss                    (6,456,477)  (6,456,477)
Balance – December 31, 2017  21,163,013  $21,163   12,740  $13  $  $33,509,648  $(32,817,403) $713,421 

See notes to consolidated financial statements

MEDOVEX CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

  Year Ended December 31, 
  2017  2016 
Cash Flows from Operating Activities        
Net loss $(6,456,477) $(16,227,484)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation  27,100   11,396 
Amortization of intangible assets     189,522 
Amortization of debt discount  31,773   357,297 
Debt conversion expense  355,985   68,694 
Intangible asset impairment loss     1,584,048 
Goodwill impairment loss     6,455,645 
Disposal loss     852,864 
Stock based compensation  683,169   776,968 
Straight-line rent adjustment  (491)  688 
Common stock issued for consulting services  114,500   249,300 
Non-cash directors fees     20,000 
Adjustment of fair value of warrant modification     25,720 
Changes in operating assets and liabilities, net of effects of acquisition and disposition:        
Accounts receivable  (157,069)  33,045 
Other receivables  (86,888)   
Prepaid expenses  229,632   (128,400)
Inventory  (294,714)   
Unearned revenue  1,048    
Accounts payable  (29,554)  (52,584)
Interest payable     (3,670)
Accounts payable to related parties  12,319    
Accrued liabilities  (20,800)  359,483 
Net Cash Used in Operating Activities  (5,590,467)  (5,427,468)
Cash Flows from Investing Activities        
Proceeds from disposition of, net assets of Streamline Inc.     500,000 
Expenditures for property and equipment  (16,682)  (85,133)
Net Cash (Used in) Provided by Investing Activities  (16,682)  414,867 
Cash Flows from Financing Activities        
Principal payments under note payable obligation  (127,885)  (136,022)
Proceeds from issuance of common stock, net of offering costs  3,838,671   2,778,256 
Proceeds from issuance of warrants, net of offering costs  1,248,575   833,985 
Proceeds from issuance of short term debt     859,029 
Net Cash Provided by Financing Activities  4,959,361   4,335,248 
Net Decrease in Cash  

(647,788)

   

(677,353)

 
Cash - Beginning of period  892,814   1,570,167 
Cash - End of period $245,026  $892,814 
Cash paid for interest $7,161  $11,469 
Non-cash investing and financing activities        
Finance agreement for insurance policy $69,343  $66,582 
Conversion of note and accrued interest to common stock and preferred stock  826,874   1,072,513 
Conversion of short-term loan to common stock  145,919     
Issuance of warrants for conversion of note  177,207    
Issuance of common stock for consulting services  114,500   249,300 
Common stock issued for board fees  375,000    
Issuance of common stock for preferred stock conversion  931    
Issuance of common stock warrants for placement agent fees  153,688    
Repayment of due from stockholder through forgone director fees     20,000 
Note receivable from disposition of Streamline     150,000 

See notes to consolidated financial statements

F-6

Note 1 - Organization

Description of Business

MedoveX Corp. (the “Company” or “MedoveX”), was incorporated in Nevada on July 30, 2013 as SpineZ Corp. (“SpineZ”) and changed its name to MedoveX Corp. on March 20, 2014. MedoveX is2021, the parent company of Debride Inc. (“Debride”), which was incorporated under the lawsCompany completed a review of the State of Florida on October 1, 2012. The Company is inR&D status regarding the business of designingexclusive product supply and marketing proprietary medical devices for commercial use in the United Statesservices agreements with Rion, LLC (“Rion”) to develop and Europe. The Company received CE marking in June 2017 for the DenerveX System and it is now commercially available throughout the European Union and several other countries that accept CE marking. The Company’s first sale of the DenerveX System occurred in July 2017. The Company plans to seek approval for the DenerveX System from thedistribute (post U.S. Food & Drug Administration, the “FDA”, approval) a biologic combining its PRP-PBMC (“FDA”PRP”) intechnology with Rion’s exosomes (“EV”) technology for the United States.treatment of chronic obstructive pulmonary disease (“COPD”). The Company has determined a single entity biologic from an alternative commercial source will be a more viable solution. The Company has decided to move away from Rion’s PRP technology and is progressing towards alternate biologics and therapeutic devices to meet the needs of the business.

In May 2016, the BoardAs of Directors authorized management to seek buyers for Streamline, Inc., the Company’s wholly owned subsidiary acquired in March 2015. In December 2016,June 30, 2022, the Company enteredhas closed all of the LHI clinics and has moved away from the Infusion Division as part of its future plans. The Company has also decided that the Biotech Division will begin to transform into a definitive asset purchase agreement pursuantmedical biosciences incubator division focusing on bringing new biologics and therapeutic device technologies to which the Company agreed to sell all Streamline assets upon consummation of the divestiture (the “Closing”). The Closing occurred immediately following the execution of the asset purchase agreement on December 7, 2016. (See Note 10)market for various health conditions.

Note 2 -– Basis Of Presentation And Summary of Significant Accounting Policies

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The consolidated results for H-CYTE include the following wholly-owned subsidiaries: H-CYTE Management, LLC, Medovex Corp, Cognitive Health Institute, LLC, and Lung Institute Tampa, LLC and the results include Lung Institute Dallas, LLC (“LI Dallas”), Lung Institute Nashville, LLC (“LI Nashville”), Lung Institute Pittsburgh, LLC (“LI Pittsburgh”), and Lung Institute Scottsdale, LLC (“LI Scottsdale”), as Variable Interest Entities (“VIEs”). Additionally, H-CYTE Management, LLC was the operator and manager of the various Lung Health Institute (LHI) clinics: LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale prior to their closure.

Basis of Presentation And Principles of Consolidation

PRINCIPLES OF CONSOLIDATION

U.S. GAAP requires that a related entity be consolidated with a company when certain conditions exist. An entity is considered to be a VIE when it has equity investors who lack the characteristics of having a controlling financial interest, or its capital is insufficient to permit it to finance its activities without additional subordinated financial support. Consolidation of a VIE by the Parent would be required if it is determined that the Parent will absorb a majority of the VIE’s expected losses or residual returns if they occur, retain the power to direct or control the VIE’s activities, or both.

F-7

The accompanying consolidated financial statements include the accounts of MedoveX Corp., its wholly-owned subsidiary, Debride, as well asthe Parent, its wholly owned subsidiary, Streamline Inc. (“Streamline”).subsidiaries, and its VIEs. All intercompany accounts and transactions have been eliminated in consolidation.

Reclassification of Prior Year Presentation

RECLASSIFICATION OF PRIOR YEAR PRESENTATION

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

Use of Estimates

USE OF ESTIMATES

In preparing the financial statements, generally accepted accounting principles in the United States (“U.S. GAAP”)GAAP requires disclosure regarding estimates and assumptions used by management that affect the amounts reported in financial statements and accompanying notes. Significant estimates were made around the valuation of embedded derivatives, which impacts gains or losses on such derivatives, the carrying value of debt, interest expense, and deemed dividends. Actual results could differ from those estimates.

Cash

CASH

 

Cash

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company’s cash balances at December 31, 20172022 and 20162021 consists of funds deposited in checking accounts with commercial banks.

Accounts Receivable Sales Returns, Discounts and Allowances

ACCOUNTS RECEIVABLE

 

Accounts receivable primarily represent amounts due from customers for which revenue has been recognized. Generally, the Company does not require collateral or any other security to support its receivables.

The Company records estimated sales returns, discounts and allowances as a reduction of net sales in the same period revenue is recognized. The allowance is estimated for trade Trade accounts receivable based onare stated net of an estimate made for doubtful accounts, if any. Management evaluates the expected collectability of accounts receivable after considering the Company’s historical collection experience and the length of time an account is outstanding. The adequacy of this allowance is reviewed each reporting period and adjusted as necessary. As the Company only commenced sales in July 2017, all outstanding trade receivables were deemed collectable, thus, no allowance for doubtful accounts was recorded atregularly to determine if any account balances will potentially be uncollectible. Customer account balances are considered past due or delinquent based on the contractual agreement with each customer. Accounts are written off when, in management’s judgment, they are considered uncollectible. At December 31, 20172022 and 2016.2021, management believes no allowance is necessary. For the year ended December 31, 2022 and 2021, the Company recorded bad debt expense of approximately $68,000 and $14,000, respectively.

In February 2021, the Company implemented a patient financing program whereby it utilized third-party financing companies to facilitate financing to its patients to pay for treatments. The financing structure allows patients to make monthly payments to the financing companies with an interest rate ranging from 7.013.9% based on the patient’s credit score with contract terms ranging from 12 to 36 months. The Company subsequently receives a payment from the financing company net of the finance company’s service fees plus interest. The Company earns interest income from these arrangements which are reflected in interest income in the Company’s financials and combined with interest expense to reflect the net expense. Accounts receivable for financed treatments are listed as “Patient financing receivable, current portion” and “Patient financing receivable, net of current portion”.

Leases

LEASES

 

Other Receivables

Other receivables include input and importation value added tax (VAT) paid by the Company for conducting business in the European Union (“EU”) and for importing goods from outside the EU.

Inventory

Inventories consist of only finished goods and are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets, generally three to five years. Repairs and maintenance are expensed as incurred. Improvements and betterments, which extend the lives of the assets, are capitalized.

Leases

The Company recognizes rent expense on a straight-line basis overaccounts for leases in accordance with the term of the lease. The lease term commences on the date the Company takes possession of or controls the physical use of the property. Deferred rent is included in non-current liabilitiesFinancial Accounting Standard Board (“FASB”) Topic 842, Leases, which requires lessees to recognize leases on the balance sheet.sheet and disclose key information about leasing arrangements. The standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than twelve months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The Company has not entered into significant lease agreements in which it is the lessor.

F-8

Revenue Recognition

REVENUE RECOGNITION

The Company has elected to early adopt Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”)recognizes revenue in accordance with U.S. GAAP as outlined in the FASB ASC 606, Revenue From Contracts with Customers. Under ASC 606, the Company applies a new 5-stepCustomers, which requires that five steps be completed to determine when revenue recognition process as promulgated, the core principle of which necessitates companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service.

Identifycan be recognized: (i) identify the contract with the customer

Medovex has two types of customers: distributors, and individual hospitals and practitioners.

Distributors:

We currently have distribution agreements with distributors located in Italy, Austria, Colombia, Scandinavia, Brazil, Israel, Australia, Turkey, Spain, Switzerland, Chile, Taiwan, Poland, Slovakia, the Czech Republic and the United Kingdom. For each distributor, a standardized distribution agreement is executed and is the definitive contract between the Company and the customer. Each distribution agreement details the pricing, order placement, stocking requirements, terms of payment, and shipping terms under which the DenerveX System will be shipped to the distributor. The distributor places orders for additional product, but all these orders are subject to the terms of the Distribution Agreement.

Direct Customers:

In Germany, all our customers are direct hospitals and individual practitioners. Sales in Germany are solicited by and placed with third party contractors on behalf of Medovex. Medovex has sales agreements with each third party sales representative selling the DenerveX System. Each sales agreement details the price at which the DenerveX System must be sold to the customer. A purchase order from the customer is required before the Company will ship product to the customer. This purchase order contains all the terms and conditions of the sale and is considered the definitive contract for this type of sale.

Identifycustomer; (ii) identity the performance obligationobligations in the contract

Our stocking distributors, who sell the DenerveX System to their customers or sub-distributors, contractually take title to the products and assume all risks of ownership at the time of shipment. The Company has no further obligations once the product is shipped. Our stocking distributors are obligated to pay us the contractually agreed upon invoice price within specified terms regardless of when, if ever, they sell the products. Since no right of return exists, the product is not considered consigned inventory. For direct sales to hospitals and practitioners in Germany, the obligation is met when the product is shipped. Our direct customers do not have any contractual rights of return or exchange other than for defective product or shipping error.

Determinecontract; (iii) determine the transaction price

DenerveX Kit:

The DenerveX kit consists of one (1) Denervex handheld device, one (1) K-Wire, one (1) dilator, one (1) tissue stabilizer, (1) one portal tube and one (1) portal driver. The product is marketed as a disposable, single-use kit which includes all of the components packaged together.

The transaction price for the DenerveX Kit is specifically outlined in the standardized distribution agreements for all distributors at a price of $492.50 per kit (each). The standardized distribution agreements also contain provisions for the purchase of demo-units at a transaction price of $246.25 per kit (each). The sales transaction price for one (1) DenerveX Kit is stated in US dollars for all distribution customers.

The transaction price for the DenerveX Kit is specifically outlined in the standardized sales rep agreements for all sales contractors at a price of €1,100 per kit (each). The sales price for one (1) DenerveX Kit is stated in euros for all German sales.

Pro-40 Generators:

The DenerveX device requires a custom generator for power and cannot be used for any other purpose. For each initial order of the DenerveX Kit, a generator is provided to each customer at no charge. The Company does not recognize any revenue for the no-charge generator units. The units are removed from inventory and recognized as a cost of sales at the time of shipment. Customers may order demo generators, however, the Company charges for these units.

The transaction price for the demo generators is specifically outlined in the standardized distribution agreement for all distributors at a price of $2,500 per unit.

Allocateprice; (iv) allocate the transaction price

In the Company’s case, 100% of the transaction price is recorded as revenue.

Recognizeprice; and (v) recognize revenue when or as the entity satisfies a performance obligation

Revenue recognition occurs at the time product is shipped, FOB shipping, to all customers from the third-party distribution warehouse located in Berlin, Germany.

For Medovex, this is considered the point at which the customer gains control of the Denervex device and there are no remaining material performance obligations. If something abnormal were to happen to the product in transit, the matter would be handles with the carrier, however, the sale would remain intact.

Research and Development

Research and development costs are expensed as incurred.

Advertising

obligation. The Company expenses all salesrecords revenue under ASC 606 as services are performed for the customer.

The Company uses a standard pricing model for the types of cellular therapy treatments that is offered to its patients. The transaction price accounts for medical, surgical, facility, and marketing costsoffice services rendered by the Company for consented procedures and is recorded as incurred. Forrevenue. The Company recognizes revenue when the years ended December 31, 2017 and 2016, advertising costs were approximately $332,000 and $224,000, respectively.terms of a contract with a patient are satisfied.

TranslationThe Company offers two types of Foreign Currenciescellular therapy treatments to their patients:

1)The first type of treatment includes medical services rendered typically over a two-day period in which the patient receives cellular therapy. For this treatment type, revenue is recognized in full at time of service.
2)The Company also offers a four-day treatment in which medical services are rendered typically over a two-day period and then again, approximately three months later, medical services are rendered for an additional two days of treatment. Payment is collected in full for both service periods at the time the first treatment is rendered. Revenue is recognized when services are performed based on the estimated standalone selling price of each service.

The Company’s revenues and expenses transactedpolicy is to not offer refunds to patients. However, in foreign currencies are translated as they occur at exchange rates in effect at the time of each transaction. Realized gains and losses on foreign currency transactions are recorded as a component of other income or expense, net on the Company’s consolidated statements of operations. Aslimited instances the Company commenced salesmay make exceptions to this policy for extenuating circumstances. These instances are evaluated on a case-by-case basis and may result in a patient refund. Management performed an analysis of its customer refund history for refunds issued related to prior year’s revenue. Management used the DenerveX System in July 2017, the Company recorded an immaterial amount in foreign currency exchangeresults of this historical refund analysis to record a reserve for anticipated future refunds related to recognized revenue of approximately $25,000 for the year ended December 31, 2017.2022. The Company has now closed all of its clinical operations in the autologous infusion therapy business which delivered treatments for patients with chronic respiratory and pulmonary disorders.

Research and development costs

RESEARCH AND DEVELOPMENT COSTS

 

AssetsResearch and liabilities of the Company denominated in foreign currencies are translated at the exchange rate in effect as of the balance sheet date anddevelopment expenses are recorded as a separate component of accumulated other comprehensive income or lossin operating expenses in the shareholders’ equity section of the Company’s consolidated balance sheet. The Companyperiod in which they are incurred.

Advertising

ADVERTISING

Advertising costs are recorded an immaterial amount in unrealized foreign currency translation as of December 31, 2017, as such, we did not present as a separate component of accumulated other comprehensive incomeoperating expenses in the shareholders’ equity section of the Company’s consolidated balance sheet.period in which they are incurred.

Share-Based Compensation

Income Taxes

SHARE-BASED COMPENSATION

 

The Company uses the liability method of accounting for income taxes, which requires recognition of temporary differences between financial statement and income tax bases of assets and liabilities, measured by enacted tax rates. A valuation allowance is recorded to reduce deferred tax assets when necessary.

Stock-Based Compensation

The Company maintains a stock option incentive plan and accounts for stock-based compensation in accordance with ASC 718,Compensation - Stock Compensation. The Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award to employees and directors. As required by fair value provisions of share-based compensation, employee and non-employee share-based compensation expense recognized is calculated over the requisite service period of the awards and reduced for estimated forfeitures.

F-9

Income Taxes

The Company utilizes the liability method of accounting for income taxes as set forth in FASB ASC Topic 740, “Income Taxes”. Under the liability method, deferred taxes are determined based on temporary differences between the financial statement and tax bases of assets and liabilities using tax rates expected to be in effect during the years in which the difference turns around. The Company accounts for interest and penalties on income taxes as income tax expense. A valuation allowance is recorded when it is more likely than not that a tax benefit will not be realized. In determining the need for valuation allowances the Company considers projected future taxable income and the availability of tax planning strategies.

From inception to December 31, 2022, the Company has incurred net losses and, therefore, has no current income tax liability. The net deferred tax asset generated by these losses is fully offset by a valuation allowance as of December 31, 2022 and 2021 since it is currently likely that the benefit will not be realized in future periods.

There are no uncertain tax positions at December 31, 2022 and 2021. The Company has not undergone any tax examinations since inception.

Net Loss Per Share

NET LOSS PER SHARE

 

Loss per Share

Basic loss per share is computed on the basis of the weighted average number of shares outstanding for the reporting period. Diluted loss per share is computed on the basis of the weighted average number of common shares plus potentially dilutive potential common shares outstanding using the treasury stock method.and if-converted methods, as applicable. Any potentially dilutive securities are anti- dilutiveantidilutive due to the Company’s net losses. For the years presented, there is no difference between the basic and diluted net loss per share: 7,194,215 warrants and 1,314,059 common stock options outstanding were considered anti-dilutive and excluded for the years presented.

Discontinued Operations

As more fully described in Note 10, in May 2016, management was authorized to locate a buyer for Streamline Inc., the Company’s wholly owned subsidiary acquired in March 2015, by the Board of Directors. Streamline’s results of operations have been classified as discontinued operations for all periods presented.

Fair Value Measurements

FAIR VALUE MEASUREMENTS

We measure

The Company measures certain non-financial assets, liabilities, and equity issuances at fair value on a non-recurring basis. These non-recurring valuations include evaluating assets such as long-lived assets and non-amortizing intangible assets for impairment; allocating value to assets in an acquired asset group; and applying accounting for business combinations.

We useThe Company classifies its stock warrants as either liability or equity instruments in accordance with ASC 480, “Distinguishing Liabilities from Equity” (ASC 480) and ASC 815, “Derivatives and Hedging” (ASC 815), depending on the specific terms of the warrant agreement.

The Company uses the fair value measurement framework to value these assets and report the fair values in the periods in which they are recorded, adjusted above, or written down.

The fair value measurement framework includes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair values in their broad levels. These levels from highest to lowest priority are as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted on active markets, but corroborated by market data; and
Level 3: Unobservable inputs or valuation techniques that are used when little or no market data is available.

F-10

 

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include:include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. WeThe Company may also engage external advisors to assist us in determining fair value, as appropriate.

The Company evaluates its financial liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. Although we believethe Company believes that the recorded fair value of our financial instruments is appropriate at December 31, 2022, these fair values may not be indicative of net realizable value or reflective of future fair values.

Note 3 - Liquidity, Going Concern and Management’s Plans

LIQUIDITY, GOING CONCERN AND MANAGEMENT’S PLANS

 

Goodwill And Impairment of Long-Lived Assets

Goodwill is the excess of the purchase price over the fair value of net assets of acquired businesses. Goodwill is tested for impairment annually or whenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired. The test for impairment requires us to make several estimates about fair value. Our estimates associated with the goodwill impairment test are considered critical due to the amount of goodwill recorded on our consolidated balance sheets and the judgment required in determining fair value.

Other intangible assets include trademarks and purchased technology. Intangible assets with a definite life are amortized on a straight-line basis, as appropriate, with estimated useful lives ranging from five to seven years, and are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable.

Definite-lived intangible assets are tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist solely of cash. At times throughout the year, the Company may maintain certain US bank account balances in excess of FDIC insured limits. The Company may also maintain German bank account balances in excessincurred net losses of Germany’s deposit guarantee regulations within the framework of the German Banks’ Compensation Scheme. At December 31, 2017, the Company did not have cash deposits that exceeded federally insured deposit limits in the US or Germany. At December 31, 2016, the Company had only US cash deposits that exceeded federally insured deposit limits. The Company believes that its funds are deposited in high credit quality financial institutions. The Company has not experienced any losses in such accounts to date and believes it is not exposed to any significant credit risk associated with its cash deposits.

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all ASUs issued, both effective and not yet effective.

In May 2014, the FASB issued ASU 2014-09, “Revenue Recognition - Revenue from Contracts with Customers” (ASU 2014-09) that requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. This update is effective for annual reporting periods beginning on or after December 15, 2017 and interim periods therein and requires expanded disclosures. The Company adopted the amendments of ASU 2014-09 effective quarter ended September 30, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330),” which requires inventory measured using any method other than last-in, first-out or the retail inventory method to be subsequently measured at the lower of cost or net realizable value, rather than the lower of cost or market. ASU No. 2015-11 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. The Company adopted the amendments of ASU 2015-11 effective January 1, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

In November 2015, FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. ASU 2015-17 simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for public companies for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The Company is currently assessing the impact the adoption of ASU 2016-02 will have on its consolidated financial statements.

Note 3 – Inventory

Inventories consist only of finished goods and are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method.

Inventories consisted of the following items as of December 31, 2017, and December 31, 2016:

  December 31, 2017  December 31, 2016 
Split Return Electrodes $1,868  $ 
Denervex device  111,596    
Pro-40 generator  181,250    
Total $294,714  $ 

Note 4 - Property and Equipment

Property and equipment consists of the following:

  Useful Life December 31, 2017  December 31, 2016 
Furniture and fixtures 5 years $67,777  $65,987 
Computers and software 3 years  31,738   19,928 
Leasehold improvements 5 years  35,676   32,593 
     135,191   118,508 
Less accumulated depreciation    (48,018)  (20,918)
           
Total   $87,173  $97,590 

Depreciation and amortization expense, excluding depreciation and amortization from Streamline, Inc., amounted to $27,100approximately $10,300,000 for the year ended December 31, 2017 and $11,267 for the year ended2022. The Company had a negative cash balance of approximately $4,000 as of December 31, 2016.2022, which is included in current liabilities, and has historically incurred losses from operations and expects to continue to generate negative cash flows as the Company implements its plan to transition the Biotech Division into a medical biosciences incubator division focusing on bringing new biologics and therapeutic device technologies to market for various health conditions. The consolidated financial statements are prepared using generally accepted accounting principles in the United States (“U.S. GAAP”) as applicable to a going concern.

COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020 and the Company continues to monitor the impact on its operations of the COVID-19 pandemic and its aftermath. The Company believes the effect of the COVID-19 pandemic and certain public and certain governmental responses to it have negatively affected each of its last twelve quarter’s results.

 

Note 5 – Patent AssignmentDuring the COVID-19 pandemic and Contribution Agreementsits aftermath the Company experienced material reductions in demand and net revenues at its lung treatment centers. This reduction in demand lead to the Company shifting its focus from treating chronic lung disease to acquiring and developing early-stage companies or their technologies in the areas of therapeutics, medical devices, and diagnostics.

The Company had a negative cash balance of approximately $4,000 as of December 31, 2022, and approximately $4,000, as of April 30, 2023. The Company’s cash is insufficient to fund its operations over the next year and the Company is currently working to obtain additional debt or equity financing to help support short-term working capital needs.

There can be no assurance that the Company will be able to raise additional funds or that the terms and conditions of any future financing will be workable or acceptable to the Company or its shareholders. If the Company is unable to fund its operations from existing cash on hand, operating cash flows, additional borrowings, or raising equity capital, the Company may not continue operations. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

On February 1, 2013, the Company issued 750,108 shares of common stock to Scott Haufe, M.D. (“Dr. Haufe”) pursuant to the terms of a Contribution and Royalty Agreement dated January 31, 2013 between24, 2023, the Company and Dr. Haufe. This agreement provides for the Company to pay Dr. Haufe royalties equal to 1% of revenues earned from sales of any and all products derived from the use of the DenerveX technology. Royalties are payable to Dr. Haufe within 30 days after the close of each calendar quarter based on actual cash collected from sales of applicable products. The royalty period expires on September 6, 2030.

The Company also executed a co-development agreement for the DenerveX technology with royalty provisions with James R. Andrews, M.D., as more fully described in Note 12.

During 2017, the Company incurred an aggregate of approximately $1,600 in expenses under both the royalty and co-development agreements, of which approximately $1,000 was included in accounts payable at December 31, 2017. No royalties were paid in 2016.

Note 6 - Equity Transactions

Private Placements

On February 9, 2017, the Company entered into a Unit Purchase Agreement with selected accreditedcertain investors whereby the Company had the right to sell in a private placement a minimum of $3,000,000 and up to a maximum of $5,000,000 of units. Each Unit had a purchase price of $100,000 and consisted of (i) 96,154 shares of the Company’s common stock, par value $0.001 per share at a purchase price of $1.04 per share, and (ii) a warrant to purchase 48,077 shares of common stock. Each warrant has an initial exercise price of $1.50 per share and is exercisable for a period of five (5) years from the date of issuance. Investors had the option to request shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) in lieu of common stock, on a basis of one share of preferred stock for every one hundred shares of common stock.

The offering resulted in gross proceeds of $3,022,000 and resulted in the issuance of an aggregate of 1,631,730 shares of common stock, 12,740 shares of Series A Preferred Stock and warrants to purchase 2,005,761 shares of common stock. The placement agent collected an aggregate of approximately $350,000 in fees related to the offering and warrants to purchase an aggregate of 405,577 shares of common stock at a price of $1.50 per share.

Each share of Series A Preferred Stock may be converted into shares of fully paid and non-assessable shares of common stock at a rate of one hundred shares of the Company’s common stock for every share of Series A Preferred Stock.

On July 14, 2017, the Company entered into a Securities Purchase Agreement with selected accredited investors(the “SPA”), whereby the Company sold and issued to the certain investors an aggregate of 2,956,043 shares of common stock and 1,478,022 warrants to purchase common stock. The Offering resulted in $2,690,686 in gross proceeds to the Company. The placement agent collected $188,000 in total fees related to the offering. The common stock shares were sold at $0.91 per share which was the closing pricethree hundred thousand dollars ($300,000) of the Company’s common stock on July 13, 2017,convertible promissory notes (the “Note” or “Notes”), which are convertible into the day priorCompany’s Common Stock, $0.001 par value (“Common Stock”). In connection with the aforementioned Notes, the Company also issued to the agreement. Eachinvestors a warrant hasto purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $1.15$2.00 per share. Unless the Company chooses to terminate earlier, the offering and is exercisable forthe sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company has the option to extend this offering to June 30, 2023.

The Notes have a period of five years commencing six months from thematurity date of issuance.

Debt Conversion

On February 9, 2017,the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s $1,150,000 short-term note payable was converted intoCommon Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the SPA, the Company also issued a Common Stock Purchase Warrant to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial exercise date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company, dated February 24, 2023. The Company issued Warrants to purchase an aggregate of 165,86530,000 shares of common stock and 9,399 shares of Series A Preferred Stock, eliminating the Company’s debt obligation.Common Stock. The debt was converted into shares at $1.04exercise price per share which was the offering price of the Company’s stock inCommon Stock under this Warrant is $2.00.

F-11

On February 28, 2023, the February private placement. Each shareCompany entered into a securities purchase agreement for a total of Series A Preferred Stock may be converted$128,250 with an accredited investor. The notes issued are convertible into shares of fully paid and non-assessable shares of common stock at a rate65% discount to the lowest trading price in the 20-day period prior to conversion. The notes bear interest at 10% and are due one year from issuance. For the first six months, the Company has the right to prepay the notes at a premium of between 25% and 40% depending on when it is repaid.

On March 27, 2023, H-Cyte, Inc., (the “Company”) and three related party investors entered into a Securities Purchase Agreement (the “SPA”), whereby, the Company sold and issued to the certain investors, an aggregate of one hundred twenty five thousand dollars ($125,000) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”). On April 12, 2023, the Company and an additional investor entered into the SPA, whereby, the Company sold and issued an aggregate of thirty five thousand dollars ($35,000) of the Company’s Notes. In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company has the option to extend this offering to June 30, 2023.

The March 27, 2023 Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. The April 12, 2023 Note has a maturity date 60 days from issuance. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s common stock for every shareCommon Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the SPA, the Company also issued a Common Stock Purchase Warrant to certain investors, which are exercisable on or prior to the close of Series A Preferred Stock.

As consideration for convertingbusiness on the debt, the noteholders’ agreed to receive common stock in lieufive (5) year anniversary of the 200,000 warrantsinitial exercise date, to purchase common stock that were issued in conjunctionup to a certain amount of shares of Common Stock, with 20% of the short-term loan.

As a result,shares of Common Stock issuable upon conversion of the 200,000 warrants were cancelled,Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company. The Company issued Warrants to the noteholders’purchase an aggregate of 200,00013,500 shares of common stock.Common Stock. The closingexercise price per share of the Company’s stock on February 9, 2017, the day the shares were issued,Common Stock under this Warrant is $2.00.

Note 4 – Related Party Transactions

RELATED PARTY TRANSACTIONS

Officers and Board Members and Related Expenses

On January 12, 2021, Mr. Raymond Monteleone was $1.04 per share. The fair valueappointed as Chairman of the common stock issued was approximately $208,000.

preferred Stock Conversion

On March 28, 2017, 4,147 shares of Series A Preferred Stock were converted into an aggregate of 414,663 restricted shares of authorized common stock, par value $0.001 per share.

On April 21, 2017, 5,252 shares of Series A Preferred Stock were converted into an aggregate of 525,240 restricted shares of authorized common stock, par value $0.001 per share.

Stock-BasedBoard, Audit Committee Chair, and Compensation Plan

2013 Stock Option Incentive Plan

On October 14, 2013, shareholders approved the MedoveX Corp. 2013 Stock Incentive Plan (the “Plan”). Under the Plan,Committee Chair. There are understandings between the Company may grant incentive stock optionsand Mr. Monteleone for him to employees and non-statutory stock optionsreceive $5,000 per month to employees, consultants, and directors for up to 1,150,000 shares of common stock. On November 10, 2016, shareholders approved a 500,000 share increase in the number of shares available for issuance under the Plan, from 1,150,000 to 1,650,000 shares. On October 28, 2017, shareholders approved a 1,000,000 share increase in the number of shares available for issuance under the Plan, from 1,650,000 to 2,650,000 shares.

The stock options are exercisable at a price equal to the market valueserve on the dateBoard of Directors and an additional $2,500 per quarter to serve as Chairman of the grant. The Plan gives full authority for granting options, determiningBoard, Audit Committee Chair, and Compensation Committee Chair. Effective January 1, 2022, Mr. Monteleone received $7,500 per month to serve on the typeBoard of options granted,Directors and determining the fair market valuean additional $2,500 per quarter to serve as Chairman of the optionsBoard, Audit Committee Chair, and Compensation Committee Chair. Effective July 1, 2022, due to lack of working capital, Mr. Monteleone receives $3,750 per month to serve on the Plan Administrator.

The Company has the right, but not obligation,Board of Directors and to repurchase any shares obtained through exercise of an option from terminated Plan participants. The Company has 90 days from the date of termination to exercise it’s repurchase right. The Company must pay the Fair

Market Value (“FMV”)serve as Chairman of the shares if the termination was for any reason other than for cause, or the option price (if less than FMV of the shares) if the termination is for cause. The FMV is determined by the Plan Administrator on the date of termination.

During 2017, the Company granted options to purchase 189,159 shares of common stock to certain employees. The options vest as follows: 25% on the date of grantBoard, Audit Committee Chair, and 25% on each of the next three anniversaries. The options granted were at the market value of the common stock on the date of the grant.

We utilize the Black-Scholes valuation method to recognize compensation expense over the vesting period. The expected life represents the period that our stock-based compensation awards are expected to be outstanding.

We use a simplified method provided in Securities and Exchange Commission release,Staff Accounting Bulletin No. 110, which averages an award’s weighted average vesting period and contractual term for “plain vanilla” share options. The expected volatility was estimated by analyzing the historic volatility of similar public biotech companies in an early stage of development.

No dividend payouts were assumed as we have not historically paid, and do not anticipate paying, dividends in the foreseeable future. The risk-free rate of return reflects the weighted average interest rate offered for US treasury rates over the expected term of the options.

The significant assumptions used to estimate the fair value of the equity awards granted are;

Grant date February 3  March 28 
Fair value of options granted $0.5775  $0.6856 
Expected term (years)  6   6 
Risk-free interest rate  2.10%  2.11%
Volatility  52.31%  51.86%
Dividend yield  None   None 

Compensation Committee Chair. For the years ended December 31, 20172022, and 2016,2021, the Company recognized approximately $486,000expensed $75,000 and $777,000,$70,000 respectively, as compensation expense with respectfor board of director fees to stock options.

A summaryMr. Monteleone. Due to lack of financial resources, the Company’s share-based compensation activity and related informationCompany was unable to pay Mr. Monteleone for his services totaling $35,000, which is as follows:

  Shares  Weighted
Average
Exercise
Price
  Weighted
Average
Remaining Term
(Years)
 
Outstanding at 12/31/2015  380,000  $3.95   9.1 
             
Granted  744,900  $1.24   9.52 
Exercised         
Cancelled         
Outstanding at 12/31/2016  1,124,900  $2.15   9.0 
             
Granted  189,159  $1.17   9.10 
Exercised         
Cancelled         
Outstanding at 12/31/2017  1,314,059  $2.01   8.19 
Exercisable at 12/31/2017  954,740  $2.08   8.13 

As of December 31, 2017, there were 359,319 shares of time-based, non-vested stock. Unrecognized compensation cost amounts to approximately $184,000included in accrued liabilities as of December 31, 2017 and2022.

Mr. Michael Yurkowsky entered into an oral agreement with the Company on October 1, 2020, in which Mr. Yurkowsky will be recognized as an expensereceive $4,167 per month to serve on a straight-line basis over a remaining weighted average service period of 1.73 years. The fair value of vested share-based compensation at December 31, 2017 and 2016 was approximately $544,000 and $697,000, respectively.

Common stock issuance

In November 2016, the Board authorized the issuance of shares of common stock to all Board members, both current and former, in an amount equivalent to $240,000, representing their accrued but unpaid directors’ fees as of December 31, 2016. In January 2017, the Company issued an aggregate of 173,912 shares at $1.38 per share, which was the average closing price of the Company’s stock during 2016, to fulfill this obligation. The closing price of the Company’s stock on January 17, 2017, the day the shares were issued, was $1.16 per share.

In August 2017, the Board authorized the issuance of shares of common stock to all Board members, both current and former, in an amount equivalent to $135,000, representing their accrued but unpaid directors’ fees as of September 30, 2017. In October 2017, the Company issued an aggregate of 115,389 shares at $1.17 per share, which was the average closing price of the Company’s stock through September 30, 2017, to fulfill this obligation. The closing price of the Company’s stock on October 30, 2017, the day the shares were issued, was $1.09 per share.

In August 2017, the Board approved an aggregate stock grant of 300,000 restricted common shares from the 2013 Stock Option Plan.

Of the 300,000 shares granted, 175,000 of the shares are to be issued to the Company’s investor relations consultant as follows; 25% on August 17, 2017, the date of grant, 40% 4 months from the date of grant, and 35% 1 year from the date of grant. The Company recognized approximately $81,000 as compensation expense with respect to the stock grant for the year ended December 31, 2017.

The remaining 125,000 shares, of the 300,000 shares granted, are to be issued to a member of the Company’s Board of Directors as follows; 25% on August 17, 2017, the date of grant, 25% in 1 year from the date of grant and 50% 2 years from the date of grant. The Company recognized approximately $34,000 as compensation expense with respect to the stock grant for the year ended December 31, 2017.

Note 7 – Commitments

Operating Leases

Office Space

The Company pays TAG Aviation, a company owned by its Chief Executive Officer, Jarrett Gorlin (“Mr. Gorlin”) for office space that is currently being used as the Company’s principal business location plus utilities (see “Related Party Transactions”) on a monthly basis. Base rental payments under this arrangement are $2,147 per month. Rent expense and utilities cost paid to TAG Aviation amounted to approximately $34,600 and $30,400 forDirectors. For the years ended December 31, 20172022 and 2016, respectively.2021, the Company expensed $0 and $46,000 respectively, for board of director fees to Michael Yurkowsky. On December 1, 2021, the Board of Directors of the Company appointed Michael Yurkowsky to serve as the Company’s Chief Executive Officer. Upon Mr. Yurkowsky’ s appointment as CEO in December 2021, the Company terminated his payments for serving on the Board of Directors.

F-12

 

On July 8, 2015,January 12, 2021, Mr. William Horne stepped down as Chairman of the Board. Mr. Horne will remain a member of the Board. Effective March 1, 2021, the Company entered into an oral agreement with Mr. Horne in which Mr. Horne will receive $4,167 per month to serve on the Board of Directors. Mr. Horne agreed to continue to defer the $108,000 in base salary deferred by him in 2018 until such time as there is a 3 year lease agreement for a commercial building which commenced on August 1, 2015.

Total lease expense forpositive cash flow to meet the year ended December 31, 2017Company’s financial obligations and 2016 was approximately $35,000 and $34,000, respectively, related to this lease. Future minimum lease payments under this rental agreement are approximately as follows:

For the year ended:

December 31, 2018  21,000 
  $21,000 

Equipment

The Company entered into a non-cancelable 36-month operating lease agreement for equipment on April 22, 2015. The agreement is renewable at the end of the term and requiresthen the Company and Mr. Horne will work together in good faith to maintain comprehensive liability insurance.

Total lease expensenegotiate a payment plan for such deferred salary. Effective December 1, 2021, Mr. Horne will receive $5,000 per month to serve on the Board of Directors. Effective July 1, 2022, due to lack of working capital, Mr. Horne receives $2,500 per month to serve on the Board of Directors. For the years ended December 31, 20172022, and 20162021, the Company expensed $50,000 and $37,500, respectively, for board of director fees to Mr. Horne. Due to lack of financial resources, the Company was approximately $2,600. Future minimum lease payments under this operating lease agreement are approximatelyunable to pay Mr. Horne for his services totaling $17,500, which is included in accrued liabilities as follows:of December 31, 2022.

For the year ended:

December 31, 2018  800 
  $800 

F-14

Consulting Agreements

In January 2017, the consultingMr. Richard Rosenblum entered into an oral agreement with one of the Company’s founding stockholders to provide business development consulting services was modified from $5,000Company effective January 17, 2022, in which Mr. Rosenblum will receive $5,000 per month to $10,000 per month and initially extended through January 2018, however, was modified and terminated effective October 31, 2017. The Company paid $95,000 forserve on the year ended December 31, 2017 under the agreement. The Company paid $55,000 for the year ended December 31, 2016 under the agreement.

InBoard of Directors. Effective July 2017, the Company modified the consulting agreement with the sales, marketing, and distribution consultant in Latin America. The agreement1, 2022, due to provide consulting services was modified from $5,000lack of working capital, Mr. Rosenblum receives $2,500 per month to $7,000 per month and extended through December 31, 2017. The Company paid $66,000 and $10,000, respectively, for the years ended December 31, 2017 and 2016 under this agreement.

On August 23, 2017, the Company retained a consulting firm to provide advisory services specific to matters with respect to potential mergers and acquisitions over a nine-month period at a fee of $75,000. The fee is payable in quarterly installments of $25,000 beginning at the start of the advisory period and every three months thereafter. The engagement was originally set to terminate on May 10, 2018, however was terminated early effective December 31, 2017. The Company paid $25,000 in 2017 under the agreement.

The Company has consulting agreements with three sales, marketing, and distribution consultants in Europe who provide consulting services for aggregate compensation amounting to approximately €27,500 (approximately $33,000) per month. The consulting agreements, while subject to modifications, commenced at separate dates and will also terminate at separate dates through April 30, 2019. The Company paid approximately $238,000 and $85,000, respectively, for the years ended December 31, 2017 and 2016.

Employment Agreements

The Company entered into Employment Agreements with each of its five executive officers for aggregate compensation amounting to approximately $1,064,000 and $984,000, per annum, plus customary benefits for the years ended December 31, 2017 and 2016, respectively. These employment agreements, having commenced at separate dates, are for terms of three years which began in October 2013 and ends in January 2018.

The agreements provide for the Company to pay six months of severance in the event of (i) the Company’s termination of an executive’s employment without cause, (ii) the resignation by an executive for good reason, (iii) a change in control of the Company, (iv) a material reduction in an executive’s duties, or (v) a requirement that an executive move their primary work location more than 50 miles.

Co-Development Agreement

In September 2013, the Company executed a Co-Development Agreement with James R. Andrews, M.D. (“Dr. Andrews”) to further evaluate, test and adviseserve on the developmentBoard of products incorporating the use of the patented technology. In exchange for these services the Company is obligated to pay Dr. Andrews a royalty of 2% of revenues earned from applicable product sales over a period of 5 years. If Dr. Andrews is listed as inventor of any Improvement Patent on the DenerveX device during the 5-year term, he would continue to receive a 1% royalty after the 2% royalty expires for the duration of the effectiveness of the Improvement Patent. See Note 5.

Generator development agreement

The Company is obligated to reimburse Bovie up to $295,000 for the development of the Pro-40 electrocautery generator.Directors. For the year ended December 31, 2017 and 2016,2022 the Company paid approximately $33,200 and $102,400, respectively, under this agreement. Throughexpensed $42,500 for board of director fees to Mr. Rosenblum. Due to lack of financial resources, the Company was unable to pay Mr. Rosenblum for his services totaling $17,500, which is included in accrued liabilities as of December 31, 2017, we have paid approximately $422,000 to Bovie for production services.The original $295,0002022.

Mr. Matthew Anderer entered into an oral agreement was a base number along the pathway of development. Additional requirements were incurred as the research and development process progressed and as a result certain prices increased and additional costs were incurred to further customize the DenerveX System. We are currently manufacturing the generator for sales.

Distribution center and logistic services agreement

The Company has a non-exclusive distribution center agreement through June 2019 with a logistics service provider in Berlin, Germany, pursuant to which they manage and coordinate the DenerveX System products which the Company exportseffective January 17, 2022, in which Mr. Anderer will receive $5,000 per month to serve on the EU. The Company pays a fixed monthly feeBoard of €2,900 (approximately $3,500) for all accounting, customs declarations and office support, and a variable monthly fee ranging from €1,900Directors. Effective July 1, 2022, due to €6,900 (approximately $2,300lack of working capital, Mr. Anderer receives $2,500 per month to $8,300), basedserve on volumethe Board of shipments, for logistics, warehousing and customer support services. Total expenses paid under the distribution center and logistics agreement was approximately $75,700 forDirectors. For the year ended December 31, 2017.2022 the Company expensed $42,500 for board of director fees to Mr. Anderer. Due to lack of financial resources, the Company was unable to pay Mr. Anderer for his services totaling $17,500, which which is included in accrued liabilities as of December 31, 2022.

Note 8 – Short Term Liabilities

Debt and Other Obligations

Finance AgreementConvertible Notes Payable

TheOn April 1, 2021, the Company, entered into a commercial insurance premium finance and security agreementSecured Convertible Note Purchase Agreement (the “April 2021 Note Purchase Agreement”) with five (5) related party investors (the “Holders”). Pursuant to the terms of the April 2021 Note Purchase Agreement, the Company sold promissory notes in December 2017. The agreement finances the Company’s annual D&O insurance premium. Payments are due in quarterly installmentsaggregate principal amount of approximately $24,000 and carry$2,575,000 maturing on June 17, 2022 with an annual percentage interest rate of 5.98%8%.

The Company had an outstanding premium balanceNotes are convertible into shares of approximately $68,000Common Stock at December 31, 2017 relateda discount of 20% to the price paid for such New Securities in the next round of financing that meets the definition of Qualified Financing as defined in the April 2021 Note Purchase Agreement. The Notes are secured by the assets of the Company under a security agreement with the Holders. The lead investor of the April 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $1,500,000 of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is included in notes payable, current portion in the consolidated balance sheets.

Promissory Notes

In conjunction with the consummationa principal stockholder and related party of the Streamline acquisition in March 2015, the Company assumed two promissory notes for approximately $135,000 and $125,000 payable to the BankCompany. An additional affiliate of North Dakota New Venture Capital Program and North Dakota Development Fund, both outside non-related parties. Assumption of the liabilities was not includedFWHC, LLC provided an additional $25,000 as part of the asset purchase agreement that was executed in December 2016. Thus,April 2021 Note Purchase Agreement.

On October 14, 2021, the Company retainedentered into the promissorySecond Closing Bring Down Agreement (the “October 2021 Note Purchase Agreement”) whereby the five (5) related party investors who had entered into the April 2021 Note Purchase Agreement purchased new notes upon consummationin the Company in the aggregate principal amount of $750,000. The Notes are due and payable on June 17, 2022 and bear interest at an annual rate of 8%. The Notes are convertible into shares of Common Stock at a discount of 20% to the price paid for such New Securities in the next financing that meets the definition of a Qualified Financing as defined in the Note Purchase Agreement. The Notes are secured by all of the divestiture.

Payments on bothassets of the notes are due in aggregate monthly installments of approximately $5,700 and carry an interest rate of 5%. BothCompany under a security agreement with the Holders. The lead investor of the October 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $437,000 of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $7,000 as part of the October 2021 Note Purchase Agreement.

F-13

On February 22, 2022, the Company entered into a Debt Conversion Agreement (the “Amendment Agreement”) which i) provided for an additional round of convertible debt financing (“Tranche 2 Notes”) of up to $500,000 and ii) amended the conversion price on the convertible notes haveissued April 1, 2021 and October 8, 2021 (“Tranche 1 Notes”) from 80% of the price paid in a Qualified Financing (proceeds of at least $15 million), to the lesser of (x) $0.002 and (y) the price paid in a Qualified Financing (proceeds of at least $10 million). The Amendment Agreement also provides the following Milestone Payments:

1)$1,000,000 after filing a premarket notification pursuant to Section 510(k) of the Food, Drug and Cosmetic Act, of its intent to market its PRP cellular therapy
2)Following the closing of a Qualified financing, 25% of all proceeds raised in excess of $10 million (not to exceed $1 million)

The Milestone Payments are not to exceed $2 million, and the Amendment Agreement also specifies that a Qualified Financing will not occur prior to the closing of the acquisition of Jantibody, LLC.

The Company evaluated the Amendment Agreement under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that probability of having to pay a Milestone payment was minimal and the change in the fair value of the conversion feature was not material. Since the Amendment did not cause a material change in cash flows, extinguishment accounting was not applicable.

On April 29, 2022, the Company entered into an Amended and Restated Note Conversion Agreement (the “Note Conversion Agreement”) with certain holders of its Tranche 1 Notes (i) providing for a conversion price equal to the lesser of (x) $0.002 per share (pre-split) and (y) the price per share paid by the investors in a Qualified Financing for such New Securities purchased for cash and not through conversion of Notes (as such terms are defined in the Note Conversion Agreement), in each case subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization, (ii) automatic conversion upon the occurrence of a Qualified Financing, and (iii) amendment of the maturity date from March 31, 2022 to June 17, 2022 (the “New Notes”). Upon the effectiveness of August 1, 2019.the Company’s 1,000-1 reverse split, the conversion price adjusted to the lesser of (a) the price in the Qualified Financing or (b) $2.00 per share. The promissory notes had outstanding balancesNew Notes also provided the investors with Royalty Payments equal to 15% of approximately $104,000 and $165,000 at December 31, 2017 and December 31, 2016, respectively.

Expected future paymentsall net sales generated by the Company with respect to the sale of products or services associated with the 510(k) Notification related to the promissory notes asCompany’s autologous cellular therapy (PRP-PBMC) to treat chronic lung disorder. The Royalty Payments are in lieu of Decemberthe Milestone payments but are perpetual and there is no limit to the aggregate amount of Royalty Payments that may be paid.

Due to changes in key provisions of the Tranche 1 Notes, the Company analyzed the before and after cash flows between the (i) fair value of the New Notes and (ii) reacquisition price of the Tranche 1 Notes prior to the (A) change in the maturity date from March 31, 2017, are approximately as follows:2022 to June 17, 2022, (B) change in the conversion price to the lesser of (x) $2.00 and (y) the price paid in a Qualified Financing, and (C) the fair value of the potential Royalty Payments, to determine whether these changes resulted in a modification or extinguishment of the Tranche 1 Notes.

For the year ended:

2018  64,000 
2019  45,000 
  $109,000 

The Company paid interest expense relatedused a discounted cash flow method with Monte Carlo Simulation to value the promissory notesRoyalty Payments. Future Royalty Payments were estimated based on management’s best estimate of future cash flows under various scenarios which were discounted to present value using a risk-adjusted rate of 70%.

Based on the before and after cash flows of each note, the change was considered significantly different. Consequently, the New Notes were accounted for as a debt extinguishment of the Tranche 1 Notes and a new debt issuance of the New Notes. The Company recorded a $2.2 million loss upon extinguishment of debt in the year ended December 31, 2017 and 2016 in2022, which was comprised of the following:

SCHEDULE OF LOSS UPON EXTINGUISHMENT

     
Carrying value of Tranche 1 Notes $3,580,738 
Less: Fair value of New Notes  (4,079,838)
Less: Fair value of Royalty Payments  (1,697,000)
Loss on Extinguishment $(2,196,100)

The Note Conversion Agreement also provided for the consummation of a Tranche 2 Financing (the “Tranche 2 Notes”) subject to (i) the aggregate principal amount of approximately $7,000 indebtedness represented by the Tranche 2 Notes being capped at $500,000 and $10,000, respectively. The(ii) Tranche 2 Notes’ being an unsecured obligation of the Company had unpaid accrued interestand expressly subordinate in all respects to all indebtedness of the amountCompany under the Notes and including language in which the holders of approximately $69,000 atsuch Tranche 2 Notes acknowledge, confirm and agree to the foregoing subordination terms. Pursuant to the terms of the Note Conversion Agreement, the Investors have agreed not to sell any capital stock of the Company for a period of 12 months following the Qualified Financing. For the year ended December 31, 2017 and 2016 related to2022, approximately $499,000 of amortization of the promissorydebt premium is included in interest income. Management is currently working with the noteholders on the extension of the maturity of the outstanding notes.

F-14

Short Term Note Payable

 

On September 13, 2016, the Board of Directors approved a resolution authorizing the Company to obtain a secured nine-month term loan for the principal amount of $1,150,000. In connection therewith, on September 16, 2016,June 9, 2022, the Company entered into a Unit Purchase Agreementsecurities purchase agreement for a total of $272,500 with selectedtwo accredited investors wherebyinvestors. The notes issued are convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The notes bear interest at 10% and are due one year from issuance. For the first six months, the Company hadhas the right to sell unitsprepay the notes at a premium of between 25% and 35% depending on when it is repaid.

The Company also issued a promissory note for $100,000, on June 9, 2022, to another accredited investor. This note bears interest at 15% (no matter when repaid) and converts at a discount of 25% of the price of a public offering or a 25% discount to the VWAP of the five (5) days prior to conversion.

The embedded features in the convertible notes were analyzed under Accounting Standards Codification 815-“Derivatives and Hedging” (ASC 815) to determine if they required bifurcation as derivative instruments. To be a private placementderivative, one of the criteria is that the embedded component must be net-settleable. While the Company’s Common Stock was traded on an exchange at the time of the transaction, the underlying shares are not readily convertible into cash since there is insufficient daily trading volume for the holders to secureconvert the loan.convertible notes into Common Stock without significantly affecting the share price. Accordingly, the embedded derivatives, including the embedded conversion feature, did not meet the definition of a derivative, and therefore, did not require bifurcation from the host instrument. Certain default put provisions, including a default put and default interest, were not considered to be clearly and closely related to the host instrument but the Company concluded that the value of these provisions was de minimus at inception. The Company will reconsider the value of these provisions each reporting period to determine if the value becomes material to the financial statements.

 

On February 9, 2017,August 8, 2022, the Company’s $1,150,000 short-termCompany entered into a securities purchase agreement for a total of $65,000 with an accredited investor. The note payable was convertedissued is convertible into an aggregate of 165,865 shares of common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The note bears interest at 10% and 9,399 sharesis due one year from issuance. For the first six (6) months, the Company has the right to prepay the notes at a premium of Series A Preferred Stock, eliminatingbetween 25% and 40% depending on when it is repaid.

The Company chose to early adopt effective January 1, 2021, ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contract in Entity’s Own Equity. Thus, the Company’sApril 2021 and October 2021 Note Purchase Agreements did not require consideration of a beneficial conversion feature and were accounted for solely as debt obligation. See Note 6.on the balance sheets.

Other Obligations

 

Original Issuance Discount

The principal face value ofDuring the loan was $1,150,000 and was issued with an original issuance discount of $150,000 which resulted in aggregate proceeds of $1,000,000. The loan had a default interest rate of 15% per year and a maturity date of June 16, 2017.

Prior to the conversion,ending December 31, 2022, Michael Yurkowsky, CEO, advanced the Company would have been required to repay the principal amountapproximately $40,000 as a non-interest-bearing note with no established repayment terms. The balance owed is approximately $35,000 as of the loan following the Company’s receipt of any financing in aggregate of $1,650,000 within six months from the closing. Additionally, investors had the option to convert the $150,000 original issuance discount, which accreted over the life of the loan, and principal into future financing or be paid back in cash. The note was also presented net of the issuance costs of $5,000 which accreted over the life of the note, based on the effective interest method. Accretion expense for the year ended December 31, 2017 and 2016 was approximately $32,000 and $111,000, respectively.2022.

Note 5 - Equity Transactions

EQUITY TRANSACTIONS

On December 31, 2021, a certain warrant holder of the Company, exercised 1,339,286 warrants on a cashless basis resulting in the issuance of 818,453 shares of the Company’s common stock.

In January 2022, the Company offered certain warrant holders the opportunity to receive an additional warrant to purchase the Company’s Common Stock at $14.00 per share, for a period of five (5) years from issuance for the exercise by March 31, 2022 of each existing warrant originally issued in April 2020. As of December 31, 2022, the Company had eleven warrant holders exercise an aggregate of 83,579 warrants at $14.00 per share resulting in cash proceeds of approximately $1,170,000 to the Company.

On June 10, 2022, the Company amended (the “Amendment”) its Articles of Incorporation to effectuate a one-for-one thousand reverse stock split (the “Reverse Split”) of its common stock. The Reverse Split was approved by FINRA on June 10, 2022, and effectuated on June 13, 2022. Pursuant to the Amendment, the Company also reduced the authorized shares of common stock to 500,000,000. As a result of the Reverse Split, the Company has approximately 618,506 shares of common stock outstanding and 438,776,170 shares of Series A Preferred Stock outstanding. As a result of the Reverse Stock Split, the Series A Preferred Stock is convertible at a ratio of one thousand shares of Series A Preferred Stock into one share of common stock. Accordingly, the 438,776,170 outstanding shares of Series A Preferred Stock are now convertible into an aggregate of 438,776 shares of common stock.

On September 29, 2022, the Company entered into a securities purchase agreement with two related party accredited investors for the sale of shares of Common Stock and warrants (the “Purchase Agreement”). Pursuant to the Purchase Agreement, the Company sold an aggregate of 112,500 shares of common stock and warrants to purchase 56,250 shares of Common Stock exercisable at $2.50 per share for gross proceeds of approximately $225,000. All of the shares described in this Current Report on Form 8-K are being offered and issued to accredited investors in reliance upon exemptions from the registration requirements under Section 4(a)(2) under the Securities Act of 1933, as amended (“Securities Act”), and Rule 506 of Regulation D promulgated thereunder.

On November 14, 2022, pursuant to the Purchase Agreement, the Company sold an aggregate of 15,000 shares of common stock and warrants to purchase 7,250 shares of Common Stock exercisable at $2.50 per share for gross proceeds of $30,000.

The following table summarizes the Company’s common and preferred stock outstanding by class. The number of common stock shares has been adjusted to reflect a one-for-one thousand reverse stock split that became effective on June 13, 2022.

SCHEDULE OF COMMON AND PREFERRED STOCK OUTSTANDING

  December 31, 2022  December 31, 2021 
Common Stock  618,506   166,394 
Series A Preferred Stock  438,776,170   501,887,532 

F-15

Series A Preferred Stock

For the years ended December 31, 2022 and 2021, 63,111,364 and 36,221,875 shares of Series A Preferred Stock were converted to 63,114 and 36,222 shares of Common Stock, respectively, at the request of certain Series A Preferred Shareholders.

Voting Rights

Holders of Series A Preferred Stock (“Series A Holders”) have the right to receive notice of any meeting of holders of common stock and to vote upon any matter submitted to a vote of the holders of common stock. Each Series A Holder shall vote on each matter on an as converted basis submitted to them with the holders of common stock.

Conversion

Series A Preferred Stock converts to common stock at a 1:1000 ratio immediately upon request of the Series A Holder.

Liquidation

Series A Preferred Stock does not have preferential treatment over common stock shareholders if the Company liquidates or dissolves.

Share-Based Compensation

The Company utilizes the Black-Scholes valuation method to recognize share-based compensation expense over the vesting period. The expected life represents the period that the stock-based compensation awards are expected to be outstanding.

On April 1, 2021, the Board of Directors of the Company approved and granted certain directors and officers of the Company an aggregate of 54,750 stock options of which 4,750 were immediately vested on the date of grant. Each option granted has an exercise price of $70.00 per share and an expiration date of ten years from the date of grant. These options are not included in the Company’s current stock option plan as they were granted outside of the plan.

The Board of Directors decided not to renew the former CEO’s (Robert Greif) employment contract; therefore, the unvested shares were forfeited resulting in a reduction of share-based compensation of approximately $205,000 for the period ended September 30, 2021, that was recognized during the period ended June 30, 2021.

On June 10, 2022, the Company amended its Articles of Incorporation to effectuate a one-for-one thousand reverse stock split of its common stock. The Reverse Split was approved by FINRA on June 10, 2022 and effectuated on June 13, 2022.

As of December 31, 2022, 29,385 options were outstanding and 21,406 were vested. As of December 31, 2021, 29,635 options were outstanding and 15,385 were vested. For the years ended December 31, 2022 and 2021, the Company recognized and expense related to stock options of approximately $296,000 and $1,147,000, respectively, which is included in share based compensation. As of December 31, 2022, the Company has approximately $156,000 of unrecognized compensation costs related to non-vested stock options, which is expected to be recognized over a weighted average period of approximately 1.95 years.

Inputs used in the valuation models are as follows:

SCHEDULE OF ASSUMPTIONS USED TO CALCULATE FAIR VALUE OF STOCK OPTIONS

2021 Grants
Option value $54.00   to  $56.00 
Risk Free Rate  0.90%  to   1.37%
Expected Dividend- yield  -   to   - 
Expected Volatility  173.99%  to   176.04%
Expected term (years)  5   to   7 

F-16

The following is a summary of stock option activity for the years ended December 30, 2021 and 2022:

SUMMARY OF STOCK OPTION ACTIVITY

  Shares  

Weighted

Average

Exercise

Price

  Weighted
Average Remaining
Term (Years)
 
Outstanding at December 31, 2020  410  $1,390.00   6.72 
Granted  54,750   70.00   9.25 
Expired/Cancelled  (25,525)  70.00    
Outstanding at December 31, 2021  29,635  $86.48   9.20 
             
Exercisable at December 31, 2021  15,385  $101.74   9.16 
             
Outstanding at December 31, 2021  29,635  $86.48   9.20 
Forfeited  (250)  400.00    
Outstanding at December 31, 2022  29,385  $83.81   8.22 
             
Exercisable at December 31, 2022  21,406  $88.96   8.21 

The following is a summary of the Company’s non-vested shares for the years ended December, 2021 and 2022:

SUMMARY OF STOCK OPTION ACTIVITY NON-VESTED

  Shares  

Weighted

Average Grant

Date Fair Value

 
Non-vested at December 31, 2020  -  $- 
Granted  54,750   60.00 
Vested  (15,000)  50.00 
Forfeited  (25,500)  70.00 
Non-vested at December 31, 2021  14,250  $60.00 
         
Vested  (6,271)  54.64 
Non-vested at December 31, 2022  7,979  $55.70 

Net Loss Per Share

Basic loss per share is computed on the basis of the weighted average number of shares outstanding for the reporting period. Diluted loss per share is computed on the basis of the weighted average number of common shares plus dilutive potential common shares outstanding using the treasury stock and if-converted methods, as applicable. Any potentially dilutive securities are antidilutive due to the Company’s net losses.

The Company excluded the following securities from the calculation of basic and diluted net loss per share as the effect would have been antidilutive:

SCHEDULE OF ANTI-DILUTIVE SECURITIES OF BASIC AND DILUTED NET LOSS PER SHARE

  2022  2021 
  For the Year Ended December 31, 
  2022  2021 
Warrants to purchase common stock (in the money)  147,329   383,694 
Series A Preferred Stock convertible to common stock  438,776   501,888 
Total  586,105   885,582 
Antidilutive Shares  586,105   885,582 

Excluded from the above table are 300,638 warrants and 21,406 stock options for the year ended December 31, 2022 and 22,608 warrants and 29,635 stock options for the year ended December 31, 2021 as they are out of the money (exercise price greater than the stock price). Inclusion of such would be anti-dilutive. As a result of the Reverse Stock Split, the Series A Preferred Stock is convertible at a ratio of one thousand shares of Series A Preferred Stock into one share of common stock. Accordingly, the 438,776,168 outstanding shares of Series A Preferred Stock are convertible into an aggregate of 438,776 shares of common stock at December 31, 2022.

F-17

Note 6 – Commitments & Contingencies 

COMMITMENTS & CONTINGENCIES

CEO Compensation Agreement

On December 23, 2021, the Company entered into an employment agreement (the “Employment Agreement”) with Michael Yurkowsky, the Company’s Chief Executive Officer, to continue to serve as the Chief Executive Officer of the Company. Under the Employment Agreement, which commenced on December 1, 2021 (the “Effective Date”) and has a term of one year from the Effective Date (the “Employment Period”), Mr. Yurkowsky will receive a base salary of $180,000 per year. Upon the expiration of the Employment Period, Mr. Yurkowsky’s employment with the Company will be on an at-will basis.

In addition to his base salary, Mr. Yurkowsky may receive a one-time cash bonus in gross amount equal to $100,000 if (i) the Company’s stock is listed and quoted on the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, or the New York Stock Exchange; or (ii) the Company secures and receives financing of at least $10,000,000.

As additional compensation, Mr. Yurkowsky shall receive shares of common stock of the Company representing 1% of the Company’s fully diluted equity as of the grant date if the Company achieves a market capitalization of at least $250 million for 60 consecutive days during the Employment Period (the “Equity Award”). If the Company achieves a market capitalization of at least $500 million for 60 consecutive days during the Employment Period, the executive shall receive an additional Equity Award of 1%, such that he has in the aggregate received shares of common stock of the Company representing 2% of the Company’s fully diluted equity as of the date of grant. These market conditions were reflected in the grant date fair value of the award as required under ASC 718 Compensation-Stock Compensation.

The Equity Award was measured at fair value on its grant date using a Monte Carlo simulation model. The Monte Carlo simulation model includes assumptions for the expected term, volatility, and dividend yield, each of which are determined in reference to the Company’s historical results. The Company will recognize aggregate stock-based compensation expense of approximately $328,000 related to the Equity Award on a straight-line basis over the derived service period determined by the Monte Carlo simulation model, which was 0.71 years. During the years ended December 31, 2022 and 2021, the Company recognized approximately $290,000 and $38,000, respectively, in compensation expense related to the Equity Award. If the market capitalization targets are met sooner than the derived service period, the Company will adjust its stock-based compensation to reflect the cumulative expense associated with the vested Equity Award. The Company will recognize expense if the requisite service is provided, regardless of whether the market conditions are achieved.

Consulting Agreements

The Company entered into a consulting agreement with Tanya Rhodes of Rhodes & Associates, Inc, effective June 15, 2020, to serve as the Chief Science Officer of the Company. The agreement has a minimum term of six months with an average fee of $21,000 per month plus expenses which increases 5% per month on January 1 of each calendar year unless an alternative retainer amount is negotiated and agreed upon by both parties. The Company extended the contract on January 1, 2021, resulting in monthly expenses of $22,500 plus expenses for services rendered. As of January 1, 2022, Ms. Rhodes is continuing to receive $22,500 and is engaged on a month-to-month basis.

The Company entered into a consulting agreement with Alpha IR Group on March 1, 2022, to provide investor relations to the Company. The agreement is for twelve months with an average service fee of $9,750 per month. During 2023, the Company paused this service for a three month period.

Litigation

From time to time, the Company may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect the Company’s financial condition, results of operations, and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect the Company due to legal costs and expenses, diversion of management attention, and other factors. The Company expenses legal costs in the period incurred. The Company cannot assure that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against the Company in the future, and these matters could relate to prior, current or future transactions or events.

F-18

The Company is involved in a lawsuit with Sinclair Broadcast Group, Inc. (“Sinclair”) which was filed on September 8, 2020, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. Sinclair has obtained a legal judgment for breach of contract for advertising services in the amount of approximately $72,000 plus interest and costs. The Company has retained legal counsel for guidance in this matter. The amount is recorded in accounts payable as of December 31, 2022.

The Company is involved in a lawsuit with ITN Networks, LLC (“ITN”) which was filed on July 22, 2021, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. ITN has obtained a legal judgment for breach of contract for advertising services in the amount of approximately $45,000 plus interest and costs. The Company has retained legal counsel for guidance in this matter. The amount is recorded in accounts payable as of December 31, 2022.

Note 7 – Debt

DEBT

Notes Payable

Notes payable were assumed in the Merger (for further discussion, see Note 1 - “Overview” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K) and are due in aggregate monthly installments of approximately $5,800 and carry an interest rate of 5%. Each note originally had a maturity date of August 1, 2019. The Company finalized an eighteen-month extension to March 1, 2021.The promissory notes have an aggregate outstanding balance of approximately $69,000at December 31, 2022 and December 31, 2021. The Company has not made payments on these notes since February 10, 2020. On April 19, 2022, the Company entered into a promissory note modification agreement with the Lender extending the maturity date of the notes to April 1, 2024. The modification agreement also reduces the interest rate from 5% to 3% and requires a monthly payment of $1,000 per month with a balloon payment at the end of the modified term.

Convertible notes

On April 1, 2021, the Company, entered into a Secured Convertible Note Purchase Agreement (the “April 2021 Note Purchase Agreement”) with five (5) related party investors (the “Holders”). Pursuant to the terms of the April 2021 Note Purchase Agreement, the Company sold promissory notes in the aggregate principal amount of $2,575,000 maturing on June 17, 2022 with an annual interest rate of 8%. The Notes are convertible into shares of Common Stock at a discount of 20% to the price paid for such New Securities in the next round of financing that meets the definition of Qualified Financing as defined in the April 2021 Note Purchase Agreement. The Notes are secured by the assets of the Company under a security agreement with the Holders. The lead investor of the April 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $1,500,000 of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $25,000 as part of the April 2021 Note Purchase Agreement.

On October 14, 2021, H-Cyte, Inc. (the “Company”) entered into the Second Closing Bring Down Agreement (the “October 2021 Note Purchase Agreement”) whereby the five (5) related party investors who had entered into the April 2021 Note Purchase Agreement purchased new notes in the Company in the aggregate principal amount of $750,000. The Notes are due and payable on June 17, 2022 and bear interest at an annual rate of 8%. The Notes are convertible into shares of Common Stock at a discount of 20% to the price paid for such New Securities in the next financing that meets the definition of a Qualified Financing as defined in the Note Purchase Agreement. The Notes are secured by all of the assets of the Company under a security agreement with the Holders. The lead investor of the October 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $437,000 of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $7,000 as part of the October 2021 Note Purchase Agreement.

On February 22, 2022, the Company entered into a Debt Conversion Agreement (the “Amendment Agreement”) which i) provided for an additional round of convertible debt financing (“Tranche 2 Notes”) of up to $500,000 and ii) amended the conversion price on the convertible notes issued April 1, 2021 and October 8, 2021 (“Tranche 1 Notes”) from 80% of the price paid in a Qualified Financing (proceeds of at least $15 million), to the lesser of (x) $0.002 and (y) the price paid in a Qualified Financing (proceeds of at least $10 million). The Amendment Agreement also provides the following Milestone Payments:

1)$1,000,000 after filing a premarket notification pursuant to Section 510(k) of the Food, Drug and Cosmetic Act, of its intent to market its PRP cellular therapy
2)Following the closing of a Qualified financing, 25% of all proceeds raised in excess of $10 million (not to exceed $1 million)

F-19

The Milestone Payments are not to exceed $2 million, and the Amendment Agreement also specifies that a Qualified Financing will not occur prior to the closing of the acquisition of Jantibody, LLC.

The Company evaluated the Amendment Agreement under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that probability of having to pay a Milestone payment was minimal and the change in the fair value of the conversion feature was not material. Since the Amendment did not cause a material change in cash flows, extinguishment accounting was not applicable.

On April 29, 2022, the Company entered into an Amended and Restated Note Conversion Agreement (the “Note Conversion Agreement”) with certain holders of its Tranche 1 Notes (i) providing for a conversion price equal to the lesser of (x) $0.002 per share (pre-split) and (y) the price per share paid by the investors in a Qualified Financing for such New Securities purchased for cash and not through conversion of Notes (as such terms are defined in the Note Conversion Agreement), in each case subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization, (ii) automatic conversion upon the occurrence of a Qualified Financing, and (iii) amendment of the maturity date from March 31, 2022 to June 17, 2022 (the “New Notes”). Upon the effectiveness of the Company’s 1,000-1 reverse split, the conversion price adjusted to the lesser of (a) the price in the Qualified Financing or (b) $2.00 per share. The New Notes also provided the investors with Royalty Payments equal to 15% of all net sales generated by the Company with respect to the sale of products or services associated with the 510(k) Notification related to the Company’s autologous cellular therapy (PRP-PBMC) to treat chronic lung disorder. The Royalty Payments are in lieu of the Milestone payments but are perpetual and there is no limit to the aggregate amount of Royalty Payments that may be paid.

Due to changes in key provisions of the Tranche 1 Notes, the Company analyzed the before and after cash flows between the (i) fair value of the New Notes and (ii) reacquisition price of the Tranche 1 Notes prior to the (A) change in the maturity date from March 31, 2022 to June 17, 2022, (B) change in the conversion price to the lesser of (x) $2.00 and (y) the price paid in a Qualified Financing, and (C) the fair value of the potential Royalty Payments, to determine whether these changes resulted in a modification or extinguishment of the Tranche 1 Notes.

The Company used a discounted cash flow method with Monte Carlo Simulation to value the Royalty Payments. Future Royalty Payments were estimated based on management’s best estimate of future cash flows under various scenarios which were discounted to present value using a risk-adjusted rate of 70%.

Based on the before and after cash flows of each note, the change was considered significantly different. Consequently, the New Notes were accounted for as a debt extinguishment of the Tranche 1 Notes and a new debt issuance of the New Notes. The Company recorded a $2.2 million loss upon extinguishment of debt in the nine months ended December 31, 2022, which was comprised of the following:

SCHEDULE OF LOSS UPON EXTINGUISHMENT OF DEBT

     
Carrying value of Tranche 1 Notes $3,580,738 
Less: Fair value of New Notes  (4,079,838)
Less: Fair value of Royalty Payments  (1,697,000)
Loss on Extinguishment $(2,196,100)

The Note Conversion Agreement also provided for the consummation of a Tranche 2 Financing (the “Tranche 2 Notes”) subject to (i) the aggregate principal amount of indebtedness represented by the Tranche 2 Notes being capped at $500,000 and (ii) Tranche 2 Notes’ being an unsecured obligation of the Company and expressly subordinate in all respects to all indebtedness of the Company under the Notes and including language in which the holders of such Tranche 2 Notes acknowledge, confirm and agree to the foregoing subordination terms. Pursuant to the terms of the Note Conversion Agreement, the Investors have agreed not to sell any capital stock of the Company for a period of 12 months following the Qualified Financing.

On June 9, 2022, the Company entered into a securities purchase agreement for a total of $272,500 with two accredited investors. The notes issued are convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The notes bear interest at 10% and are due one year from issuance. For the first six months, the Company has the right to prepay the notes at a premium of between 25% and 35% depending on when it is repaid.

The Company also issued a promissory note for $100,000, on June 9, 2022, to another accredited investor. This note bears interest at 15% (no matter when repaid) and converts at a discount of 25% of the price of a public offering or a 25% discount to the VWAP of the five (5) days prior to conversion.

F-20

The embedded features in the convertible notes were analyzed under ASC 815 to determine if they required bifurcation as derivative instruments. To be a derivative, one of the criteria is that the embedded component must be net-settleable. While the Company’s Common Stock was traded on an exchange at the time of the transaction, the underlying shares are not readily convertible into cash since there is insufficient daily trading volume for the holders to convert the convertible notes into Common Stock without significantly affecting the share price. Accordingly, the embedded derivatives, including the embedded conversion feature, did not meet the definition of a derivative, and therefore, did not require bifurcation from the host instrument. Certain default put provisions, including a default put and default interest, were not considered to be clearly and closely related to the host instrument but the Company concluded that the value of these provisions was de minimus at inception. The Company will reconsider the value of these provisions each reporting period to determine if the value becomes material to the financial statements.

The Company chose to early adopt effective January 1, 2021, ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contract in Entity’s Own Equity. Thus, the April 2021 and October 2021 Note Purchase Agreements did not require consideration of a beneficial conversion feature and were accounted for solely as debt on the balance sheets.

On August 9, 2022, the Company entered into a securities purchase agreement for a total of $65,000 with an accredited investor. The note issued is convertible into common stock at a 35% discount to the lowest trading price in the 20-day period prior to conversion. The note bears interest at 10% and is due one year from issuance. For the first six (6) months, the Company has the right to prepay the notes at a premium of between 25% and 40% depending on when it is repaid.

On February 24, 2023, H-Cyte, Inc., (the “Company”) and certain investors entered into a Securities Purchase Agreement (the “SPA”), whereby, the Company sold and issued to the certain investors, an aggregate of three hundred thousand dollars ($300,000.00) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”), par value $0.001. In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company has the option to extend this offering to June 30, 2023.

The Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the SPA, the Company also issued a Common Stock Purchase Warrant to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial exercise date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company, dated February 24, 2023. The Company issued Warrants to purchase an aggregate of 30,000 shares of Common Stock. The exercise price per share of the Common Stock under this Warrant is $2.00.

On February 28, 2023, the Company entered into a securities purchase agreement for a total of $128,250 with an accredited investor. The notes issued are convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The notes bear interest at 10% and are due one year from issuance. For the first six months, the Company has the right to prepay the notes at a premium of between 25% and 40% depending on when it is repaid.

On March 27, 2023, H-Cyte, Inc., (the “Company”) and three related party investors entered into a Securities Purchase Agreement (the “SPA”), whereby, the Company sold and issued to the certain investors, an aggregate of one hundred twenty five thousand dollars ($125,000.00) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”). On April 12, 2023, the Company and an additional investor entered into the SPA, whereby, the Company sold and issued an aggregate of thirty five thousand dollars ($35,000.00) of the Company’s Notes. In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company has the option to extend this offering to June 30, 2023.

The March 27, 2023 Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. The April 12, 2023 Note has a maturity date 60 days from issuance. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the SPA, the Company also issued a Common Stock Purchase Warrant to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial exercise date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company. The Company issued Warrants to purchase an aggregate of 13,500 shares of Common Stock. The exercise price per share of the Common Stock under this Warrant is $2.00.

F-21

Paycheck Protection Program

On April 29, 2020, the Company issued a promissory note in the principal amount of $809,082 to the Bank of Tampa in connection with a loan in such amount made under the Paycheck Protection Program (“PPP Loan”). The PPP Loan bears an interest rate of 1% per annum and matures on April 29, 2022. The Company elected to use a 24-week Covered Period, per the SBA Paycheck Protection Program guidelines, which ended on October 14, 2020.

The Company did apply for loan forgiveness in an amount equal to the sum of the following costs incurred by the Company:

1) payroll costs;

2) any payment of interest on covered mortgage obligations;

3) any payment on a covered rent obligation; and

4) any covered utility payment

The Company received notification from the Small Business Administration (“SBA”), dated August 17, 2021, notifying it that $689,974 in principal and $8,847 in interest was forgiven under the guidelines of the Paycheck Protection Program. As of December 31, 2022, the PPP loan was paid in full.

Note 8 – Acquisitions 

ACQUISITIONS

The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business. Significant judgment is required in the application of the screen test to determine whether an acquisition is a business combination or an acquisition of assets.

If an acquisition is determined to be a business combination as indicated in ASC 805, Business Combinations, the assets acquired, and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. The Company recognizes and measures goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.

If an acquisition is determined to be an asset acquisition, the Company accounts for the transaction under ASC 805-50, which requires the cost of the asset acquisition, including transaction costs, to be allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis. Assets acquired as part of an asset acquisition that are considered to be in-process research and development (IPR&D) are immediately expensed unless there is an alternative future use in other research and development projects. Goodwill is not recognized in an asset acquisition and any excess consideration transferred over the fair value of the net assets acquired is allocated to the identifiable assets based on relative fair values (excluding non-qualifying assets). If the cost of the asset acquisition is less than the fair value of the net assets acquired, no gain is recognized in earnings.

Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the consideration is paid or becomes payable (unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired). Upon recognition of the contingent consideration payment, the amount is included in the cost of the acquired asset or group of assets.

On September 7, 2022, the Company acquired all of the membership interests of Jantibody LLC (“Jantibody”), a Nevada limited liability company. Jantibody is focused on the development of novel proprietary immunotherapies targeted towards ovarian cancer, pancreatic cancer, and mesothelioma. Prior to the acquisition, Michael Yurkowsky, CEO, had approximately 17.5% ownership interest in Jantibody.

Pursuant to the Jantibody Agreement, the Company issued the equity holders of Jantibody an aggregate of 52,023 shares of the Company’s common stock which represented 15% of the Company’s common stock on a fully diluted basis at the time of the transaction. In addition, for every share of the Company’s common stock issued as a result of the future conversion of the Company’s dilutive instruments, including Series A preferred stock, warrants, stock options, and convertible notes, the Jantibody members will receive 15% of the aggregate number of shares issued (the “Anti-Dilution” shares). The Anti-Dilution shares will be issued before the end of each fiscal quarter.

F-22

The Company has agreed to issue the Jantibody holders an additional 2.0% of the Company’s common stock then outstanding upon the enrollment of the first patient in a Phase I FDA trial and additional 3.0% of the Company’s then outstanding common stock on a fully diluted basis upon the enrollment of the first patient in a Phase [III] FDA trial. The Company determined the contingent consideration was not subject to derivative accounting and will be recognized when the contingency is resolved, and the consideration is paid or becomes payable as outlined in ASC 450, Contingencies.

The Company determined this transaction represented an asset acquisition as defined by ASC 805, Business Combinations, as substantially all of the value was in a single in-process research and development (“IPR&D”) group, which included the small molecule drug CXCR4 inhibitor, AMD3100, and/or checkpoint inhibitors (CPI) for anti-cancer immune modulation. As a result, the consideration transferred was allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their relative fair values resulting in approximately $1,240,000 being assigned to the IPR&D asset and approximately $1,000,000 to assumed liabilities. The liabilities assumed were current accounts payable and as such were recorded a book value.

The purchase price of approximately $247,000 represented 52,023 shares of the Company’s common stock, 344,159 Anti-Dilution shares, and direct transaction costs of $21,600. The purchase price was allocated, on a relative fair value basis, to the acquired intellectual property, and the acquired net assets as follows:

SCHEDULE OF NET IDENTIFIABLE ASSETS ACQUIRED

Consideration:    
Common stock $29,557 
Common stock (anti-dilution shares, to be issued – included in other current liabilities)  195,532 
Direct transaction costs  21,600 
Total costs of the asset acquisition $246,689 
Assets acquired    
Cash $469 
Accounts payable assumed – legal and administrative costs  (999,728)
Intangible assets: IPR&D  1,245,948 
Net identifiable assets acquired $246,689 

The IPR&D had not yet reached technological feasibility and had no alternative future use; thus, the purchased IPR&D asset and related costs were expensed immediately subsequent to the acquisition within the consolidated statements of operations.

On December 22, 2022, the Company acquired a 100% interest in Scion Solutions, LLC (“Scion”). Scion is a life sciences company that has developed a new technology in regenerative medicine specifically for limb salvage. Their proprietary product SkinDisc (patent pending) is a combination of stem cells and several other molecular components that stimulate tissue regeneration. Prior to the acquisition, Tanya Rhodes, CSO, had approximately 33.3% ownership interest in Scion.

Pursuant to the terms of the Scion Agreement, the Company issued the equity holders of Scion an aggregate of 123,153 shares of the Company’s common stock. In addition, for every share of the Company’s common stock issued within 18-months of the Effective Date of the transaction, as a result of the future conversion of the Company’s dilutive instruments, including Series A preferred stock, warrants, stock options, and convertible notes, the Scion members will receive 20% of the aggregate number of shares issued (the “Anti-Dilution” shares). The Anti-Dilution shares will be issued before the end of each fiscal quarter.

In addition, the former shareholders of Scion are eligible to receive Performance Payments consisting of the following:

SCHEDULE OF PERFORMANCE PAYMENTS

Performance Milestone Performance Payment 
Qualified Funding/Uplifting of H-Cyte $45,000 
1-Year Anniversary of Uplifting of H-Cyte $75,000 
2-Year Anniversary of Uplifting of H-Cyte $120,000 
Initiation of SkinDisc Study $50,000 
Receipt of De Novo or any other approval/clearance that would allow SkinDisc to go to market $100,000 
Submission for specific and individual reimbursement codes relating to SkinDisc $25,000 
Receipt of specific and individual reimbursement codes relating to SkinDisc $50,000 
Completion of SkinDisc Study $50,000 
Launch of any additional SkinDisc product line extension (e.g., SkinDisc Lite)* $100,000 
Annual net sales from SkinDisc (including SkinDisc extensions) (2023 and each subsequent calendar year)*  Greater of (i) 4% of net revenues from SkinDisc (including SkinDisc line extensions) during such calendar year and (ii) $50,000 
Cumulative net sales from SkinDisc (including SkinDisc extensions) of $600,000 $200,000 
Cumulative net sales from SkinDisc (including SkinDisc extension) of $2,000,000 $150,000 
Cumulative net sales from SkinDisc (including SkinDisc extension) of $4,000,000 $300,000 
Net sales from SkinDisc (including SkinDisc extensions) of $6,000,000 during any single calendar year* $300,000 

Substantially all of the value acquired was concentrated in a single in-process research and development (“IPRD”) asset, which included license rights, clinical trial data, clinical trial development plans, research and development materials, formulations and intellectual property related to SkinDisc. There was no workforce, and no outputs were present. Accordingly, the acquired set of assets and activities did not meet the definition of a business as defined by ASC 805, Business Combinations and was considered an asset acquisition. In an asset acquisition, the consideration transferred is allocated to identifiable tangible and intangible assets acquired and liabilities assumed based on their relative fair values. In the Scion acquisition, the only asset or liability acquired was IPR&D. As a result, the consideration transferred was recorded fully to the IPR&D asset.

In an asset acquisition, cash-settled contingent consideration is measured when probable and estimable, unless the contingent consideration falls under the guidance of ASC 815. The Company determined the contingent consideration was not subject to ASC 815 and thus, the performance payments which were estimable and probable (i.e., more than 50% likely to occur) were recorded on the acquisition date. The fair value was estimated based on a probability weighting of the present value of cash flows over the expected time period until payment, using a credit-risk adjusted interest rate. Each reporting period, the Company will determine if the performance payments are estimable and probable and will record them as a liability at that time.

The purchase price was allocated, as follows:

SCHEDULE OF NET IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES ASSUMED

     
Consideration:
Common stock
 $54,070 
Anti-Dilution share liability  305,998 
Contingent Performance payment liability  417,850 
Direct transaction costs  14,338 
Total costs of the asset acquisition $792,256 

The common stock value was recorded as equity. The consideration of $792,256 was recorded as IPR&D, since the SkinDisc technology was still in the research and development stage and had no alternative future use. The purchased IPR&D asset was expensed immediately subsequent to the acquisition within our consolidated statements of operations.

Note 9 - Common Stock Warrants

Fair value measurement valuation techniques, to the extent possible, should maximize the use of observable inputs and minimize the use of unobservable inputs. The Company’s fair value measurements of all warrants are designated as Level 1 since all of the significant inputs are observable and quoted prices were available in an active market for the four comparative companies used for volatility.COMMON STOCK WARRANTS

A summary of the Company’s warrant issuance activity and related information as offor the years ended December 31, 20172021 and 20162022 is as follows:

SUMMARY OF ISSUANCE OF WARRANTS

  Shares  Weighted
Average
Exercise Price
  Weighted
Average
Remaining
Contractual
Life
 
Outstanding and exercisable at December 31, 2020  413,424  $15.00   10.30 
Expired  (5,783)  330.00    
Exercised  (1,339)  10.00    
Outstanding and exercisable at December 31, 2021  406,302  $35.00   8.17 
             
Issued  148,329   9.06   4.41 
Expired  (23,085)  (364.60)   
Exercised  (83,579)  14.00    
Outstanding and exercisable at December 31, 2022  447,967  $10.90   6.65 

F-23

 

  Shares  Weighted Average
Exercise
Price
  Weighted
Average
Remaining Contractual Life
 
Outstanding at 12/31/2015  1,974,783  $2.86   4.0 
             
Issued  1,530,064  $1.34   4.2 
Outstanding at 12/31/2016  3,504,847  $1.85   3.9 
             
Issued  3,889,368  $1.37   4.2 
Cancelled  (200,000) $1.625    
Outstanding at 12/31/2017  7,194,215  $1.74   3.4 
Exercisable at 12/31/2017  7,194,215  $1.74   3.4 

The fair value of all warrants issued are determined by using the Black-Scholes-MertonBlack-Scholes valuation technique and were assigned based on the relative fair value of both the common stock and the warrants issued.

technique. The inputs used in the Black-Scholes-MertonBlack-Scholes valuation technique to value each of the warrants issued in 2017 as of their respective issue dates are as follows:

SCHEDULE OF ISSUANCE OF WARRANTS VALUATION TECHNIQUE

Event
Description
 Date MDVX
Stock Price
  Exercise Price of Warrant  Grant Date Fair Value  Life
of Warrant
 Risk Free Rate of Return (%)  Annualized Volatility Rate (%) 
Private Placement 2/8/17 $1.04  $1.50  $0.38  5 years  1.81   52.21 
Private Placement 7/14/17 $0.91  $1.15  $0.36  5 years  1.87   51.79 
Event Description Date  Number of Warrants  H-CYTE Stock Price  Exercise Price of Warrant  Grant Date Fair Value  Life of Warrant  Risk Free Rate of Return (%)  Annualized Volatility Rate (%) 
Granted for inducement agreement  1/19/2022   3,732  $63.25  $14.00  $62.00   5 years   1.62   187.79 
Granted for inducement agreement  1/20/2022   372  $64.50  $14.00  $64.00   5 years   1.62   187.85 
Granted for inducement agreement  1/20/2022   187  $64.50  $14.00  $64.00   5 years   1.62   187.85 
Granted for inducement agreement  1/24/2022   374  $48.00  $14.00  $47.00   5 years   1.53   188.01 
Granted for inducement agreement  1/25/2022   3,744  $49.10  $14.00  $48.00   5 years   1.56   188.00 
Granted for inducement agreement  2/02/2022   3,741  $44.55  $14.00  $44.00   5 years   1.60   188.25 
Granted for inducement agreement  2/04/2022   6,935  $44.38  $14.00  $43.00   5 years   1.78   188.33 
Granted for inducement agreement  2/04/2022   13,870  $44.38  $14.00  $43.00   5 years   1.78   188.33 
Granted for services provided  2/09/2022   1,000  $32.00  $14.00  $31.00   5 years   1.82   188.69 
Granted for inducement agreement  2/22/2022   41,609  $32.88  $14.00  $32.00   5 years   1.85   188.59 
Granted for inducement agreement  2/22/2022   693  $32.88  $14.00  $32.00   5 years   1.85   188.59 
Granted for inducement agreement  3/21/2022   8,322  $28.00  $14.00  $27.00   5 years   2.33   194.01 
Granted for securities purchase agreement  9/27/2022   56,250  $6.00  $2.50  $5.94   5 years   4.21   213.54 
Granted for securities purchase agreement  11/14/2022   7,500  $5.75  $2.50  $5.69   5 years   4.00   213.28 

The fair value of warrants issued during the year ended December 31, 2022 totaled approximately $377,000 and is included in general and administrative expense. The fair value of warrants issued as a result of the warrant inducement during the year ended December 31, 2022 totaled approximately $3,133,000 and is included in inducement expense. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Note 10 - Income Taxes

INCOME TAXES

 

Note 10 – Discontinued operations

Effective December 7, 2016,The Company utilizes the liability method of accounting for income taxes as set forth in FASB ASC Topic 740, “Income Taxes”. Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using tax rates expected to be in effect during the years in which the basis difference reverses. The Company accounts for interest and penalties on income taxes as income tax expense. A valuation allowances is recorded when it is more likely than not that a tax benefit will not be realized. In determining the need for valuation allowances the Company sold all Streamline related assets after the Board authorized management to seek buyers for Streamline in May 2016. The Company sought additional funds to complete the development and launch of the Company’s primary product, the DenerveX System,considers projected future taxable income and the decision to sell the Streamline assets helped raise partavailability of the necessary funds required for continuing operations of the Company in a non-dilutive manner to existing shareholders.tax planning strategies.

The sale resulted in the immediate receipt of $500,000 in cash, and a $150,000 note receivable due to the Company on or before January 1, 2018. The $150,000 note receivable represents the non-contingent portion of the receivables due from the sale and it also represents the short-term receivable as of December 31, 2017.

The Company subsequently received the short-term receivable on January 2, 2018. See Note 16. Recording the present value of the receivable at December 31, 2016 and recognizing the subsequent accretion expense over the one-year period ended December 31, 2017 led to an immaterial amount.

The terms of the sale also required that for each of the calendar years ending December 31, 2018 and December 31, 2019 (each such calendar year, a “Contingent Period”), a contingent payment in cash (each, a “Contingent Payment”) equal to five percent (5%) of the total net sales received by the acquiring party from the sale of “IV suspension system” products in excess of 100 units during each Contingent Period. Each such Contingent Payment is payable to the Company by the acquiring party by no later than March 31st of the subsequent year; provided, however, that the total aggregate amount of all Contingent Payments owed by the acquiring party to the Company for all Contingent Periods will not exceed $850,000. The Company is yet to receive any Contingent Payments.

The results of the discontinued operations, which represents Streamline’s IV Suspension System (“ISS”), are as follows:

  Year Ended December 31, 
  2017  2016 
Operating Expenses        
General and administrative $1,163  $218,444 
Research and development     59,418 
Depreciation and amortization     189,652 
Disposal loss     852,864 
Impairment loss     1,584,048 
Total Operating Expenses  1,163   2,904,426 
Operating Loss  (1,163)  (2,904,426)
Other Expenses        
Interest expense     9,983 
Total Other Expenses     9,983 
Net Loss $(1,163) $(2,914,409)

Cash flows from discontinued operations are as follows:

  Year Ended December 31, 
  2017  2016 
Cash Flows used in Operating Activities $(1,163) $(452,592)
Cash Flows provided by Investing Activities     1,286 
Cash Flows used in Financing Activities      
Net Cash Used in Discontinued Operations $(1,163) $(451,306)

Amortization expense related to the discontinued intangible assets for the year ended December 31, 2017 and 2016 was approximately $0 and $190,000, respectively. The recognition of amortization expense related to the discontinued assets ceased in May 2016 when the Board of Directors authorized Management to seek buyers for Streamline.

Depreciation expense amounted to $0 and $129, respectively, for the year ended December 31, 2017 and 2016.

Note 11 – Impairment of Intangible assets and Goodwill

As discussed in Note 2, the Company reviews long-lived assets for impairment whenever events or changes in circumstances or occurrence of events suggest impairment existsin accordance with FASB ASC 360.

The Board of Directors decision to seek buyers for Streamline, as discussed in Note 10,was made after management evaluated and determined potential impairment indicators existed relating to poor operating performance as sales were less than previously anticipated. The impact of the operating losses incurred from the Streamline portion of the business contributed significantly to the Company’s operations and financial results. As such, the Company separated the asset groups accordingly between the amortizable intangible assets in developed technology and trademark, and the non-amortizable intangible asset in goodwill, and completed an impairment analysis using a two-step process as described in Note 2.

As a result of the impairment analysis, the Company determined the carrying value of the developed technology exceeded the calculated fair value. Consequently, the Company recognized a write-down of approximately $1,035,714 related to the developed technology in the quarter ended June 30, 2016.

As a result of the impairment analysis, the Company also determined the carrying value of the trademark and goodwill exceeded the calculated fair value. Consequently, impairment losses of $6,455,645 and $548,334, respectively, were recognized in the quarter ended June 30, 2016 related to goodwill and the trademark.

Note 12 - Income Taxes

The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. As of December 31, 2017,2022, the Company has not recorded any uncertain tax positions and, therefore, has not incurred any interest or penalties relating to uncertain tax positions.

penalties. The Company’s evaluation was performed for the tax years ending December 31, 2016, 2015 and 2014, which remain subject toCompany is not currently under examination by major tax jurisdictions as of December 31, 2017. The Company does not have any tax years that areFederal or State authority and is no longer subject to U.S. federal or state and local, or non-US income tax examinations.examination for years prior to 2019.

F-24

 

For the years ended December 31, 2017 and 2016, the Company has incurred net losses and, therefore, has no current income tax liability and recognized no income tax expense. The net deferred tax asset generated by these losses, which principally consist of start-up costs deferred for income tax purposes, is fully reserved as of December 31, 2017 and 2016 since it is more likely than not that the benefit will not be realized in future periods.

A reconciliation of the statutory federal income tax expense (benefit) to the effective tax is as follows:follows for the years ended December 31:

SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE (BENEFIT)

  2017  2016 
Statutory rate – federal  21.0%  34.0%
State taxes, net of federal benefit  4.0   4.0 
         
Income tax benefit  25.0%  38.0%
Less valuation allowance  (25.0)  (38.0)
Total  0.00%  0.00%
  2022  2021 
Statutory rate – federal  21.0%  21.0%
Effect of:        
State deferred provision  3.4   5.1 
State NOL true-up  

(.3

)  (2.1)
Prior year true up  .1   (6.8)
Other true-ups  

8.9

   - 
Loan forgiveness - PPP  -   3.0 
Other permanent differences  

(8.2

)  - 
Change in valuation allowances  (24.9)  (20.2)
Income taxes  0.0%  0.0%

Our

The Company’s financial statements contain certain deferred tax assets which have arisen primarily as a result of losses incurred that are considered start-up costs for tax benefits associated with the loss before income taxes incurred,purposes, as well as net deferred income tax assets resulting from other temporary differences related to certain reserves and differences between book and tax depreciation and amortization. We record a valuation allowance against our net

The Company assesses the realizability of deferred tax assets when we determine that based on the weightavailable evidence, including a history of available evidence,taxable income and estimates of future taxable income. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that our netall or some portion of deferred tax assets will not be realized.

In our evaluation Due to the history of losses incurred by the Company, management believes it is not more likely than not that all of the weight of available evidence, we considered recent reported losses as negative evidence which carried substantial weight. Therefore, we considered evidence related todeferred tax assets can be realized. Accordingly, the four sources of taxable income, to determine whether such positive evidence outweighed the negative evidence associated with the losses incurred. The positive evidence considered included:

taxable income in prior carryback years, if carryback is permitted under the tax law;
future reversals of existing taxable temporary differences;
tax planning strategies; and
future taxable income exclusive of reversing temporary differences and carryforwards.

During fiscal 2017Company established and 2016, we weighed all available positive and negative evidence and concluded the weight of the negative evidence of a cumulative loss continued to outweigh the positive evidence. Based on the conclusions reached, we maintainedrecorded a full valuation allowance during 2017on its net deferred tax assets of $16.0 million and 2016.$13.5 million as of December 31, 2022 and 2021, respectively.

Deferred tax assets and liabilities consist of the following at December 31:

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

 2017 2016  2022 2021 
Deferred Tax Assets:                
Start-up costs $5,566,520  $5,738,469 
Federal and state net operating loss carry forwards $11,475,536  $10,680,766 
Capitalized start-up costs  1,858,781   1,980,984 
Capitalized research and development costs  616,031   210,448 
Patents  26,777   32,371 
Share-based compensation  238,109   203,761   423,133   543,252 
Total Deferred Tax Assets  5,804,629   5,942,230 
Depreciation/Amortization  

720,701

   

--

 
Accruals  

833,004

   

--

 
Other  94,305   35,083 
Total gross deferred tax assets  16,048,268   13,482,904 
Deferred Tax Liabilities        
Right-of-use asset  -   - 
Total gross deferred tax liabilities  -   - 
Valuation Allowance  (5,804,629)  (5,942,230)  16,048,268   13,482,904 
Net Deferred Tax Asset $  $ 
Net deferred tax assets $-  $- 

Utilization of the net operating loss carryforwards is subject to a substantial annual limitation due to the “ownership change” limitations provided by Section 382 and 383 of the Internal Revenue Code of 1986, as amended, and other similar state provisions. Any annual limitation may result in the expiration of net operating loss carryforwards before utilization. As of December 31, 2022, the Company had $46.4 million of U.S. federal net operating loss carryforwards available to reduce future taxable income, of which $39.2 million will be carried forward indefinitely for U.S. federal tax purposes and $7.2 million will expire beginning in 2035 to 2037. The Company is requiredalso has $31.3 million of U.S. state net operating loss carryforwards of which $30.6 million will be carried forward indefinitely and $.7 million that will expire beginning in 2035 to file federal income tax returns2037.

Note 11 – Subsequent Events

SUBSEQUENT EVENTS

On February 24, 2023, H-Cyte, Inc., (the “Company”) and state income tax returns incertain investors entered into a Securities Purchase Agreement (the “SPA”), whereby, the statesCompany sold and issued to the certain investors, an aggregate of Florida, Georgiathree hundred thousand dollars ($300,000.00) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”), par value $0.001. In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and Minnesota. There are no uncertain tax positions at December 31, 2017. The Company has not undergone any tax examinations since inception and is therefore not subject to examination by any applicable tax authorities.

Note 13 - Related-Party Transactions

Royalty Agreement

As further described in Note 5,the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company has the option to extend this offering to June 30, 2023.

The Notes have a Contributionmaturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and Royalty Agreement with Dr. Haufe.

During 2017,will be calculated on an actual/365-day basis. In the event that the Company incurred an aggregate of approximately $1,600 in expenses under both the royalty and co-development agreements, of which approximately $1,000 was included in accounts payable at December 31, 2017. No royalties were incurred in 2016.

Co-Development Agreement

As further described in Note 7, the Company hasmoves forward with a Co-Development Agreement with Dr. Andrews.

During 2017, the Company incurred an aggregate of approximately $1,600 in expenses under both the royalty and co-development agreements, of which approximately $1,000 was included in accounts payable at December 31, 2017. No co-developments expenses were incurred in 2016.

Aviation Expense

Periodically the Company may charter general aviation aircraft from TAG Aviation LLC (“TAG”), a company owned by Mr. Jarrett Gorlin. The Company believes that such aircraft charter is on terms no less favorable then it would receive from a third party. General aviation expenses paid to TAG was approximately $0 and $26,000, respectively, for the years ended December 31, 2017 and 2016.

Operating Lease

As described in Note 7, the Company pays TAG Aviation LLC, (“TAG”), a company owned by Mr. Gorlin, for month to month rental of office space at Dekalb-Peachtree Airport in Atlanta Georgia plus cost of utilities. Rent payments under this arrangement is $2,147 per month.

Rent expense and utilities cost paid to TAG Aviation amounted to approximately $34,600 and $30,400, respectively, for the years ended December 31, 2017 and 2016.

Consulting Expense

As described in Note 7, the Company paid $95,000 and $55,000, respectively, for the year ended December 31, 2017 and 2016 to a founding stockholder for business advisory services.

Note 14 - Research and Development

Devicix Prototype Manufacturing Agreement

In November 2013, the Company accepted a proposal from Devicix, a Minneapolis Minnesota based FDA registered contract medical device designer and developer, to develop a commercially viable prototype of its product that could be used to receive regulatory approval from the FDA and other international agencies for use on humans to relieve pain associated with Facet Joint Syndrome.

The development work commenced in December 2013. The total estimated cost of this work was initially established at $960,000; however, the terms of the proposal allow either the Company or the manufacturer to cancel the development work with 10 days’ notice.

During 2017, the Company incurred approximately $302,000 of expense under this agreement, with approximately $7,000 of the amount in payables at December 31, 2017. During 2016, the Company incurred approximately $481,000 of expense under this agreement, with approximately $63,000 of the amount in payables at December 31, 2016.

Through December 31, 2017 and 2016, we have paid approximately $1,849,000 and $1,547,000, respectively, to Devicix under this agreement. The agreement with Devicix is now complete following the commercial launch of the DenerveX System.

DenerveX Generator Manufacturing Agreement

The DenerveX device requires a custom electrocautery generator for power. As described in Note 7, in November 2014, the Company contracted with Bovie to customize one of their existing electrocautery generators for use with DenerveX Device, and then manufacture that unit on a commercial basis once regulatory approval for the DenerveX was obtained.

The Bovie agreement required a base $295,000 development fee to customize the unit, plus additional amounts if further customization was deemed necessary beyond predetermined estimates.

The Company paid approximately $33,000 and $102,000, respectively, for the years ended December 31, 2017 and 2016. Through December 31, 2017 and 2016, we have paid approximately $422,000 and $389,000, respectively, to Bovie related to this agreement. The agreement with Bovie is now complete following the commercial launch of the DenerveX System.

Nortech Manufacturing Agreement

In November 2014, we selected Nortech Systems Inc. (“Nortech”), a Minneapolis, Minnesota based FDA registered contract manufacturer, to produce 315 DenerveX devices from the prototype supplied by Devicix for use in final development and clinical trials. The agreement with Nortech includes agreed upon per unit prices for delivery of the devices.

Actual work on development of the final units began in November 2014. During 2017, the Company incurred approximately $146,000 of expense under this agreement, with approximately $40,000 of the amount in payables at December 31, 2017. During 2016, the Company incurred approximately $455,000 of expense under this agreement, with approximately $61,000 of the amount in payables at December 31, 2016.

From inception through December 31, 2017 and 2016, we have paid approximately $890,000 and $744,000, respectively, to Nortech under the agreement. The agreement with Nortech is now complete following the commercial launch of the DenerveX System.

Note 15 – Liquidity, Going Concern and Management’s Plans

The Company incurred net losses of approximately $6,456,000 and $16,277,000 for the years ended December 31, 2017 and 2016, respectively. The Company will continue to incur losses until such timequalified offering, as it can sell a sufficient enough volume of the DenerveX System with margins sufficient to offset expenses.

To date, the Company’s primary source of funds has been from the issuance of debt and equity.

As discussed in Note 6, in February and July 2017, the Company obtained approximately $2,618,000 and $2,469,000, respectively, net of fees, in private equity financings. The Company will require additional cash in 2018 and is exploring other fundraising options. No assurances can be provided regarding the success of such efforts. Furthermore, if the Company is unable to raise sufficient financing in 2018, it could be required to undertake initiatives to conserve its capital resources, including delaying or suspending the launch of its product outside the United States and seeking FDA approval to sell its productreferenced in the United States. Delaying or suspending these initiatives would raise substantial doubt aboutSPA, the Company’s ability to continue as a going concern.

The financial statements do not includeHolder may convert the unpaid and outstanding principal plus any adjustments to the carrying amounts of its assets or liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 16 - Subsequent Events

On January 2, 2018, the Company received the $150,000 short-term receivable from the sale of Streamline. See Note 10.

On January 31, 2018, the Company issued a 5% convertible debenture in exchange for $100,000. The debenture accrues interest at 5% per annum. Principalaccrued and interest are due on January 30, 2019. The denture is convertible at the option of the holderunpaid Interest into shares of the Company’s common stockCommon Stock at a conversion rate equivalentprice equal to 85%a 20% discount to the offering price.

Further, in connection with the SPA, the Company also issued a Common Stock Purchase Warrant to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the average closing priceinitial exercise date, to purchase up to a certain amount of shares of Common Stock, with 20% of the Company’s common stock forshares of Common Stock issuable upon conversion of the 20 days precedingConvertible Promissory Note purchased by the conversion.Holder, pursuant to the SPA between the Holder and the Company, dated February 24, 2023. The Company issued Warrants to purchase an aggregate of 30,000 shares of Common Stock. The exercise price per share of the Common Stock under this Warrant is $2.00.

On February 2, 2018, the Company received a resignation letter from Mr. Patrick Kullmann from his position as Chief Operating Officer of the Company. There were no disagreements between Mr. Kullmann and the Company. Mr. Kullmann will continue to work with the Company in an advisory capacity through July 31, 2018.

On February 26, 2018,28, 2023, the Company entered into a securities purchase agreement for a total of $128,250with selectedan accredited investor. The notes issued are convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The notes bear interest at 10% and are due one year from issuance. For the first six months, the Company has the right to prepay the notes at a premium of between 25% and 40% depending on when it is repaid.

On March 27, 2023, H-Cyte, Inc., (the “Company”) and three related party investors entered into a Securities Purchase Agreement (the “SPA”), whereby, the Company sold and issued to the certain investors, an aggregate of 770,000one hundred twenty five thousand dollars ($125,000.00) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”). On April 12, 2023, the Company and an additional investor entered into the SPA, whereby, the Company sold and issued an aggregate of thirty five thousand dollars ($35,000.00) of the Company’s Notes. In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase (the “Purchase Warrant”) a certain number of shares of common stock and 385,000 warrantsCommon Stock, which are equal to purchase common stock. The offering resulted in $308,000 in gross proceeds to20% of the Company. Theshares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a five-year term commencing six months from issuanceof five (5) years, with an exercise price of $0.75. The shares were sold at $0.40$2.00 per share.

On March 26, 2018 Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company has the option to extend this offering to June 30, 2023.

The March 27, 2023 Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. The April 12, 2023 Note has a maturity date 60 days from issuance. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the SPA, the Company also issued a promissory noteCommon Stock Purchase Warrant to Steve Gorlin, fathercertain investors, which are exercisable on or prior to the close of Jarrett Gorlin,business on the Company’s CEO, forfive (5) year anniversary of the principalinitial exercise date, to purchase up to a certain amount of $200,000, plus interest, at a rateshares of five percent per year. The outstanding principalCommon Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and all accrued but unpaid interest is due on April 30, 2018.the Company. The Company issued warrantsWarrants to purchase an aggregate of 133,33313,500 shares of common stock par value $.001Common Stock. The exercise price per share in conjunction withof the promissory note. Each warrant has an exercise price of $0.75 andCommon Stock under this Warrant is exercisable for a period of five years commencing from the date of issuance.$2.00.

F-25

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financialaccounting officer, as appropriate to allow timely decisions regarding disclosure.

OurThe Chief Executive Officer (our “CEO”(“CEO”) and our Chief Financial Officer (our “CFO”(“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of December 31, 2017,2022, the end of our fiscal year. In designing and evaluating the Company’s disclosure controls and procedures, we recognizemanagement recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only provide reasonable assurance of achieving the desired control objective. Based onobjectives, and the evaluationCompany necessarily is required to apply its judgment in evaluating the cost-benefit relationship of ourpossible disclosure controls and procedures.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2017,2022.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, ourDecember 31, 2022, the Company’s disclosure controls and procedures were not effective atbecause of the reasonable assurance level.material weakness in our internal control over financial reporting as discussed below, and as a result, the Company engaged consultants to help mitigate these material weaknesses.

In light of the conclusion that our internal disclosure controls are classified as ineffective as of December 31, 2022, we have applied procedures and processes as necessary to ensure the reliability of our financial reporting in regard to this annual report. Accordingly, the Company believes, based on its knowledge, that: (i) this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report; and (ii) the financial statements, and other financial information included in this annual report, fairly present in all material respects our financial condition, results of operations and cash flows as of and for the periods presented in this annual report.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Under the supervision of our CEO and CFO, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 201732, 2022, using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013 Framework).

18

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of December 31, 2017,2022, we determined that there were no control deficiencies existingexisted that constituted material weaknesses as follows:

an ineffective control environment due to an insufficient number of accounting personnel with an appropriate level of knowledge and experience, related to some of the Company’s more complex accounting transactions and SEC financial reporting,
ineffective control activities and monitoring controls due to the lack of segregation of duties and insufficient analysis of certain accounts.

Remediation Efforts to Address Material Weaknesses

Management is committed to maintaining a strong internal control environment. In response to the identified material weaknesses, management, with the oversight of the Audit Committee, has taken actions toward the remediation of the respective material weaknesses in internal control over financial reporting as outlined below.

(i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting (iii) continued education.

The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material weaknesses.manner.

OurManagement believes continuing to use qualified consultants and experts to help with the Company’s more complex transactions will help remediate the material weaknesses described above. The Audit Committee and management will continue to monitor the implementation of these remediation measures and the effectiveness of our internal controls over financial reporting on an ongoing basis.

As a result of the material weaknesses described above, our CEO and CFO concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 20172022, based on criteria established in Internal Control—Integrated Frameworkissued by COSO (2013 Framework).

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal controls over financial reporting because this is not required of the Company pursuant to Regulation S-KSK Item 308(b).

Changes in Internal Control Over Financial Reporting

Except as set forth above, there were no changes in our internal control over financial reporting

During 2017, we established and filled that occurred during the positions of Controller and Accounting Clerk, allowing us to segregate duties between these two positions and the CFO. In 2016 and previous years, the fact we had only one person performing most of the financial functions created a material weakness in our internal controls. However, with duties now segregated between 3 individuals as ofyear ended December 31, 2017, based on the evaluation of the new disclosure controls and procedures, our CEO and our CFO concluded2022, that our disclosure controls and procedures were effective.

The addition of the two new financial positions in 2017 qualify as changes to our internal controls as defined by Rule 13a-15(f) and Rule 15d-15(e) promulgated under the Exchange Act, andmaterially affected, or that are reasonably likely to materially affect in a positive mannerour internal control over financial reporting.

ITEM 9B.OTHER INFORMATION

None.

2019

 

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our board of directors consists of ten (10)five (5) members: Larry Papasan, Scott M. W. Haufe, M.D., James R. Andrews, M.D., Jarrett Gorlin, Randal R. Betz, M.D., Major General C.A. “Lou” Hennies (retired), Ron Lawson, Jesse Crowne, John C. Thomas, Jr.William E. Horne, Raymond Monteleone, Michael Yurkowsky, Richard Rosenblum, and Jon Mogford.Matthew Anderer.

Our current executive officers are Jarrett Gorlin,Michael Yurkowsky, Chief Executive Officer; Charles Farrahar,Officer, Jeremy Daniel, Chief Financial Officer, and Treasurer; Jeffery Wright, Controller and Dennis Moon, Executive Vice President.Tanya Rhodes, Chief Science Officer.

Directors and Executive Officers

The following table provides information as of March 26, 2018April 30, 2023, as to each person who is, as of the filing hereof, a director and/or executive officer of the Company:

NamePosition(s)Age
Jesse CrowneMichael YurkowskyChief Executive Officer/Director Co-Chairman of the Board3851
Major General C.A. “Lou” HenniesJeremy DanielDirector (2) (3)Chief Financial Officer8046
James R. Andrews, M.D.Tanya RhodesDirectorChief Science Officer7662
Scott M. W. Haufe, M.D.Raymond MonteleoneDirector (2)52
Ron LawsonDirector (1) (3)73
Randal R. Betz, M.D.Director66
John C. Thomas, Jr.Director (1)64
Jon MogfordDirector60
Larry PapasanCo-ChairmanChairman of the Board (1) (2) (3)7775
Jarrett GorlinWilliam E HorneChief Executive Officer and Director4268
Dennis MoonRichard RosenblumExecutive Vice PresidentDirector4264
Charles FarraharMatthew AndererChief Financial Officer & SecretaryDirector57
Jeffery WrightController35

(1)MemberChairman of audit committee
(2)Member of and compensation committee
(3)Member of nominating and corporate governance committee

No Family Relationships

There is no family relationship between any director and executive officer or among any directors or executive officers.

Business Experience and Background of Directors and Executive Officers

BOARD OF DIRECTORS

Jesse Crowne

Raymond Monteleone

Raymond Monteleone serves managerial and consultative roles at several enterprises. Mr. Monteleone currently serves as the chairman and president of Paladin Global Partners, LLC since 2007; a board member and vice president of Dannelly, Monteleone & Associates, LLC since 2010; sits on the board of Chen Moore and Associates Inc. since 2015; is a managing member at Diner Investment Partners, LLC since 2016 and Uyona Management, LLC since 2013; a managing member and the chief financial officer at HBRE, LLC since 2013 and Horne Management, LLC since 2011; and the president at Monteleone & Associates Consulting, Inc. since 2005. Mr. Monteleone received a college degree from the New York Institute of Technology and an MBA degree from Florida Atlantic University. Mr. Monteleone, until recently, was the interim CFO and Reorganization Officer of LVI Intermediate Holdings, Inc.

A former partner with Arthur Young (now EY), Raymond Monteleone joined H-CYTE after working closely with several large and small companies serving as board member and/or advisor, specializing in strategic planning, health care, tax and financial planning and corporate management. Mr. Monteleone previously held officer positions with Sensormatic Electronics Corporation, a billion-dollar company listed in the New York Stock Exchange and was a member of the Board of Directors of Rexall Sundown, Inc., a large public entity. He also previously served as an officer working closely with the Board of Directors of Laser Spine Institute (“LSI”) and worked as deputy commissioner, chief operating officer, and chief financial officer with the Florida Department of Education. He attended an exclusive Arthur Young Harvard Business School program and earned his MBA from Florida Atlantic University. Considered an expert in financial analysis and business management, Mr. Monteleone is regularly featured as a lecturer at various universities and professional associations.

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Jesse Crowne was appointed

William E. Horne

William “Bill” Horne is a founder and former Chief Executive Officer and Chairman of the Board of Laser Spine Institute. From 2005 to serve2015, Mr. Horne served as the company’s CEO, expanding the homegrown organization from one facility with nine employees, to seven state-of-the-art surgery centers with more than 1,000 employees across six states, while driving annual revenues as high as $288M during his tenure. In his role as Chairman of the Board, of Directors on February 2, 2018. Mr. Crowne has been acting as a Vice President of Business Development forhe led the Company since January 2015. Mr. Crowne has been a Managing Partner at Gorlin Companies, a healthcare focused single family office specializing in founding and funding early ventures since July 2015. Between August 2015 and January 2017, Mr. Crowne has been the President of Vavotar Life Sciences, a private clinical stage biotechnology company developing antibody directed oncology products. Since 2016, Mr. Crowne has served as an Adjunct Professor at Westminster College teaching a course on financing new ventures to MBA students. From October 2013 to March 2014, he was the Co-Founder of Virtual Clinic Trials, LLC, a cloud based document management solution for clinical trials until it was sold to Global Deal Market in 2014. From 2010 to June 2014, he was an associate at White Pine Medical, a subsidiary of Essex Woodlands, which was a private equity investment fund seeking late-stage medical device opportunities.

Major General C.A. “Lou” Hennies

Mr. Hennies became a directorstrategic direction of the Company in September 2013. Lou Hennies is a career soldier having served his country in uniformcompany, which has made it possible for 41 years where he rose through the ranksmore than 75,000 patients to take back their lives from enlisted status to that of a commissioned officer retiring in 2001 as a Major General.chronic pain with its minimally invasive spine procedures.

He served a total of 37 months in combat in Republic of Vietnam as a Company/Troop commander of four units and as a battalion/squadron staff officer in the 4th Battalion, 23rd Infantry Regiment, 25th Infantry Division, Cu Chi, and the 7th Squadron, 17th Air Cavalry in II Corps. Stateside he commanded another Air Cavalry Troop followed by command of the 1st Squadron, 17th Air Cavalry in the 82nd Airborne Division.Michael Yurkowsky

Selected for Brigadier General in 1986, he subsequently served as the Army’s Deputy Chief of Public Affairs and Director of Army Safety and Commanding General of the U.S Army Safety Center. Initially retiring in 1991, he returned to service in 1995 as The Adjutant General (TAG) of the Alabama Army and Air National Guard and as a Cabinet Officer in the Administration of Governor Fob James Jr.

He is a graduate of the Army’s Command and General Staff College, The Army War College, and The Center for Creative Leadership. A graduate of the University of Nebraska-Omaha with a Bachelor Degree in Political Science, he also holds a Master of Arts Degree in Journalism from the University of Nebraska-Lincoln and a Master of Science in Public Administration from Shippensburg University, Pennsylvania.

His awards and decorations include the Army Distinguished Medal with Oak Leaf Cluster, the Silver Star, the Legion of Merit with Oak Leaf Cluster, the Distinguished Flying Cross, the Soldiers Medal, the Bronze Star with “V” device and 5 Oak Leaf Clusters, the Purple Heart, the Air Medal with “V” (2) and numeral 29, and the Alabama Distinguished Medal with Oak Leaf Cluster. He is also a recipient of numerous foreign decorations from the Republic of Vietnam and the Republic of Korea.

He has been awarded the Army Aviation Order of Saint Michael (Gold), the Infantry’s Order of Saint Maurice (Primicerius) and the Army Aviation Hall of Fame Medallion and has been inducted into the Infantry Officer Candidate Hall of Fame, the Army Aviation Hall of Fame, and the Air Force Gathering of Eagles Class of 2000.

James R. Andrews, M.D.

James R. Andrews, M.D., has served as a Director of the Company since September 2013. Dr. Andrews is recognized throughout the world for his scientific and clinical research contributions in knee, shoulder and elbow injuries, and his skill as an orthopedic surgeon. Dr. Andrews is a founder and current Medical Director for the American Sports Medicine Institute, a non-profit organization dedicated to the prevention, education and research in orthopaedic and sports medicine, as well as the Andrews Research and Education Institute.

He is Clinical Professor of Orthopaedic Surgery at the University of Alabama Birmingham Medical School, the University of Virginia School of Medicine and the University of South Carolina Medical School. He is Adjunct Professor in the Department of Orthopaedic Surgery at the University of South Alabama and Clinical Professor of Orthopaedics at Tulane University School of Medicine.

He serves as Medical Director for Auburn University Intercollegiate Athletics and Team Orthopaedic Surgeon; Senior Orthopaedic Consultant at the University of Alabama; Orthopaedic Consultant for the college athletic teams at Troy University, University of West Alabama, Tuskegee University and Samford University. He serves on the Tulane School of Medicine Board of Governors.

Dr. Andrews serves on the Medical and Safety Advisory Committee of USA Baseball and on the Board of Little League Baseball, Inc.

HeMr. Yurkowsky has been a member of the Sports Medicine CommitteeBoard of the United States Olympic Committee and served on the NCAA Competitive Safeguards in Medical Aspects of Sports Committee.

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In the professional sports arena, Dr. Andrews is Senior Consultant for the Washington Redskins Football team; Medical Director for the Tampa Bay Rays Baseball team and Medical Director of the Ladies Professional Golf Association.

Dr. Andrews serves as the National Medical Director for Physiotherapy Associates, a national outpatient rehabilitation provider. He serves on the board of directors of Fast Health Corporation and Robins Morton Construction Company. He has a Doctor of Laws Degree from Livingston University and Doctor of Science Degrees from Troy and Louisiana State Universities. He has recently written a book,Any Given Monday, about sports injuries and how to prevent them for athletes, parents and coaches.

Scott M. W. Haufe, M.D.

Scott M. W. Haufe, M.D., is a co-founder of Debride and has been a DirectorDirectors of the Company since September 2013. Dr. Haufe2019. Mr. Yurkowsky also serves as President and Chairman of Deverra Therapeutics, a clinical stage biotech developing allogeneic cell therapies. Mr. Yurkowsky operates his own family office, YP Holdings LLC, which has an investment portfolio of 50 private companies and has participated in over 100 financing transactions with public companies since 2012. Previously, Mr. Yurkowsky managed his own hedge fund and worked as a broker at several national broker-dealer firms. On December 6, 2021, the Board of Directors of the Company appointed Michael Yurkowsky to serve as the Company’s Chief Executive Officer.

Richard Rosenblum

Mr. Rosenblum is a board certified physicianbusiness veteran and entrepreneur in the fieldsareas of Anesthesiology, Pain Medicinethe financial services, capital markets, healthcare, technology and Hospice /Palliative Medicine.real estate. His experience ranges from serving as managing director at several investment merchant banks to heading companies as a C-suite executive. He beganalso sits on the boards of public and private healthcare, life sciences and technology-sector companies.

Mr. Rosenblum is currently President, CFO and Board Member of Innovative Payment Solutions, Inc., a California-based FinTech company focused on building a 21st century universal digital payment and money remittance platform. As the founder of Harborview Capital Advisors, LLC, Mr. Rosenblum leads a team of strategic advisors in the areas of capital formation, merchant banking and management consulting, and has raised more than $250 million in capital funding for companies. Since founding it over 20 years ago, Mr. Rosenblum has served as manager and director of Harborview Property Management LLC, raising over $100 million while managing domestic and international commercial and multi-family real estate assets. From 2008 to 2014, Mr. Rosenblum was Director, President and Executive Chairman of Alliqua Biomedical Inc. (NASDAQ: ALQA), a leader in hydrogel manufacturing technology in the wound care sector.

Mr. Rosenblum received his B.A. in Finance & Accounting from the State University of New York at Buffalo in 1981, graduating summa cum laude.

Matthew Anderer

Mr. Anderer started his career in the fieldUnited States Air Force as a fast jet and special operations pilot and instructor before taking operational and staff officer roles with Special Operations Command and NATO. He has commanded worldwide airlift capability of Anesthesiology wherethe highest posts within the White House and from a technology perspective, he served as Chiefhas directed a range of Anesthesiologyhigh-profile, high-value acquisition projects. Mr. Anderer was the Director of the US Air Force leadership and Pain Management with St. Lucie Anesthesia Associates until 1998 while continuing his passioncitizenship development program for research.

Beginning in 1993, Dr. Haufe was first published and has since authored numerous peer reviewed journal articles. Specifically, in 2005, he was recognized for his publication on220,000 cadets before taking command of the endoscopic treatment for sacroilitis.

During 2006, he again authored the first paper on intradiscal stem cell therapy in an attempt to rejuvenate the human disc and in 2010 he developed a minimally invasive procedure for resolving spinal arthritis and subsequently published his findingsbusiest air mobility group in the Internal Journalworld, responsible for support to destinations world-wide. Among other contingency crisis operations in this capacity, Matt played a crucial role establishing robust, resilient, and repeatable processes to prevent the potential spread of Med Sci. Additionally,the Ebola Virus for aircraft, cargo and passengers that transited sub-Saharan West Africa. He is currently the training systems Country Integration Lead for Lockheed Martin’s F-35 International customers, a position that he is named on multiple patents for treating pain related issues. Dr. Haufe earned his MD from the University of South Florida College of Medicine in 1992 with honors and completed his residency in Anesthesiology in 1996.has held since prior to 2017.

He currently practices in Destin, FL with Anesthesia, Inc., and is affiliated with Sacred Heart Hospital, Destin Surgery Center, and Healthmark Medical Center. He is
Most recently, Mr. Anderer was also
a member of the American Society of Anesthesiologists and the Florida Society of Anesthesiologists.

Larry Papasan

Larry Papasan has served as Chairman of the board of directors of the Company since September 2013. From July 1991 until his retirementBoard for Deverra Theraputics, a clinical stage cell therapy company headquartered in May 2002, Mr. Papasan served as President of Smith & Nephew Orthopedics. Mr. Papasan is also currently serving as a member of the board of directors for MiMedx Group, Inc., and has also served as a member of the board of directors of Reaves Utility Income Fund [NasdaqCM:UTG], a closed-end management investment company, since February 2003 and of Triumph Bancshares, Inc. (a bank holding company) since April 2005.

Previously, Mr. Papasan served as Director and Chairman of the board of directors of BioMimetic Therapeutics, Inc. prior to being sold to Wright Medical. BioMimetic Therapeutics worked on developing and commercializing bio-active recombinant protein-device combination products for the healing of musculoskeletal injuries and disease, including orthopedic, periodontal, spine and sports injury applications. Mr. Papasan also previously served as a Director for SSR Engineering, Inc. and AxioMed Spine Corporation.

John C. Thomas, Jr.

John Thomas has been a director of the Company since September 2013 and currently serves as the CFO/corporate secretary for CorMatrix Cardiovascular, Inc., a privately held medical device company which he joined in 2001. Over the past 24 years, Mr. Thomas has served as the CFO of numerous startup companies and managed their financing activities from the initial financing up to their initial public offering. Some of these companies are still private and some have become public entities. The companies in the health care industry that have gone public while Mr. Thomas was the CFO include CytRx Corporation (1986 – 1990), CytRx Biopool (1988 – 1991), Medicis Pharmaceutical Corporation (1988 –1991), EntreMed, Inc. (1991 – 1997), DARA BioSciences, Inc. (1998 – 2009) and, MiMedx, Inc. (2006 – 2009). He has also been the CFO of Surgi-Vision, Inc., a private research company involved in MRI technology (1998 – 2010) that subsequently changed its name to MRI Interventions and went public. Mr. Thomas has also been the CFO of Motion Reality, Inc., a privately-held company with proprietary software that captures and analyzes motion data since 1991.

Presently, he serves as a member of the board of directors of Novelion, formerly QLT, Inc., (NL), a publicly traded medical company and NantKwest, Inc. a publicly traded company (NK). Mr. Thomas is a certified public accountant.

Ron Lawson

Mr. Lawson became a member of the board of directors on August 11, 2016 as a replacement for Thomas Hills. Mr. Lawson has over 35 years of experience in the orthopedic industry. In 1996, he served as the Senior Vice President of Worldwide Sales and Customer Service for Pfizer’s Orthopedic Division, Howmedica. In 1998, upon Stryker Corporation’s acquisition of Howmedica, Mr. Lawson was appointed to serve as Senior Vice President of Sales, Marketing and Product Development. In 2000, he was asked to lead the revitalization of Stryker’s European business as its President, EMEA and in 2001, was promoted to Group President, International. From 2005 to 2007, Mr. Lawson served as Stryker’s Group President for International and Global Orthopedics where he was focused on strengthening the Stryker Orthopedic business worldwide. Since 2009, Mr. Lawson has been a member of the Lawson Group where he provides strategic consulting services specializing in orthopedic medical technology.

Mr. Lawson previously served as Chairman of the Board of IMDS, Corporation and also served as a member of the Health Care Advisory Board of Arsenal Capital Partners. He presently serves as a Director of Plasmology 4, Corporation as well as a Director of DJO Global, a Blackstone company.

Randal R. Betz, M.D.

Dr. Randal Betz has been a director of the Company since September 2013. Dr. Betz is an orthopaedic spine surgeon with a private practice in Princeton, New Jersey. He has held hospital positions as Chief of Staff at Shriners Hospitals for Children – Philadelphia and Medical Director of Shriners’ Spinal Cord Injury Unit. Dr. Betz is also a Clinical Professor of Orthopaedic Surgery at the Icahn School of Medicine at Mount Sinai in New York City.

Dr. Betz earned a Medical Degree from Temple University School of Medicine and was awarded the Alpha Omega Alpha honor. His Internship in general surgery and Residency in Orthopaedic Surgery were at Temple University Hospital. Dr. Betz’s Fellowship in Pediatric Orthopedics was at the Alfred I DuPont Institute (now Nemours/AI duPont Hospital for Children) in Wilmington, DE. Since his graduate work, Dr. Betz has had postdoctoral fellowship experiences with ABC Traveling Fellowship, North American Traveling Fellowship, the Berg-Sloat Traveling Fellowship, and recently the SRS Traveling Fellowship (serving as Senior Mentor). Many national and international professional societies count Dr. Betz as a member including: the American Academy of Orthopaedic Surgeons, American Paraplegia Society, American Spinal Injury Association, and Scoliosis Research Society. For many of these organizations, Dr. Betz has fulfilled the roles of board of director member and committee member, and he served as President of the Scoliosis Research Society in 2005.

In addition to an active hospital practice in pediatric spinal surgery, research is an important area of Dr. Betz’s career. He is a recipient of many research grants and he has ten patents, including several involving research in fusionless treatment of spinal deformities. Dr. Betz is coeditor of several medical textbooks, has contributed 45 chapters to medical books, and has authored or coauthored over 300 peer-reviewed or invited articles. Worldwide, Dr. Betz has delivered hundreds of paper presentations and invited lectures. Dr. Betz is double board certified by the American Board of Orthopaedic Surgery and the American Board of Physical Medicine and Rehabilitation (specializing in Spinal Cord Injury Medicine).

Jarrett Gorlin

Jarrett Gorlin has served as the Chief Executive Officer, President, and a Director of the Company since November, 2013. Prior to joining the Company, Mr. Gorlin served as the President of Judicial Correction Services, Inc. (“JCS”), the largest provider of private probation services in the country, which he co-founded in 2001.

In 2011, he successfully negotiated the sale of JCS to Correctional Healthcare Companies (“CHC”), after which he has continued to serve as the President of JCS. Under Mr. Gorlin’s leadership, JCS made INC. Magazine’s list of the Fastest Growing Companies in America in 2010, 2011, and 2012. Mr. Gorlin began his career by becoming the youngest rated commercial helicopter pilot at the age of 16, and becoming the chief pilot for the Fulton County Sheriff’s Office in Atlanta, Georgia.

Mr. Gorlin has served as Captain and Commander at the Fulton County Sheriff’s Office where he has worked from 1996 to present. He continues to serve his community through law enforcement as the commander of a reserve unit overseeing 90 deputy sheriffs, who work in the courts, jail and warrant divisions. Mr. Gorlin also serves as a political advisor and consultant to many elected officials in the Atlanta area, including the current sitting Sheriff of Fulton and Clayton County, Georgia. He has also served on the campaign finance committee for the former Governor of Georgia Roy Barnes.

Jon Mogford, PH.D.

Dr. Mogford became a member of the board of directors on November 10, 2016 as a replacement for John Blank, M.D. Dr. Mogford serves as the Vice Chancellor for Research for The Texas A&M University System and provides research and development leadership to the System’s eleven universities and seven state agencies encompassing 30,000 faculty and staff, >135,000 students, a budget of more than $4 billion and research expenditures of more than $945 million annually. Prior to joining the Texas A&M University System in 2011, Dr. Mogford served as a program manager and then Deputy Director of the Defense Sciences Office (DSO) of the Defense Advanced Research Projects Agency (DARPA) in the U.S. Department of Defense. As DSO Deputy Director, he provided strategic planning and implementation of ≈$400M/year in R&D in the physical, biomedical and material sciences.

He provided leadership to 20 Program Managers in the development and management of office investments ranging from the fundamental sciences to commercial transition efforts for both defense and non-defense applications. Dr. Mogford led expansion of formal working relationship between DARPA and the FDA to improve the ability of each organization to meet mission goals, which was highlighted as a DARPA-FDA-NIH partnership by the White House. He is the recipient of the Secretary of Defense Medal for Outstanding Public Service.

His DARPA programs included scar-free regeneration of wounds, metabolic control strategies for survival of severe blood loss, biomarker-responsive biomaterials for drug delivery, stem cell-based bioreactor production of universal donor red blood cells, computational design of novel proteins, and active hemostatic biomaterials for treatment of internal and external wounds. He has authored or co-authored 29 peer-reviewed publications.

Dr. Mogford obtained his bachelor’s degree in Zoology from Texas A&M University and doctorate in Medical Physiology from the Texas A&M University Health Science Center, College Station, Texas. His research in vascular physiology continued at the University of Chicago as a Postdoctoral fellow from 1997-98. Dr. Mogford transitioned his research focus to the field of wound healing at Northwestern University, both as a Research Associate and also as a Research Assistant Professor from 1998-2003. He then served as a Life Sciences Consultant to DARPA on the Revolutionizing Prosthetics program from 2003-2005.

NON-DIRECTOR EXECUTIVE OFFICERS

President and Chief Operating Officer – Patrick Kullmann

Patrick Kullmann served as our President and Chief Operating Officer from September 2013 through February 2018. Mr. Kullmann has served in a contract capacity as the Chief Executive Officer of Streamline, Inc., a medical technology company since 2012. He is also the Founder of CG3 Consulting, LLC, a global medical technology advisory firm in Minneapolis, Boston and San Diego which he founded in 2008. CG3 Consulting provides consulting services to clients in the healthcare, scientific and technology industries. Prior to establishing CG3 Consulting, Mr. Kullmann was a senior director at Medtronic in their $2.3 billion Cardiovascular Division. He started his career working as a surgical sales representative in the Texas Medical Center in Houston. Mr. Kullmann has served in senior marketing, market development and sales leadership positions at Boston Scientific, Baxter, Johnson & Johnson, and four start-up medical device companies – two of which had successful liquidity events for a combined value of $220m.Seattle. He is a graduate of Northern MichiganVillanova University, Air Command and has an MBA from California Coastal University. The board believes that Mr. Kullmann hasStaff College, Naval Staff College and the experience, qualifications, attributes and skills necessary to serve as President and Chief Operating Officer because of his years of experience in the medical technology field.Geneva Center for Security Policy.

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NON-DIRECTOR EXECUTIVE OFFICERS

Chief Financial Officer and Treasurer Charles FarraharJeremy Daniel

Charlie Farrahar is a Certified Public Accountant with over 30 years of managerial finance, administration, human resource and risk management experience inJeremy Daniel has been the public, private and non-profit sectors. Mr. Farrahar was the first Chief Financial Officer of the Company from its inception in 2013 through its initial public offering. He remained with the Company as its Secretary, only, from January 2015 until August 16, 2017, when he agreedH-CYTE Inc since 2019. Prior to resume the CFO role.that, Mr. Farrahar currently serves as Chief Financial Officer for several small private biotech companiesDaniel worked in the researchprivate sector in the accounting and development stage. In 2013, he joined a private governmental assistance startup as its CFO and Director of Human Resources, helping withfinance field for the sale of that company to a private entity in 2011 after it had grown to a multi-state operation with over 400 employees. In the late 1990’s, he was CFO of Credit Depot Corp. (a Nasdaq listed entity).

Controller – Jeffery Wright

past twenty years. Mr. WrightDaniel is a Certified Public Accountant and previously served as our received a college degree from the University of Cincinnati and an MBA degree from Xavier University. The Company currently does not have any employment agreement with Mr. Daniel.

Chief FinancialScience Officer – Tanya Rhodes

Ms. Rhodes is an innovative, growth-oriented leader in the healthcare industry with a broad base of international experience in all aspects of operational business including R&D, clinical and Treasurerregulatory, and business development. Ms. Rhodes has a demonstrated record of accomplishment for bringing new technologies from January 2015concept through August 2017. commercialization and possesses an in-depth knowledge of biological tissues, enzymes, stem cells, antimicrobials, and natural products.

Prior to joining the Company on June 15, 2020, Ms. Rhodes held various C-level positions in December 2014, Mr. Wrightmany sectors, including wound care, dermatology, aesthetics and plastic surgery. Ms, Rhodes was an audit senior at Ernstthe VP of Innovation for Smith & Young within the Assurance Services division, where he had an opportunity to help manage audits of large ($2 billion to $10 billion annual revenue) publicly-traded companies. He also has experience auditing medium size ($2Nephew and a global executive team member driving a $450 million - $200 million annual revenue) privately-held companies in multiple industries with other accounting firms. Prior to his career in public accounting, Mr. Wright worked as a trading analyst in the retirement trust services department at Reliance Trust Company, managing the institutional trading desk to settle mutual fund transactions with the National Securities Clearing Corporation. Mr. Wright holds Master of Professional Accountancy and Bachelor of Business Administration degrees from the Georgia State University Robinson College of Business and is a member of the Georgia Society of Certified Public Accountants.business.

Executive Vice President – Dennis Moon

Dennis MoonMs. Rhodes has served as our Senior Vice President of Rhodes & Associates since November, 2013. Prior to joining2016 through which, Ms. Rhodes has held long-term contracts with medical device and drug companies as well as private equity companies.

Ms. Rhodes completed her PhD in molecular orbital computational chemistry in the Company, he wasUnited Kingdom and received a master’s degree in the Chief Operations Officer for Judicial Correction Services (2006 – 2013) supervisingManagement of Technology in the day to day operations of the JCS community supervision division, which supervised over 50,000 active probationers throughout the southeast United States. He was responsible for supervision of over 400 employees and over 1.8 million financial transactions per year. Dennis is a graduate of the University of Central Florida and has a degree in Psychology with an emphasis on Drug and Alcohol addiction.

After graduating high school, he joined the United States Army where he served for eight years as an Intelligence Analyst and received numerous awards and medals for various services. The board believes that Mr. Moon has the experience, qualifications, attributes and skills necessary to serve as Senior Vice President because of his years of experience in the military and in management of employees.

Director Independence

The Company has determined that Major General C.A. “Lou” Hennies, Scott M. W. Haufe, M.D., Ron Lawson, Jon Mogford, John C. Thomas, Jr. and Larry Papasan are “independent” as defined by, and determined under, the applicable director independence standards of The NASDAQ Stock Market LLC.

Liability and Indemnification of Directors and Officers

OurThe Company’s Articles of Incorporation provide that to the fullest extent permitted under Nevada law, ourits directors will not be personally liable to the Company or its stockholders for monetary damages for breach of the duty of care, breach of fiduciary duty or breach of any other duties as directors. OurThe Company’s Articles of Incorporation also provide for indemnification of ourits directors and officers by the Company to the fullest extent permitted by law. The Company maintains D&O insurance coverage.

Role of Board in Risk Oversight Process

OurThe Company’s board of directors has responsibility for the oversight of the Company’s risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from board committees and members of senior management to enable our board to understand the company’s risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, strategic and reputational risk.processes.

The audit committee reviews information regarding liquidity and operations and oversees ourthe Company’s management of financial risks. Periodically, the audit committee reviews ourthe Company’s policies with respect to risk assessment, risk management, loss prevention and regulatory compliance. Oversight by the audit committee includes direct communication with ourthe Company’s external auditors and discussions with managementthe CFO regarding significant risk exposures and the actions management has taken to limit, monitor or control such exposures. The compensation committee is responsible for assessing whether any of our compensation policies or programs has the potential to encourage excessive risk-taking. The nominating/corporate governance committee manages risks associated with the independence of the board, corporate disclosure practices, and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire board is regularly informed through committee reports about such risks. Matters of significant strategic risk are considered by our board as a whole.

Board Committees and Independence

OurThe Company’s board of directors has established an audit committee, a nominating and corporate governance committee and a compensation committee, each of which operates under a charter that has been approved by ourthe board.

EachThe corporate governance committee is in the process of the Company’s current independent directors, Major General C.A. “Lou” Hennies, Scott M. W. Haufe, M.D., Ron Lawson, Jon Mogford, John C. Thomas Jr., and Larry Papasan, are independent under the rules of the NASDAQ Capital Market. Accordingly, our board has determined that all of the members of each of the board’s three standing committees are independent as defined under the rules of the NASDAQ Capital Market.being formulated.

In addition, all members of the audit committee meet the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934, or the Exchange Act.

Audit Committee

The members of our audit committee are John C. Thomas, Jr., Ron Lawson and Larry Papasan. Mr. ThomasMonteleone chairs the audit committee. The audit committee’s main function is to oversee our accounting andthe financial reporting processes, internal systems of control, independent registered public accounting firm relationships and the audits of our financial statements.

This committee’s responsibilities include, among other things:

appointing, approving the compensation of and assessing the independence of our registered public accounting firm;
overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports from such firm;
reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;
monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;
overseeing our internal audit function;
overseeing our risk assessment and risk management policies;
establishing policies regarding hiring employees from the independent registered public accounting firm and procedures for the receipt and retention of accounting related complaints and concerns;
meeting independently with our internal auditing staff, independent registered public accounting firm and management;
reviewing and approving or ratifying any related person transactions; and
preparing the audit committee report required by the Securities and Exchange Commission, or SEC, rules.

All audit and non-audit services, other thande minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee.

Our board of directors has determined that John C. Thomas, Jr. is an “audit committee financial expert” as defined in applicable SEC rules.

Nominating and Corporate Governance Committee

The members of our nominating and corporate governance committee are Major General C.A. “Lou” Hennies, Ron Lawson and Larry Papasan.Company. Mr. Hennies chairs the nominating and corporate governance committee. This committee’s responsibilities include, among other things:

identifying individuals qualified to become members of our board of directors;
recommending to our board of directors the persons to be nominated for election as directors and to each of our board’s committees;
developing, recommending to the board, and assessing corporate governance principles, codes of conduct and compliance mechanisms; and
overseeing the evaluation of our board of directors.

Compensation Committee

The members of our compensation committee are Larry Papasan, Major General C.A. “Lou” Hennies and Scott M. W. Haufe, M.D. Mr. PapasanMonteleone also chairs the compensation committee. This committee’s responsibilities include, among other things:

reviewing and recommending corporate goals and objectives relevant to the compensation of our chief executive officer and other executive officers;
making recommendations to our board of directors with respect to, the compensation level of our executive officers;
reviewing and recommending to our board of directors employment agreements and significant arrangements or transactions with executive officers;
reviewing and recommending to our board of directors with respect to director compensation; and
overseeing and administering our equity-based incentive plans;

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our board of directors or our compensation committee. Mr. Gorlin, CEO and Director, will abstain on any board vote involving executive compensation by the board as a whole.

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Board Diversity

Our nominating and corporate governance committee will be responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members.

In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for election, and the board of directors, in approving (and, in the case of vacancies, appointing) such candidates, will take into account many factors, including the following:

personal and professional integrity, ethics and values;
experience in corporate management, such as serving as an officer or former officer of a publicly-held company;
development or commercialization experience in large medical products companies;
experience as a board member or executive officer of another publicly-held company;
strong finance experience;
diversity of expertise and experience in substantive matters pertaining to our business relative to other board members;
diversity of background and perspective, including with respect to age, gender, race, place of residence and specialized experience;
conflicts of interest; and
practical and mature business judgment.

Currently, our board of directors evaluates each individual in the context of the board of directors as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.

Code of Business Conduct and Ethics

We haveThe Company has adopted a written code of business conduct and ethics that applies to ourthe Company’s directors, officers, and employees, including ourits principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A current copy of the code will be posted on the Corporate Governance section of our website,www.MedoveX.com.

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In addition, we intendthe Company intends to post on ourits website all disclosures that are required by law or the listing standards of The NASDAQOTCQB Capital Market concerning any amendments to, or waivers from, any provision of the code. The reference to our website address does not constitute incorporation by reference of the information contained at or available through ourthe Company’s website, and you should not consider it to be a part of this Annual Report.

Procedures for Security Holders to Recommend Nominees for Election as Directors

There have been no material changes to the procedures by which security holders may recommend nominees to the board of directors since the Company last described such procedures or any material changes thereto.

Company Policy as to Director Attendance at Annual Meetings of Stockholders

The Company’s policy encourages board members to attend annual meetings of stockholders.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires each person who is a director or officer or beneficial owner of more than 10% of the common stock of the Company to file reports in connection with certain transactions. To the knowledge of the Company, based solely upon a review of forms or representations furnished to the Company during or with respect to the most recent completed fiscal year, there were a few isolated instances where the director purchased or received shares and was late filing under section 16(a). All of the required filings have now been made.

ITEM 11.EXECUTIVE COMPENSATION

Name & Position Fiscal Year 

Salary

($)

  

Bonus

($)

  

Stock Option Awards

($)

  All Other Compensation ($)  

Total

($)

 
Jarrett Gorlin, CEO 2017  272,000   -   38,474   -   310,474 
  2016  272,000   -   27,413   -   299,413 
                       
Patrick Kullmann, COO 2017  231,000   -   32,674   -   263,674 
  2016  231,000   -   23,281   -   254,281 
                       
Dennis Moon, EVP 2017  201,000   -   28,431   -   229,431 
  2016  201,000   -   20,257   -   221,257 
                       
Jeffery Wright, Controller 2017  140,000   -   18,388   -   158,388 
  2016  130,000   -   13,102   -   143,102 
                       
Charles Farrahar, CFO 2017  45,000   -   -   -   45,000 
  2016  45,000   -   -   -   45,000 
Name & Position Fiscal Year  Salary ($)  Bonus ($)  

Stock

Option

Awards ($)

  All Other Compensation ($)  Total ($) 
Michael Yurkowsky, CEO  2022   180,000   -   

327,787

          -   

507,787

 
   2021   15,000   -   191,833   -   206,833 
Jeremy Daniel, CFO  2022   200,000   -   

-

   -   

200,000

 
   2021   200,000   -   274,250   -   474,250 
Tanya Rhodes, CSO  2022   252,000   -   

-

   -   

252,000

 
   2021   252,000   -   275,313   -   527,213 

Employment Agreements

From their first date of employment, the Company entered into Employment and Confidential Information and Inventions Assignment (“Confidentiality”) Agreements with each of its four officers. These agreements are identical with the exception of the salary amount in the Employment Agreement.

The Confidentiality Agreement, among other things, obligates each officer not to disclose Confidential Information (as defined in the Agreement) for a period of 5 years after their last date of employment. It commits the employee to assign any work product developed at MedoveX to the Company and assist with obtaining patents for that work as necessary. It contains a provision prohibiting employees from soliciting clients or hiring Company personnel for a period of 2 years after their separation.

The Employment Agreements are for a term of three years and define the compensation and benefits each employee will receive when they start employment. They also define the circumstances for and the effect on compensation and benefits under the following scenarios:

a.Termination without cause
b.Termination upon death or disability
c.Termination by the Company for cause
d.Termination by the employee for good reason, including material diminishment of position, demands to move or change in control of the Company
e.Termination by the Company without cause, upon disability or by employee with good reason
f.Termination for other reasons

If the Company terminates without cause or the employee terminates with good reason, the employee continues to collect his salary and benefits for 6 months after termination. The Employment Agreement also contains a non-compete clause prohibiting the employee from competing with the Company for 1 year after their separation. Currently no employment agreements are in effect.

The current annualized salaries of our executive officers as of April 11, 2023 are as follows:

Name & Position Annual Salary 
Jarrett Gorlin, CEO $272,000 
Charles Farrahar, CFO $45,000 
Jeffery Wright, Controller $140,000 
Dennis Moon, EVP $201,000 
Name & Position Annual Salary 
Michael Yurkowsky, CEO $180,000 
Jeremy Daniel, CFO $200,000 
Tanya Rhodes, CSO $252,000 

29

Director Compensation

The board established a policy of paying outside (non-employee) directorsThere are understandings between the Company and Mr. Raymond Monteleone as follows: $2,500 per quarter as Audit Committee Chair and Compensation Committee Chair, and $5,000 per quartermonth for each full quarteradvisory services and to serve as Chairman of service.

In November 2016, the Board authorized the issuance of shares of common stock to all Board members, both current and former, in an amount equivalent to $240,000, representing their accrued but unpaid directors’ fees as of December 31, 2016. In January 2017,Board. On April 1, 2021, the Company issuedgranted Mr. Monteleone an aggregate of 173,911 shares at $1.385,250,000 stock options with a total fair value of $287,750. Effective January 1, 2022, Mr. Monteleone will receive $7,500 per share, which wasmonth to serve on the average closing priceBoard of Directors and an additional $2,500 per quarter to serve as Chairman of the Company’s stock during 2016,Board, Audit Committee Chair, and Compensation Committee Chair. Effective July 1, 2022, due to fulfill this obligation. The closing pricelack of working capital, Mr. Monteleone receives $3,750 per month to serve on the Board of Directors and to serve as Chairman of the Company’s stockBoard, Audit Committee Chair, and Compensation Committee Chair.

There are understandings between the Company and William Horne as follows: $4,167 per month to serve on January 17, 2017, the day the shares were issued, was $1.16 per share.

In August 2017, the Board authorized the issuance of shares of common stock to all Board members, both current and former, in an amount equivalent to $135,000, representing their accrued but unpaid directors’ fees as of September 30, 2017. In October 2017,Directors. On April 1, 2021, the Company issuedgranted Mr. Horne an aggregate of 115,389 shares at $1.172,000,000 stock options with a total fair value of $110,500. Effective December 1, 2021, Mr. Horne will receive $5,000 per share, which wasmonth to serve on the average closing priceBoard of Directors. Effective July 1, 2022, due to lack of working capital, Mr. Horne receives $2,500 per month to serve on the Company’s stock through September 30, 2017,Board of Directors.

There are understandings between the Company and Richard Rosenblum as follows: $5,000 per month to fulfill this obligation. The closing priceserve on the Board of Directors. Effective July 1, 2022, due to lack of working capital, Mr. Rosenblum receives $2,500 per month to serve on the Company’s stockBoard of Directors.

There are understandings between the Company and Matthew Anderer as follows: $5,000 per month to serve on October 30, 2017, the dayBoard of Directors. Effective July 1, 2022, due to lack of working capital, Mr. Anderer receives $2,500 per month to serve on the shares were issued, was $1.09 per share.Board of Directors.

23

 

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information is presented for each person we know to be a beneficial owner of 5% or more of our securities, each of our directors and executive officers, and our officers and directors as a group.

The percentage of common equity beneficially owned is based upon 21,163,013618,506 shares of Common Stock and 438,776,170 shares of Series A Preferred Stock, which converts to Common Stock at a 1000:1 ratio, issued and outstanding as of December 31, 2017.2022.

The number of shares beneficially owned by each stockholder is determined under the rules issued by the Securities and Exchange Commission and includes voting or investment power with respect to such securities.

Under these rules, beneficial ownership includes any shares as to which the individual or entity has sale or shared voting power or investment power. Unless otherwise indicated, the address of all listed stockholders is c/o MEDOVEX, 3060 Royal Boulevard South Suite 150, Atlanta, Alpharetta 30022. H-CYTE, 2202 N West Shore Blvd. Ste 200, Tampa, FL 33607

Unless otherwise indicated each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned, subject to community property laws where applicable.

  Number of Shares Beneficially Owned(1)  Percentage of common equity beneficially owned 
Scott M.W. Haufe, M.D., Director  811,170(2) (4)  3.7%
Farrahar, Charles  193,576   0.9%
Jarrett Gorlin, Director and Officer  671,843(3) (10)  3.1%
Larry W. Papasan, Co-chair of the Board of Directors  238,136(4)  1.1%
John C. Thomas, Jr., Director  109,960(4)  0.5%
Patrick Kullmann, Officer  281,506(5) (8)  1.3%
Jeffery Wright, Officer  63,629(7)  0.3%
Major General C.A. “Lou” Hennies, Director  141,348(4)  0.6%
James R. Andrews, M.D., Director  141,348(4)  0.6%
Ron Lawson, Director  318,256(12)  1.4%
Jesse Crowne, Co-chair of the Board of Directors  251,990(6)  1.1%
Randal R. Betz, M.D., Director  141,348(4)  0.6%
Mogford Jon, Director  165,840(11)  0.8%
Dennis Moon, Officer  245,226(9)  1.1%
Officers and Directors as a Group (14 persons)  3,775,176   17.2%
  

Number of Shares

Beneficially Owned(1)

  

Percentage of

common equity

beneficially owned (2)

 
Michael Yurkowsky, Director and Officer (4)  13,203   1.24%
William E. Horne, Director (5)  29,695   2.79%
Raymond Monteleone, Director  4,000   0.38%
Jeremy Daniel, Officer  2,750   0.26%
Tanya Rhodes, Officer  43,239   4.08%
RMS Shareholder, LLC  50,925   4.82%
FWHC Holdings (6)  697,263   51.83%
CFRS Investments, LLC (7)  85,738   7.91%
CTS Equities Holdings (8)  185,419   16.65%
DB-BZ, LLC (9)  94,584   8.71%
Officers and Directors as a Group (5 persons)  92,887   6.41%

(1)Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to shares beneficially owned and options and warrants exercisable within 60 days. Beneficial ownership is based on information furnished by the individuals or entities.
(2)Percentage calculated using for each person or entity the sum of that person’s or entity’s outstanding shares plus shares from exercisable options and warrants and shares from convertible securities divided by the sum of total outstanding shares plus that person’s or entity’s outstanding shares plus shares from exercisable options and warrants and shares from convertible securities.
(2)(3)Includes 532,335The Series A Preferred shares held by Morgan Stanley Smith Barney custodian for Nicole Haufe Roth IRA, 25,000have been calculated assuming that the shares held by Haufe Family Limited Partnership and 209,275have been converted to common shares held by Nicole Haufe. Mr. Haufe disclaims beneficial ownershipat 1-1000 per the terms of the shares.

(3)Includes 506,837 shares held by The Jarrett S. & Rebecca L. Gorlin Family Limited Partnership. Mr. Gorlin disclaims beneficial ownership of the shares.Reverse Split (see Note 1).
(4)
(4)Includes 10,000Represents Mr. Yurkowsky’s 50% ownership in YPH, LLC which entitles him to 9,261 common shares pursuant toand 933 warrants which are exercisable within 60 days of December 31, 2022. It also included 2,667 options, exercisable within 60 days.days, personally held by Mr. Yurkowsky.
(5)
(5)Includes 96,7888,443 common shares held with RMS Shareholder, LLC through Horne Management, LLC (of which Mr. Horne owns 96%), 830 common shares held with RMS Shareholder, LLC through Uyona Management (of which Mr. Horne owns 90%) and 3,665 Series A Preferred Stock shares and 1,870 warrants through Uyona Management II, (of which Mr. Horne owns 33%). It also includes 4,368 common shares and 4,637 warrants held by Pamela M.C. Kullmann. Mr. Kullmann disclaims beneficial ownership of Pamela M.C. Kullmann’s shares.  
(6)Includes 56,250Horne Management directly with the Company along with 4,726 common shares pursuant toand 1,167 options, exercisable within 60 days.  days of December 31, 2022, held personally by Mr. Horne.
(6)
(7)Includes 63,629Represents 57,822 common shares, pursuant to options351,416 Series A Preferred Stock shares, and 288,026 warrants which are exercisable within 60 days.  days of December 31, 2022 held by FWHC Holdings, LLC, FWHC Bridge, LLC, and FWHC Bridge Friends, LLC.
(7)
(8)Includes 72,680Represents 8,322 common shares, pursuant to options51,208 Series A Preferred Stock shares, and 26,208 warrants which are exercisable within 60 days.  days of December 31, 2022.
(8)
(9)Includes 51,650Represents 129,200 common shares pursuant to optionsand 56,220 warrants which are exercisable within 60 days.  days of December 31, 2022 held by Blue Zone Med, LLC, Chris T. Sullivan, and CTS Equities, L.P.
(9)
(10)Includes 54,671Represents 66,474 common shares pursuant to optionsand 28,110 warrants which are exercisable within 60 days.  
(11)Includes 150,000 shares pursuant to options exercisable within 60 days.  
(12)Includes 300,000 shares pursuant to options exercisable within 60 days.  days of December 31, 2022.

24

 

Equity Compensation Plan Information

In October 2013,the Merger, the Company adopted theassumed

The 2013 Stock Incentive Plan (the “Plan”).

The Plan is intended to secure for usH-CYTE and ourits stockholders the benefits arising from ownership of ourits Common Stock by individuals we employthe Company employs or retainretains who will be responsible for the future growth of the enterprise. The Plan is also designed to help attract and retain superior personnel for positions of substantial responsibility, including advisory relationships where appropriate, and to provide individuals with an additional incentive to contribute to ourthe Company’s success.

The “Administrator” of the Plan is the Compensation Committee of the Board;CEO; however, the Administrator may also delegate to one or more officers of the Company the authority to make most determinations otherwise reserved for decision by the Administrator. Under the Plan, the Administrator has the flexibility to determine eligible participants and the type and amount of awards to grant to eligible participants.

The Administrator may make the following types of grants under the Plan, each of which will be an “Award”:

qualified incentive stock options (“QISOs”);
nonqualified stock options; and
awards of restricted stock and/or restricted stock units.

OurThe Company’s officers, key employees, directors, consultants, and other independent contractors or agents who are responsible for or contribute to ourits management, growth or profitability will be eligible for selection by the Administrator to participate in the Plan, provided, however, that QISOs may be granted only to ourthe Company’s employees.

WeH-CYTE authorized and reserved for issuance under the Plan an aggregate of 2,650,0002,650 shares of ourits Common Stock. As of December 31, 2017, we have granted2022, the Company had outstanding an aggregate of 1,314,059165 options to purchase common stock at a weighted average price of $1.51$3,076 per share to certain employees, consultants and to outside directors. As of December 31, 2017, we have granted an aggregate of 368,000 commonshare. The Company did not grant stock shares fromoptions under the Plan to certain outside consultants at the market price on the day of grant.plan in 2022 or 2021. If any of the awards granted under the Plan expire, terminate, or are forfeited for any reason before they have been exercised, vested, or issued in full, the unused shares allocable to or subject to those expired, terminated or forfeited awards will become available for further grants under the Plan.

31

On April 1, 2021, the Board of Directors of the Company approved a non-qualified stock option agreement and granted an aggregate of 54,750 stock options to certain directors and officers of the Company having an exercise price of $70.00 per share and an expiration date of ten years from the date of grant (The “Options). The Director’s Options vest over a period of three years, and the Chief Executive Officer and Chief Financial Officer’s Options vest over a period of four years. These options were granted outside of the Plan. The Board of Directors decided not to renew the former CEO’s (Robert Greif) employment contract, which expired in September 2021, therefore, 25,500 unvested shares were forfeited. (see Note 5)

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The Company pays TAG Aviation (“TAG”), a company owned by CEO Jarrett Gorlin, for executive office space in Atlanta Georgia at a rate of $2,147 per month plus related utilities.

The rental rate is 90% of the amount billed to TAG Aviation by the owner of the property. The Company has also chartered aircraft from TAG Aviation. The total amount spent for chartered service with TAG Aviation was approximately $0 in 2017 and $26,000 in 2016. The Company believes that such aircraft charter is on terms no less favorable then it would receive from a third party.

Policies and Procedures for Related Person Transactions

OurH-CYTE’s board of directors has adopted written policies and procedures for the review of any transaction, arrangement, or relationship in which we arethe Company is a participant, the amount involved exceeds $120,000 and one of ourits executive officers, directors, director nominees or 5% stockholders, or their immediate family members, each of whom we referis referred to as a “related person,” has a direct or indirect material interest.

25

 

If a related person proposes to enter into such a transaction, arrangement or relationship, which we referthe Company refers to as a “related person transaction,” the related person must report the proposed related person transaction to our Chief Executive Officer.the CEO. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by ourthe audit committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction.

If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the committee will review and consider:

the related person’s interest in the related person transaction;
the approximate dollar value of the amount involved in the related person transaction;
the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
whether the transaction was undertaken in the ordinary course of our business;
whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party; and
the purpose of, and the potential benefits to us of, the transaction.

The committee may approve or ratify the transaction only if the committee determines that, under all of the circumstances, the transaction is in ourthe Company’s best interests. The committee may impose any conditions on the related person transaction that it deems appropriate.

In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our board of directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:

interests arising solely from the related person’s position as an executive officer of another entity (whether or not the person is also a director of such entity) that is a participant in the transaction, where (i) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (ii) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction and (iii) the amount involved in the transaction is less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; and
a transaction that is specifically contemplated by provisions of ourthe Company’s charter or bylaws.

The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the compensation committee in the manner specified in its charter.

26

 

We did not have a written policy regarding the review and approval of related person transactions. Nevertheless, with respect to such transactions, it was our policy for our board of directors to consider the nature of and business reason for such transactions, how the terms of such transactions compared to those which might be obtained from unaffiliated third parties and whether such transactions were otherwise fair to and in the best interests of, or not contrary to, our best interests.

In addition, all related person transactions required prior approval, or later ratification, by our board of directors.

Indemnification Agreements

Our certificate of incorporation provides that we will indemnify our directors and officers to the fullest extent permitted by Nevada law. In addition, we have entered into indemnification agreements with our directors.

Stock Option Grants to Executive Officers and Directors

WeH-CYTE authorized and reserved for issuance under the Plan an aggregate of 2,650,0002,650 shares of our Common Stock. In 2017 and 2016, we granted an aggregate of 147,611 and 597,600, respectively, ofThe Company did not grant stock options to purchase common stock to executive officers and directors.under the plan in 2021. If any of the Awards granted under the Plan expire, terminate, or are forfeited for any reason before they have been exercised, vested or issued in full, the unused shares allocable to or subject to those expired, terminated or forfeited awards will become available for further grants under the Plan.

On April 1, 2021, the Board of Directors of the Company approved a non-qualified stock option agreement and granted an aggregate of 54,750,000 stock options to certain directors and officers of the Company having an exercise price of $0.07 per share and an expiration date of ten years from the date of grant (The “Options). The Director’s Options vest over a period of three years, and the Chief Executive Officer, Chief Financial Officer, and Chief Science Officer’s Options vest over a period of four years. These options are not included in the Company’s current stock option plan as they were granted outside of the Plan.

Policies and Procedures for Approving Related Person Transactions

OurThe Company’s policy and procedure with respect to any related person transaction between the Company and any related person requiring disclosure under Item 404(a) of regulation S-K under the Exchange Act, is that the Company’s audit committee reviews all such transactions.

This review covers any material transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which the Company was and is to be a participant, and a related party had or will have a direct or indirect material interest, including, purchases of goods or services by or from the related party or entities in which the related party has a material interest, indebtedness, guarantees of indebtedness and employment by the Company of a related party. The board of directors has adopted a written policy reflecting the policy and procedure identified above.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following is a summary of the fees billed to the Company by Frazier & Deeter, LLC for professional accounting services rendered for the fiscal yearsyear ended December 31, 20172022 and 2016.2021.

 Fiscal Year 2017  Fiscal Year 2016  Fiscal Year 2022  Fiscal Year 2021 
Audit fees $99,500  $108,500  $232,500  $237,500 
Tax fees  11,000   16,000  - - 
Other fees  2,500      -  - 
Total $113,000  $124,500  $232,500 $237,500 

Audit fees consist of fees billed for services rendered for the audit of our financial statements and review of our financial statements included in our quarterly reports on Form 10–Q. Other fees consist of comfort letter service fees.

Tax fees consist of fees billed for professional services related to the preparation of our U.S. federal and state income tax returns.

Policy on Pre-Approval by Audit Committee of Services Performed by Independent Registered Public Accounting Firms

The policy of the audit committee is to pre-approve all audit and permissible non-audit services to be performed by the independent public accounting firm during the fiscal year. The audit committee pre-approves services by authorizing specific projects within the categories outlined above. The audit committee’s charter delegates to its Chair the authority to address any requests for pre-approval of services between audit committee meetings, and the Chair must report any pre-approval decisions to the audit committee at its next scheduled meeting. All of the services related to the fees described above were approved by the audit committee pursuant to the pre-approval provisions set forth in the applicable SEC rules and the audit committee’s charter.

PART IV

27

 

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)Financial Statements. The following are filed as part of Item 15 of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm:
Frazier & Deeter, LLCF-2
Consolidated Balance SheetsF-3
Consolidated Statements of OperationsF-4
Consolidated Statements of Stockholders’ Equity (Deficit)F-5
Consolidated Statements of Cash FlowsF-6
Notes to Consolidated Financial StatementsF-7

SIGNATURES

(a)(3)Exhibits required by Item 601 of Regulation S-K. The information required by this Section (a)(3) of Item 15 of this Annual Report on Form 10-K is set forth on the exhibit index that follows the Signatures page hereof.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

MEDOVEX CORP.H-CYTE, Inc.
Date: March 30, 2018May 10, 2023By:

/s/ Jarrett GorlinMichael Yurkowsky

Jarrett Gorlin,Michael Yurkowsky
Chief Executive Officer

SignatureTitleDate
/s/ Jarrett GorlinMichael YurkowskyChief Executive Officer President and Director
Jarrett GorlinMichael Yurkowsky(Principal Executive Officer)March 30, 2018May 10, 2023
/s/ Charles FarraharJeremy DanielChief Financial Officer
Charles FarraharJeremy Daniel(Principal Financial and Accounting Officer)March 30, 2018
/s/ Jesse Crowne
Jesse CrowneChairman of the Board of DirectorsMarch 30, 2018
/s/ Clyde A. Hennies
Clyde A. HenniesDirectorMarch 30, 2018
/s/ Scott M.W. Haufe
Scott M.W. HaufeDirectorMarch 30, 2018
/s/ James R. Andrews
James R. AndrewsDirectorMarch 30, 2018
/s/ Ron Lawson
Ron LawsonDirectorMarch 30, 2018
/s/ Randal R. Betz
Randal R. BetzDirectorMarch 30, 2018
/s/ Larry Papasan
Larry PapasanDirectorMarch 30, 2018
/s/ John Thomas
John ThomasDirectorMarch 30, 2018
/s/ JonMogford
Jon MogfordDirectorMarch 30, 2018May 10, 2023

3528

 

EXHIBIT INDEX

Exhibits

Exhibit NumberDescription
2.13.1AgreementSecond Amended and PlanRestated Articles of Merger, dated SeptemberIncorporation (incorporated by reference to Definitive Information Statement on Form DEF 14C filed on June 16, 2013 among MedoveX Corp. f/k/a SpineZ Corp. and Debride Inc. (1)2020)
2.23.2AgreementAmended and Plan of Merger, dated March 9, 2015 among MedoveX Corp. and Streamline, Inc. (2)Restated By-Laws (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K filed on November 21, 2019)
2.33.3AssetCertificate of Designation of Series D Preferred Stock (incorporated by reference to Exhibit 3.2 to the current report on Form 8-K filed on November 21, 2019)
3.4Amended and Restated Certificate of Designation of Series B Preferred Stock (incorporated by reference to Exhibit 3.3 to the current report on Form 8-K filed on November 21, 2019)
10.1Secured Convertible Note and Warrant Purchase Agreement dated December 7, 2016, among MedoveX Corp., Streamline, Inc., Skytron, LLC and certain other parties thereto (3)April 17, 2020 (incorporated by reference to Exhibit 10.1 to the annual report on Form 10-K filed on April 22, 2020).
3.110.2ArticlesForm of Incorporation of Spinez Corp. (1)Secured Convertible Note dated April 17, 2020 (incorporated by reference to Exhibit 10.2 to the annual report on Form 10-K filed on April 22, 2020)
3.210.3CertificateForm of Warrant dated April 17, 2020 (incorporated by reference to Exhibit 10.3 to the annual report on Form 10-K filed on April 22, 2020)
10.4Security Agreement dated April 17, 2020 (incorporated by reference to Exhibit 10.4 to the annual report on Form 10-K filed on April 22, 2020)
10.5Intellectual Property Security Agreement dated April 17, 2020 (incorporated by reference to Exhibit 10.5 to the annual report on Form 10-K filed on April 22, 2020)
10.6Form of Subsidiary Guarantee dated April 17, 2020 (incorporated by reference to Exhibit 10.6 to the annual report on Form 10-K filed on April 22, 2020)
10.7Amendment Letter to William Horne Employment Agreement dated April 17, 2020 (incorporated by reference to Exhibit 10.7 to the annual report on Form 10-K filed on April 22, 2020)
10.8First Amendment to Hawes Secured Note dated April 17, 2020 (incorporated by reference to Exhibit 10.8 to the Articles of Incorporation of Spinez Corp. (changing the name of the company to MedoveX Corp. and Effecting the Reverse Split of the Outstanding Shares of MedoveX Corp.’s Common Stock).annual report on Form 10-K filed on April 22, 2020)
3.310.9Bylaws of MedoveX Corp. (1)
4.1ModificationSecurities Purchase Agreement dated November 15, 2019 by and between the Company and Steve Gorlin dated January 25, 2016. (5)FWHC LLC (incorporated by reference to Exhibit 10.1 to current report on Form 8-K filed on November 21, 2019)
4.210.10AmendmentRight of First Refusal and Co-Sale Agreement dated November 15, 2019 by and among the Company, FWHC LLC and certain key holders (incorporated by reference to Exhibit 10.2 to current report on Form 8-K filed on November 21, 2019)
10.11Voting Agreement dated November 15, 2019 by and among the ModificationCompany, FWHC and certain key holders (incorporated by reference to Exhibit 10.3 to current report on Form 8-K filed on November 21, 2019)
10.12Investors’ Rights Agreements dated November 15, 2019 by and among the Company, FWHC and certain key holders (incorporated by reference to Exhibit 10.4 to current report on Form 8-K filed on November 21, 2019)
10.13Services Agreement dated November 18, 2019 by and between the Company and Steve Gorlin dated February 16, 2016. (6)Rion, LLC (incorporated by reference to Exhibit 10.5 to current report on Form 8-K filed on November 21, 2019)
4.310.14Form of Standby Purchase Agreement (incorporated by reference to Registration Statement on Form S-1 filed on July 2, 2020)
10.15Second Amendment to the ModificationHorne Employment Agreement (incorporated by and between the Company and Steve Gorlin dated March 25, 2016. (7)reference to Exhibit 10.1 to current report on Form 8-K filed on August 3, 2020)
4.414ThirdCode of Business Conduct and Ethics (incorporated by reference to Exhibit 14 to Amendment No. 1 to the Modification Agreement by and between the Company and Steve Gorlin dated November 1, 2016 (7)Registration Statement on Form S-1/A filed on October 7, 2014)
4.521Fourth Amendment to the Modification Agreement by and between the Company and Steve Gorlin dated November 30, 2016 (8)
10.12013 Stock Incentive Plan. (1)
10.2Employment Agreement between MedoveX Corp. and Jarrett Gorlin dated October 14, 2013. (1)
10.3Employment Agreement between MedoveX Corp. and Patrick Kullmann dated October 14, 2013. (1)
10.4Employment Agreement between MedoveX Corp. and Charlie Farrahar dated October 14, 2013. (1)
10.5Employment Agreement between MedoveX Corp. and Dennis Moon dated November 11, 2013. (1)
10.6Contribution and Royalty Agreement between MedoveX and Scott W. Haufe dated January 31, 2013. (1)
10.7Co-Development Agreement between MedoveX Corp. and Dr. James Andrews dated September 30, 2013. (1)
10.8Consulting Agreement between MedoveX Corp. and Robb Knie dated December 2, 2013. (1)
10.9Engineering Services Agreement between MedoveX Corp. and Devicix, LLC dated November 25, 2013. (1)
10.10Form of Indemnification Agreement. (1)
10.11Promissory note issued on November 9, 2015 in favor of Steve Gorlin
10.12Warrant issued on November 9, 2015 to Steve Gorlin
10.13Form of Common Stock Purchase Warrant (9)
10.14Form of Unit Purchase Agreement between MedoveX Corp. and Investors (10)
10.15Form of Registration Rights Agreement between MedoveX Corp. and Investors (10)
10.16Private Placement Memorandum Supplement dated April 18, 2016 (10)
10.17Form of Warrant (11)
10.18Form of Unit Purchase Agreement (11)
10.19Form of Registration Rights Agreement (11)
10.20Form of Note (12)
10.21Form of Warrant (12)
10.22Form of Security Agreement (12)
10.23Form of Warrant (4)
10.24Form of Unit Purchase Agreement (4)
10.25Form of Registration Rights Agreement (4)

10.26Form of Common Stock Purchase Warrant issued by MedoveX Corporation to each of the Investors (13)
10.27Form of Securities Purchase Agreement, by and between the Company and Investors (13)
10.28Consulting Agreement, by and between MedoveX Corp. and CG# Consulting LLC, dated February 2, 2018 (14)
10.29Form of Securities Purchase Agreement, by and between the Company and Investors (15)
10.30Form of Warrant issued by MedoveX Corp. to each of the Investors (15)
14Business and Code of Ethics of MedoveX Corp. (1)
21.1Subsidiaries of MedoveX Corp. *the Registrant (incorporated by reference to Exhibit 21 to Registration Statement on Form S-1 filed on July 2, 2020)
24.131.1Power of Attorney (included on signature page).*
31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2Certification of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

(*)Filed herewith
(1)Incorporated by reference herein from the Registration Statement on Form S-1/A filed on September 8, 2014
(2)Incorporated by reference herein from the Current Report on Form 8-K filed on March 11, 2015.
(3)Incorporated by reference herein from the Current Report on Form 8-K filed on December 12, 2016.
(4)Incorporated by reference herein from the Current Report on Form 8-K filed on February 14, 2017.
(5)Incorporated by reference herein from the Current Report on Form 8-K filed on January 25, 2016.
(6)Incorporated by reference herein from the Current Report on Form 8-K filed on February 17, 2017.
(7)Incorporated by reference herein from the Current Report on Form 8-K filed on November 4, 2016
(8)Incorporated by reference herein from the Current Report on Form 8-K filed on December 6, 2016
(9)Incorporated by reference herein from the Current Report on Form 8-K filed on April 25, 2016
(10)Incorporated by reference herein from the Current Report on Form 8-K filed on May 5, 2016
(11)Incorporated by reference herein from the Current Report on Form 8-K filed on August 8, 2016
(12)Incorporated by reference herein from the Current Report on Form 8-K filed on September 19, 2016
(13)Incorporated by reference herein from the Current Report on Form 8-K filed on July 14, 2017
(14)Incorporated by reference herein from the Current Report on Form 8-K filed on February 6, 2018
(15)Incorporated by reference herein from the Current Report on Form 8-K filed on March 1, 2018
(1)Incorporated by reference herein from the Registration Statement on Form S-1/A filed on December 9, 2014.
(2)Incorporated by reference herein from the Current Report on Form 8-K filed on March 11, 2015.
(3)Incorporated by reference herein from the Current Report on Form 8-K filed on January 25, 2016.
(4)Incorporated by reference herein from the Current Report on Form 8-K filed on February 17, 2016.
(*)Filed herewith

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