UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[ ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended September 30, 2017March 31, 2022
Commission File No. 0-22179
GUIDED THERAPEUTICS, INC.
(Exact Name of Registrant as Specified in Its Charter)
GUIDED THERAPEUTICS, INC. |
(Exact Name of Registrant as Specified in Its Charter) |
Delaware | 58-2029543 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
5835 Peachtree Corners East, Suite B
Norcross, Georgia 30092
(Address of principal executive offices) (Zip Code)
(770) 242-8723
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes [X] No[ ]☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13 (a) of the Exchange Act. [ ]☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.
Yes [ ]☐ No [X]☒
As of November 7, 2017,May 10, 2022, the registrant had 19,453,46927,568,698 shares of commonCommon Stock, $0.001 par value per share, outstanding.
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
INDEX
PART I — FINANCIAL INFORMATION
Page | ||||
3 | ||||
3 | ||||
Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (Unaudited) | 4 | |||
5 | ||||
7 | ||||
Notes to | 8 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 | |||
34 | ||||
36 | ||||
38 | ||||
35 | ||||
37 | ||||
39 | ||||
39 | ||||
40 | ||||
40 | ||||
Unregistered | 40 | |||
40 | ||||
Item 4. | Mine Safety Disclosures | 40 | ||
Item 5. | Other Information | 40 | ||
40 | ||||
41 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited (in Thousands) | ||||||||
ASSETS | September 30, 2017 | December 31, 2016 | ||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 74 | $ | 14 | ||||
Accounts receivable, net of allowance for doubtful accounts of $244 and $279 at September 30, 2017 and December 31, 2016, respectively | — | — | ||||||
Inventory, net of reserves of $409 and $278, at September 30, 2017 and December 31, 2016, respectively | 577 | 773 | ||||||
Other current assets | 179 | 259 | ||||||
Total current assets | 830 | 1,046 | ||||||
Property and equipment, net | 56 | 126 | ||||||
Other assets, net of reserve of $293 at September 30, 2017 | 19 | 320 | ||||||
Total noncurrent assets | 75 | 446 | ||||||
TOTAL ASSETS | $ | 905 | $ | 1,492 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
CURRENT LIABILITIES: | ||||||||
Notes payable in default, including related parties | $ | 689 | $ | 1,008 | ||||
Short-term notes payable, including related parties | 820 | 197 | ||||||
Accounts payable | 2,965 | 2,600 | ||||||
Convertible notes in default | 2,322 | 2,361 | ||||||
Convertible notes payable | 814 | 468 | ||||||
Accrued liabilities | 3,650 | 2,670 | ||||||
Deferred revenue | 156 | 34 | ||||||
Total current liabilities | 11,416 | 9,338 | ||||||
Warrants at fair value | 1,834 | 1,420 | ||||||
TOTAL LIABILITIES | 13,250 | 10,758 | ||||||
COMMITMENTS & CONTINGENCIES (Note 7)
STOCKHOLDERS’ DEFICIT: | ||||||||
Series C convertible preferred stock, $.001 par value; 9.0 shares authorized, 1.2 and 1.6 shares issued and outstanding as of September 30, 2017 and December 31, 2016, (Liquidation preference of $1,177 and $1,643 at September 30, 2017 and December 31, 2016, respectively) | 431 | 601 | ||||||
Series C1 convertible preferred stock, $.001 par value; 20.3 shares authorized, 4.3 shares issued and outstanding as of September 30, 2017 and December 31, 2016 (Liquidation preference of $4,312 at September 30, 2017 and December 31, 2016) | 701 | 701 | ||||||
Common stock, $.001 Par value; 1,000,000 shares authorized, 9,253 and 669 shares issued and outstanding as of September, 30 2017 and December 31, 2016, respectively | 751 | 742 | ||||||
Additional paid-in capital | 117,223 | 116,380 | ||||||
Treasury stock, at cost | (132 | ) | (132 | ) | ||||
Accumulated deficit | (131,319 | ) | (127,558 | ) | ||||
TOTAL STOCKHOLDERS’ DEFICIT | (12,345 | ) | (9,266 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 905 | $ | 1,492 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements. | ||||||||
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSBALANCE SHEETS
(Unaudited, in Thousands)thousands)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, | FOR THE NINE MONTHS ENDED SEPTEMBER 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
REVENUE: | ||||||||||||||||
Sales – devices and disposables | $ | 33 | $ | 95 | $ | 137 | $ | 486 | ||||||||
Cost of goods sold | 97 | 85 | 195 | 185 | ||||||||||||
Gross (loss) profit | (64 | ) | 10 | (58 | ) | 301 | ||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Research and development | 69 | 87 | 251 | 525 | ||||||||||||
Sales and marketing | 37 | 92 | 187 | 295 | ||||||||||||
General and administrative | 1,169 | 510 | 1,894 | 2,187 | ||||||||||||
Total operating expenses | 1,275 | 689 | 2,332 | 3,007 | ||||||||||||
Operating loss | (1,339 | ) | (679 | ) | (2,390 | ) | (2,706 | ) | ||||||||
OTHER INCOME (EXPENSES): | ||||||||||||||||
Other income | 3 | 24 | 18 | 67 | ||||||||||||
Interest expense | (268 | ) | (226 | ) | (814 | ) | (1,597 | ) | ||||||||
Change in fair value of warrants | (761 | ) | 670 | (359 | ) | 2,276 | ||||||||||
Total other income (expenses) | (1,026 | ) | 468 | (1,155 | ) | 746 | ||||||||||
LOSS BEFORE INCOME TAXES | (2,365 | ) | (211 | ) | (3,545 | ) | (1,960 | ) | ||||||||
PROVISION FOR INCOME TAXES | — | — | — | — | ||||||||||||
NET LOSS | $ | (2,365 | ) | $ | (211 | ) | $ | (3,545 | ) | (1,960 | ) | |||||
PREFERRED STOCK DIVIDENDS | (52 | ) | (179 | ) | (216 | ) | (941 | ) | ||||||||
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | (2,417 | ) | $ | (390 | ) | $ | (3,761 | ) | (2,901 | ) | |||||
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS | ||||||||||||||||
BASIC | $ | (0.35 | ) | $ | (1.36 | ) | $ | (1.43 | ) | (25.52 | ) | |||||
DILUTED | $ | (0.35 | ) | $ | (1.36 | ) | $ | (1.43 | ) | (25.52 | ) | |||||
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||||||||||
BASIC | 6,884 | 283 | 2,632 | 114 | ||||||||||||
DILUTED | 6,884 | 283 | 2,632 | 114 | ||||||||||||
|
| March 31, |
|
| December 31, |
| ||
|
| 2022 |
| 2021 |
| |||
|
| (unaudited) |
|
|
|
| ||
ASSETS |
| |||||||
|
|
|
|
|
|
| ||
Current Assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 725 |
|
| $ | 643 |
|
Accounts receivable, net of allowance for doubtful accounts of $126 at March 31, 2022 and December 31, 2021 |
|
| 39 |
|
|
| 46 |
|
Inventory, net of reserves of $785 at March 31, 2022 and December 31, 2021 |
|
| 570 |
|
|
| 571 |
|
Other current assets |
|
| 453 |
|
|
| 377 |
|
Total current assets |
|
| 1,787 |
|
|
| 1,637 |
|
|
|
|
|
|
|
|
|
|
Non-Current Assets: |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 28 |
|
|
| 14 |
|
Operating lease right-of-use assets, net of amortization |
|
| 355 |
|
|
| 372 |
|
Other assets |
|
| 17 |
|
|
| 17 |
|
Total non-current assets |
|
| 400 |
|
|
| 403 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 2,187 |
|
| $ | 2,040 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 2,476 |
|
| $ | 2,362 |
|
Accounts payable, related parties |
|
| 80 |
|
|
| 87 |
|
Accrued liabilities |
|
| 1,228 |
|
|
| 1,768 |
|
Deferred revenue |
|
| 514 |
|
|
| 337 |
|
Current portion of lease liability |
|
| 70 |
|
|
| 67 |
|
Current portion of long-term debt |
|
| 67 |
|
|
| 88 |
|
Current portion of long-term debt, related parties |
|
| 27 |
|
|
| 0 |
|
Short-term notes payable |
|
| 12 |
|
|
| 48 |
|
Short-term notes payable, related parties |
|
| 31 |
|
|
| 40 |
|
Convertible notes payable in default |
|
| 161 |
|
|
| 161 |
|
Short-term convertible notes payable |
|
| 745 |
|
|
| 736 |
|
Derivative liability |
|
| 38 |
|
|
| 0 |
|
Total current liabilities |
|
| 5,449 |
|
|
| 5,694 |
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities |
|
|
|
|
|
|
|
|
Long-term lease liabilities |
|
| 307 |
|
|
| 325 |
|
Derivative liability |
|
| 0 |
|
|
| 32 |
|
Long-term convertible debt |
|
| 852 |
|
|
| 820 |
|
Long-term debt |
|
| 0 |
|
|
| 22 |
|
Long-term debt, related parties |
|
| 568 |
|
|
| 592 |
|
Total long-term liabilities |
|
| 1,727 |
|
|
| 1,791 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 7,176 |
|
|
| 7,485 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C convertible preferred stock, $0.001 par value; 9.0 shares authorized, 0.3 shares issued and outstanding as of March 31, 2022 and December 31, 2021. Liquidation preference of $286 at March 31, 2022 and December 31, 2021. |
|
| 105 |
|
|
| 105 |
|
Series C1 convertible preferred stock, $0.001 par value; 20.3 shares authorized, 1.0 shares issued and outstanding as of March 31, 2022 and December 31, 2021. Liquidation preference of $1,049 at March 31, 2022 and December 31, 2021. |
|
| 170 |
|
|
| 170 |
|
Series C2 convertible preferred stock, $0.001 par value; 5,000 shares authorized, 3.3 shares issued and outstanding as of March 31, 2022 and December 31, 2021. Liquidation preference of $3,263 at March 31, 2022 and December 31, 2021. |
|
| 531 |
|
|
| 531 |
|
Series D convertible preferred stock, $0.001 par value; 6.0 shares authorized, 0.8 shares issued and outstanding as of March 31, 2022 and December 31, 2021. Liquidation preference of $763 at March 31, 2022 and December 31, 2021, respectively. |
|
| 276 |
|
|
| 276 |
|
Series E convertible preferred stock, $0.001 par value; 5.0 shares authorized, 1.0 and 1.7 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively. Liquidation preference of $968 and $1,736 at March 31, 2022 and December 31, 2021, respectively. |
|
| 914 |
|
|
| 1,639 |
|
Series F convertible preferred stock, $0.001 par value; 1.5 shares authorized, 1.4 shares issued and outstanding as of March 31, 2022 and December 31, 2021. Liquidation preference of $1,411 and $1,426 at March 31, 2022 and December 31, 2021, respectively. |
|
| 1,174 |
|
|
| 1,187 |
|
Series F-2 convertible preferred stock, $0.001 par value; 5.0 shares authorized, 3.2 shares issued and outstanding as of March 31, 2022 and December 31, 2021. Liquidation preference of $3,237 at March 31, 2022 and December 31, 2021. |
|
| 2,963 |
|
|
| 2,963 |
|
Series G convertible preferred stock, $0.001 par value; 1,000 shares authorized, nil shares issued and outstanding as of March 31, 2022 and December 31, 2021. Liquidation preference was nil at March 31, 2022 and December 31, 2021. |
|
| 0 |
|
|
| 0 |
|
Common stock, $0.001 par value; 500,000 shares authorized, 22,316 and 13,673 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively |
|
| 3,410 |
|
|
| 3,403 |
|
Additional paid-in capital |
|
| 129,042 |
|
|
| 126,800 |
|
Treasury stock at cost |
|
| (132 | ) |
|
| (132 | ) |
Accumulated deficit |
|
| (143,442 | ) |
|
| (142,387 | ) |
|
|
|
|
|
|
|
|
|
Total stockholders’ deficit |
|
| (4,989 | ) |
|
| (5,445 | ) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| $ | 2,187 |
|
| $ | 2,040 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
GUIDED THERAPEUTICS INC. AND SUBSIDIARY | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited, in Thousands) | ||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, | ||||||||
2017 | 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (3,545 | ) | $ | (1,960 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Bad debt (recovery) expense | 298 | 4 | ||||||
Depreciation | 77 | 148 | ||||||
Amortization of debt issuance costs and discounts | 196 | 930 | ||||||
Stock based compensation | 56 | 72 | ||||||
Change in fair value of warrants | 359 | (2,276 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Inventory | 196 | (40 | ) | |||||
Accounts receivable | (89 | ) | (53 | ) | ||||
Other current assets | 80 | 317 | ||||||
Other assets | 300 | 47 | ||||||
Accounts payable | 366 | 626 | ||||||
Deferred revenue | 122 | (148 | ) | |||||
Accrued liabilities | 1,103 | 728 | ||||||
Total adjustments | 3,064 | 355 | ||||||
Net cash used in operating activities | (481 | ) | (1,605 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from debt financing, net of discounts and debt issuance costs | 746 | 1,719 | ||||||
Payments made on notes payable | (205 | ) | (145 | ) | ||||
Net cash provided by financing activities | 541 | 1,574 | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 60 | (31 | ) | |||||
CASH AND CASH EQUIVALENTS, beginning of year | 14 | 35 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 74 | $ | 4 | ||||
SUPPLEMENTAL SCHEDULE OF: | ||||||||
Cash paid for: | ||||||||
Interest | $ | 1 | $ | 62 | ||||
NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Issuance of common stock as debt repayment | $ | 185 | $ | 251 | ||||
Dividends on preferred stock | $ | 216 | $ | 941 | ||||
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Sales - devices and disposables |
| $ | 5 |
|
| $ | 0 |
|
Cost of goods sold |
|
| 1 |
|
|
| 0 |
|
Gross profit |
|
| 4 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
| 21 |
|
|
| 16 |
|
Sales and marketing |
|
| 40 |
|
|
| 36 |
|
General and administrative |
|
| 386 |
|
|
| 771 |
|
Total operating expenses |
|
| 447 |
|
|
| 823 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (443 | ) |
|
| (823 | ) |
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
Interest expense |
|
| (101 | ) |
|
| (141 | ) |
Change in fair value of derivative liability |
|
| (6 | ) |
|
| (88 | ) |
Gain from extinguishment of debt |
|
| 41 |
|
|
| 87 |
|
Change in fair value of warrants |
|
| 0 |
|
|
| 448 |
|
Other expenses |
|
| 2 |
|
|
| 0 |
|
Total other income (expense) |
|
| (64 | ) |
|
| 306 |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
| (507 | ) |
|
| (517 | ) |
Provision for income taxes |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| (507 | ) |
|
| (517 | ) |
Preferred stock dividends |
|
| (548 | ) |
|
| (55 | ) |
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS |
| $ | (1,055 | ) |
| $ | (572 | ) |
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS |
|
|
|
|
|
|
|
|
Basic |
| $ | (0.05 | ) |
| $ | (0.04 | ) |
Diluted |
| $ | (0.05 | ) |
| $ | (0.04 | ) |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
| 20,683 |
|
|
| 13,172 |
|
Diluted |
|
| 20,683 |
|
|
| 13,172 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2022
(unaudited, in thousands)
|
| Preferred Stock |
|
| Preferred Stock |
|
| Preferred Stock |
|
| Preferred Stock |
| ||||||||||||||||||||
Series C | Series C1 | Series C2 | Series D | |||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
| ||||||||
Balance at December 31, 2021 |
|
| - |
|
| $ | 105 |
|
|
| 1 |
|
| $ | 170 |
|
|
| 3 |
|
| $ | 531 |
|
|
| 1 |
|
| $ | 276 |
|
Common stock warrants exercised |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Issuance of common stock for payment of Series D preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Issuance of common stock for payment of Series E preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Issuance of common stock for payment of Series F preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Issuance of common stock for payment of Series F-2 preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Issuance of common stock for payment of interest |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Issuance of common stock for Series F and Series F-2 one-time 15% dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Conversion of Series E preferred stock to common stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Conversion of Series F preferred stock to common stock |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Stock-based compensation |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Expense for warrants issued to consultants |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Accrued preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Balance at March 31, 2022 |
|
| - |
|
| $ | 105 |
|
|
| 1 |
|
| $ | 170 |
|
|
| 3 |
|
| $ | 531 |
|
|
| 1 |
|
| $ | 276 |
|
|
| Preferred Stock |
|
| Preferred Stock |
|
| Preferred Stock |
| |||||||||||||||
Series E | Series F | Series F2 | ||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
| ||||||
Balance at December 31, 2021 |
|
| 2 |
|
| $ | 1,639 |
|
|
| 1 |
|
| $ | 1,187 |
|
|
| 3 |
|
| $ | 2,963 |
|
Common stock warrants exercised |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Issuance of common stock for payment of Series D preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
Issuance of common stock for payment of Series E preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Issuance of common stock for payment of Series F preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Issuance of common stock for payment of Series F-2 preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
Issuance of common stock for payment of interest |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
Issuance of common stock for Series F and Series F-2 one-time 15% dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Conversion of Series E preferred stock to common stock |
|
| (1 | ) |
|
| (725 | ) |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Conversion of Series F preferred stock to common stock |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| (13 | ) |
|
| - |
|
|
| - |
|
Stock-based compensation |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expense for warrants issued to consultants |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Accrued preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Balance at March 31, 2022 |
|
| 1 |
|
| $ | 914 |
|
|
| 1 |
|
| $ | 1,174 |
|
|
| 3 |
|
| $ | 2,963 |
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Common Stock |
|
| Paid-In |
|
| Treasury |
|
| Accumulated |
|
|
| ||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Stock |
|
| Deficit |
|
| Total |
| ||||||
Balance at December 31, 2021 |
|
| 13,673 |
|
| $ | 3,403 |
|
| $ | 126,800 |
|
| $ | (132 | ) |
| $ | (142,387 | ) |
| $ | (5,445 | ) |
Common stock warrants exercised |
|
| 4,478 |
|
|
| 4 |
|
|
| 712 |
|
|
| 0 |
|
|
| 0 |
|
|
| 716 |
|
Issuance of common stock for payment of Series D preferred dividends |
|
| 23 |
|
|
| 0 |
|
|
| 15 |
|
|
| 0 |
|
|
| 0 |
|
|
| 15 |
|
Issuance of common stock for payment of Series E preferred dividends |
|
| 13 |
|
|
| 0 |
|
|
| 8 |
|
|
| 0 |
|
|
| 0 |
|
|
| 8 |
|
Issuance of common stock for payment of Series F preferred dividends |
|
| 158 |
|
|
| - |
|
|
| 105 |
|
|
| 0 |
|
|
| 0 |
|
|
| 105 |
|
Issuance of common stock for payment of Series F-2 preferred dividends |
|
| 96 |
|
|
| 0 |
|
|
| 64 |
|
|
| 0 |
|
|
| 0 |
|
|
| 64 |
|
Issuance of common stock for payment of interest |
|
| 121 |
|
|
| 0 |
|
|
| 81 |
|
|
| 0 |
|
|
| 0 |
|
|
| 81 |
|
Issuance of common stock for Series F and Series F-2 one-time 15% dividends |
|
| 624 |
|
|
| 0 |
|
|
| 399 |
|
|
| 0 |
|
|
| 0 |
|
|
| 399 |
|
Conversion of Series E preferred stock to common stock |
|
| 3,070 |
|
|
| 3 |
|
|
| 722 |
|
|
| 0 |
|
|
| 0 |
|
|
| - |
|
Conversion of Series F preferred stock to common stock |
|
| 60 |
|
|
| 0 |
|
|
| 13 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Stock-based compensation |
|
| - |
|
|
| 0 |
|
|
| 44 |
|
|
| 0 |
|
|
| 0 |
|
|
| 44 |
|
Expense for warrants issued to consultants |
|
| - |
|
|
| 0 |
|
|
| 79 |
|
|
| 0 |
|
|
| 0 |
|
|
| 79 |
|
Accrued preferred dividends |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (548 | ) |
|
| (548 | ) |
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (507 | ) |
|
| (507 | ) |
Balance at March 31, 2022 |
|
| 22,316 |
|
| $ | 3,410 |
|
| $ | 129,042 |
|
| $ | (132 | ) |
| $ | (143,442 | ) |
| $ | (4,989 | ) |
The accompanying notes are an integral part of these consolidated statements.
5 |
Table of Contents |
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(unaudited, in thousands)
Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | |||||||||||||||||||||||||||||
Series C | Series C1 | Series C2 | Series D | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance at December 31, 2020 | - | $ | 105 | 1 | $ | 170 | 3 | $ | 531 | 1 | $ | 276 | ||||||||||||||||||||
Series F preferred offering | - | 0 | - | - | - | - | - | - | ||||||||||||||||||||||||
Conversion of debt and expenses for Series F preferred stock | - | - | - | - | - | 0 | - | 0 | ||||||||||||||||||||||||
Issuance of warrants to finders | - | 0 | - | 0 | - | - | - | - | ||||||||||||||||||||||||
Series G preferred offering | - | - | - | - | - | - | - | 0 | ||||||||||||||||||||||||
Issuance of common stock for payment of Series D preferred dividends | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Issuance of warrants to consultants | - | - | - | - | - | 0 | - | 0 | ||||||||||||||||||||||||
Conversions of warrants from liability to equity | - | 0 | - | 0 | - | 0 | - | 0 | ||||||||||||||||||||||||
Stock-based compensation | - | 0 | - | 0 | - | 0 | - | 0 | ||||||||||||||||||||||||
Accrued preferred dividends | - | - | - | - | - | 0 | - | 0 | ||||||||||||||||||||||||
Net loss | - | 0 | - | 0 | - | 0 | - | 0 | ||||||||||||||||||||||||
Balance at March 31, 2021 | - | $ | 105 | 1 | $ | 170 | 3 | $ | 531 | 1 | $ | 276 |
|
| Preferred Stock |
|
| Preferred Stock |
|
| Preferred Stock |
| |||||||||||||||
Series E | Series F | Series G | ||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
| ||||||
Balance at December 31, 2020 |
|
| 2 |
|
| $ | 1,639 |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | 0 |
|
Series F preferred offering |
|
| - |
|
|
| 0 |
|
|
| 2 |
|
|
| 1,667 |
|
|
| - |
|
|
| 0 |
|
Conversion of debt and expenses for Series F preferred stock |
|
| - |
|
|
| 0 |
|
|
| 2 |
|
|
| 2,559 |
|
|
| - |
|
|
| 0 |
|
Issuance of warrants to finders |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Series G preferred offering |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 153 |
|
|
| 0 |
|
Issuance of common stock for payment of Series D preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Issuance of warrants to consultants |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Conversions of warrants from liability to equity |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Stock-based compensation |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Accrued preferred dividends |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Balance at March 31, 2021 |
|
| 2 |
|
| $ | 1,639 |
|
|
| 4 |
|
| $ | 4,226 |
|
|
| 153 |
|
| $ | 0 |
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
|
| ||||||||||
|
| Common Stock |
|
| Paid-In |
|
| Treasury |
|
| Accumulated |
|
|
| ||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Stock |
|
| Deficit |
|
| Total | |||||||
Balance at December 31, 2020 |
|
| 13,138 |
|
| $ | 3,403 |
|
| $ | 123,109 |
|
| $ | (132 | ) |
| $ | (139,956 | ) |
| $ | (10,855 | ) |
Series F preferred offering |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,667 |
|
Conversion of debt and expenses for Series F preferred stock |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
| 2,559 |
|
Issuance of warrants to finders |
|
| - |
|
|
| 0 |
|
|
| 151 |
|
|
| - |
|
|
| - |
|
|
| 151 |
|
Series G preferred offering |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Issuance of common stock for payment of Series D preferred dividends |
|
| 42 |
|
|
| 0 |
|
|
| 14 |
|
|
| 0 |
|
|
| 0 |
|
|
| 14 |
|
Issuance of warrants to consultants |
|
| - |
|
|
| 0 |
|
|
| 398 |
|
|
| 0 |
|
|
| 0 |
|
|
| 398 |
|
Conversions of warrants from liability to equity |
|
| - |
|
|
| 0 |
|
|
| 1,755 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,755 |
|
Stock-based compensation |
|
| - |
|
|
| 0 |
|
|
| 62 |
|
|
| 0 |
|
|
| 0 |
|
|
| 62 |
|
Accrued preferred dividends |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (55 | ) |
|
| (55 | ) |
Net loss |
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (517 | ) |
|
| (517 | ) |
Balance at March 31, 2021 |
|
| 13,180 |
|
| $ | 3,403 |
|
| $ | 125,489 |
|
| $ | (132 | ) |
| $ | (140,528 | ) |
| $ | (4,821 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
6 |
Table of Contents |
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
|
| Three Months Ended |
| |||||
March 31, |
| |||||||
|
| 2022 |
|
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | (507 | ) |
| $ | (517 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Amortization of debt issuance costs and discounts |
|
| 41 |
|
|
| 64 |
|
Amortization of beneficial conversion feature |
|
| 0 |
|
|
| 8 |
|
Stock based compensation |
|
| 44 |
|
|
| 62 |
|
Change in fair value of warrants |
|
| 0 |
|
|
| (448 | ) |
Change in fair value of derivatives |
|
| 6 |
|
|
| 88 |
|
Amortization of lease right-of-use-asset |
|
| 16 |
|
|
| 0 |
|
Expense for warrants issued to consultants |
|
| 79 |
|
|
| 398 |
|
Gain from forgiveness of debt |
|
| (41 | ) |
|
| (87 | ) |
Other non-cash expenses (income) |
|
| 6 |
|
|
| 0 |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 6 |
|
|
| 0 |
|
Inventory |
|
| 1 |
|
|
| (1 | ) |
Other current assets |
|
| (76 | ) |
|
| 46 |
|
Other non-current assets |
|
| 0 |
|
|
| (18 | ) |
Accounts payable and accrued liabilities |
|
| 84 |
|
|
| 65 |
|
Lease liabilities |
|
| (15 | ) |
|
| 0 |
|
Deferred revenue |
|
| 177 |
|
|
| 20 |
|
NET CASH USED IN OPERATING ACTIVITIES |
|
| (179 | ) |
|
| (320 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (14 | ) |
|
| (1 | ) |
NET CASH USED FOR INVESTING ACTIVITIES |
|
| (14 | ) |
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from warrant exercises |
|
| 365 |
|
|
| 0 |
|
Payments made on notes payable |
|
| (90 | ) |
|
| (557 | ) |
Proceeds from Series F offering, net of costs |
|
| 0 |
|
|
| 1,818 |
|
Proceeds from Series G offering, net of costs |
|
| 0 |
|
|
| 125 |
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
| 275 |
|
|
| 1,386 |
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH |
|
| 82 |
|
|
| 1,065 |
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period |
|
| 643 |
|
|
| 182 |
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD |
| $ | 725 |
|
| $ | 1,247 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 6 |
|
| $ | 405 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE FOR NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Dividends on preferred stock |
| $ | 548 |
|
| $ | 55 |
|
Common stock issued for payment of interest |
| $ | 81 |
|
| $ | - |
|
Issuance of series F-2 preferred stock |
| $ | 0 |
|
| $ | 2,559 |
|
Issuance of warrants to finders in connection with Series F and Series F-2 preferred stock |
| $ | 0 |
|
| $ | 151 |
|
Common stock issued for payment of dividends |
| $ | 592 |
|
| $ | 14 |
|
Conversion of Series E Preferred Shares into Common Stock |
| $ | 725 |
|
| $ | 1,755 |
|
Conversion of Series F Preferred Shares into Common Stock |
| $ | 13 |
|
| $ | 0 |
|
The accompanying notes are an integral part of these consolidated financial statements.
7 |
Table of Contents |
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION, BACKGROUND, AND BASIS OF PRESENTATION
Organization
Guided Therapeutics, Inc. (formerly SpectRx, Inc.), together with its wholly owned subsidiary, InterScan, Inc. (formerly Guided Therapeutics, Inc.), collectively referred to herein as the “Company”, is a medical technology company focused on developing innovative medical devices that have the potential to improve healthcare. The Company’s primary focus is the continued commercialization of its LuViva non-invasive cervical cancer detection device and Backgroundextension of its cancer detection technology into other cancers, including esophageal. The Company’s technology, including products in research and development, primarily relates to biophotonics technology for the non-invasive detection of cancers.
A 1:800
During the year ended December 31, 2021, the Board simultaneously approved a 1-for-20 reverse stock split of all of the Company’s issued and outstandingour common stock was implemented onand decreased the total number of authorized common shares to 500,000,000. On November 7, 2016. As a result of18, 2021, the Company submitted an Issuer Company Related Action Notification regarding the reverse stock split every 800 shares of issued and outstanding common stock was converted into 1 share of common stock. All fractional shares created byto the Financial Industry Regulatory Authority (“FINRA”). FINRA has not yet declared an effective date for the reverse stock split were rounded tosplit. The Company will adjust the nearest whole share. The number of authorized shares available for future grant under its equity incentive plan and employee stock purchase plans and will also adjust the number of common stock did not change. Theoutstanding awards issued to reflect the effects of its reverse stock split decreased the Company’s issuedsplit. All historical share and outstanding shares of common stock from 453,694,400 shares to 570,707 shares as of that date. See Note 4, Stockholders’ Deficit. Unless otherwise specified, all per share amounts reflected throughout this report will be adjusted to reflect stock split at the time it becomes effective.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934. The December 31, 2021 balances reported herein are reported onderived from the audited consolidated financial statements for the year ended December 31, 2021. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.
All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a post-stock split basis,fair presentation of the Company as of September 30, 2017. On February 24, 2016,March 31, 2022 and December 31, 2021, and the Company had also implemented a 1:100 reverse stock splitconsolidated results of its issuedoperations and outstanding common stock.cash flows for the three-month periods ended March 31, 2022 and 2021 have been included.
The Company’s prospects must be considered in light of the substantial risks, expenses and difficulties encountered by entrants into the medical device industry. This industry is characterized by an increasing number of participants, intense competition and a high failure rate. The Company has experienced net losses since its inception and, as of September 30, 2017,March 31, 2022, it had an accumulated deficit of approximately $131.3$143.4 million. To date, the Company has engaged primarily in research and development efforts and the early stages of marketing its products. The Company may not be successful in growing sales for its products. Moreover, required regulatory clearances or approvals may not be obtained in a timely manner, or at all. The Company’s products may not ever gain market acceptance and the Company may not ever generate significant revenues or achieve profitability. The development and commercialization of the Company’s products requires substantial development, regulatory, sales and marketing, manufacturing and other expenditures. The Company expects operating losses to continue through at leastfor the end of 2017foreseeable future as it continues to expend substantial resources to complete development of its products, obtain regulatory clearances or approvals, build its marketing, sales, manufacturing and finance capabilities, and conduct further research and development.
Basis of Presentation
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The accompanying unaudited condensed consolidated financial statements included herein have been preparedCompany is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial reportingone reportable operating segment. The Company’s principal decision makers are the Chief Executive Officer and withits Chief Financial Officer. Management believes that its business operates as one reportable segment because: a) the instructions to Form 10-QCompany measures profit and Article 10 of Regulation S-X. Accordingly, theyloss as a whole; b) the principal decision makers do not include allreview information based on any operating segment; c) the Company does not maintain discrete financial information on any specific segment; d) the Company has not chosen to organize its business around different products and footnotes required by GAAP for complete financial statements. These statements reflect adjustments, all of which are of a normal, recurring nature,services, and which are, ine) the opinion of management, necessaryCompany has not chosen to present fairly the Company’s financial position as of September 30, 2017, results of operations for the three and nine months ended September 30, 2017 and 2016, and cash flows for the three and nine months ended September 30, 2017 and 2016. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results for a full fiscal year. Preparing financial statements requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2016.organize its business around geographic areas.
All information and footnote disclosures included in the consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
Going Concern
The Company’s consolidated financial statements have been prepared and presented on a basis assuming it will continue as a going concern. The factors below raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.
At September 30, 2017,March 31, 2022, the Company had a negative working capital of approximately $10.6$3.7 million, accumulated deficit of $131.3$143.4 million, and incurred a net loss including preferred dividends of $2.4$1.1 million for the quarterthree months then ended. Stockholders’ deficit totaled approximately $12.3$5.0 million at September 30, 2017,March 31, 2022, primarily due to recurring net losses from operations.
During the three-month period ended March 31, 2022, the Company raised $0.4 million of proceeds from warrant exercises. The Company will need to continue to raise capital in order to provide funding for its operations and deemed dividends on warrants and preferred stock, offset by proceeds from the exercise of warrants and proceeds from sales of stock.
The Company’s capital-raising efforts are ongoing.FDA approval process. If sufficient capital cannot be raised, during the first quarter of 2018, the Company will continue its plans of curtailing operations by reducing discretionary spending and staffing levels and attempting to operate by only pursuing activities for which it has external financial support. However, there can be no assurance that such external financial support will be sufficient to maintain even limited operations or that the Company will be able to raise additional funds on acceptable terms, or at all. In such a case, the Company might be required to enter into unfavorable agreements or, if that is not possible, be unable to continue operations, and to the extent practicable, liquidate and/or file for bankruptcy protection.
The Company had warrants exercisable for approximately 86.825.4 million shares of its common stock outstanding at September 30, 2017,March 31, 2022, with exercise prices ranging between $0.017$0.15 and $40,000$0.80 per share. Exercises of thesein-the-money warrants would generate a total of approximately $6.2$4.7 million in cash, assuming full exercise, although the Company cannot be assured that holders will exercise any warrants. Management may obtain additional funds through the public or private sale of debt or equity, and grants, if available.
2. SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies were set forth in the audited financial statements and notes thereto for the year ended December 31, 2016 included in its annual report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant areas where estimates are used include the allowance for doubtful accounts, inventory valuation and input variables for Black-Scholes, Monte Carlo simulations and binomial calculations. The Company uses the Monte Carlo simulations and binomial calculations in the calculation of the fair value of the warrant liabilities and the valuation of embedded conversion options and freestanding warrants.
Principles of ConsolidationAccounting Standard Updates
The accompanying consolidated financial statements include the accountsA variety of Guided Therapeutics, Inc.proposed or otherwise potential accounting standards are currently under consideration by standard-setting organizations and its wholly owned subsidiary. All intercompany transactions are eliminated.
Accounting Standard Updates
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, “Deferralcertain regulatory agencies. Because of the Effective Date”, which amends ASU 2014-09. As a result,tentative and preliminary nature of such proposed standards, management has not yet determined the effective date will beeffect, if any that the first quarterimplementation of fiscal year 2018 with early adoption permitted in the first quarter of fiscal year 2017. Subsequently, the FASB has issued the followingsuch proposed standards related to ASU 2014-09: ASU 2016-08, “Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” (“ASU 2016-08”); ASU 2016-10, “Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing,” (“ASU 2016-10”); ASU 2016-12, “Revenue from Contracts with Customers (Topic 606) Narrow-Scope Improvements and Practical Expedients,” (“ASU 2016-12”); and ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” (“ASU 2016-20”), which are intended to provide additional guidance and clarity to ASU 2014-09. The Company must adopt ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 along with ASU 2014-09 (collectively, the “New Revenue Standards”). The New Revenue Standards may be applied using one of two retrospective application methods: (1) a full retrospective approach for all periods presented, or (2) a modified retrospective approach that presents a cumulative effect as of the adoption date and additional required disclosures. The Company is evaluating the impact that adoption of this guidance willwould have on the determination or reporting of its financial results.
In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” (“ASU 2015-11”). ASU 2015-11 requires inventory be measured at the lower of cost and net realizable value and options that currently exist for market value be eliminated. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. ASU 2015-11 should be applied prospectively. The Company has adopted this guidance during the quarter ended September 30, 2017 on a prospective basis. The adoption of this guidance did not have a significant impact on the operating results for the period ended September 30, 2017.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” that requires lessees to recognize on the balance sheet the assets and liabilities associated with the rights and obligations created by those leases. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as finance or operating lease. The update is effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.
In March 2016, the FASB issued ASU 2016-05, “Derivatives and Hedging (Topic 815),” (“ASU 2016-05”). ASU 2016-05 provides guidance clarifying that novation of a derivative contract (i.e., a change in counterparty) in a hedge accounting relationship does not, in and of itself, require dedesignation of that hedge accounting relationship. The effective date will be the first quarter of fiscal year 2017, with early adoption permitted. The Company has adopted this guidance during the quarter ended March 31, 2017 on a prospective basis. The adoption of this guidance did not have a significant impact on the operating results for the period ended September 30, 2017.
In March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (Topic 815),” (“ASU 2016-06”). ASU 2016-06 simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by clarifying that an exercise contingency does not need to be evaluated to determine whether it relates to interest rates and credit risk in an embedded derivative analysis. The effective date will be the first quarter of fiscal year 2017, with early adoption permitted. The Company has adopted this guidance during the quarter ended March 31, 2017 on a prospective basis. The adoption of this guidance did not have a significant impact on the operating results for the period ended September 30, 2017.
In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting,” (“ASU 2016-09”). ASU 2016-09 is intended to simplify several aspects related to how share-based payments are accounted for and presented in the financial statements, such as requiring all income tax effects of awards to be recognized in the income statement when the awards vest or are settled and allowing a policy election to account for forfeitures as they occur. In addition, all related cash flows resulting from share-based payments will be reported as operating activities on the statement of cash flows. ASU 2016-09 could result in increased volatility of the Company’s provision for income taxes and earnings per share, depending on the Company’s share price at exercise or vesting of share-based awards compared to grant date. The effective date will be the first quarter of fiscal year 2017, with early adoption permitted. The Company has adopted this guidance during the quarter ended March 31, 2017 on a prospective basis. The adoption of this guidance did not have a significant impact on the operating results for the period ended September 30, 2017.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses,” (“ASU 2016-13”). ASU 2016-13 sets forth a “current expected credit loss” model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. The guidance in this new standard replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. The effective date will be the first quarter of fiscal year 2020. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments,” (“ASU 2016-15”). ASU 2016-15 reduces the existing diversity in practice in financial reporting by clarifying existing principles in ASC 230, “Statement of Cash Flows,” and provides specific guidance on certain cash flow classification issues. The effective date for ASU 2016-15 will be the first quarter of fiscal year 2018, with early adoption permitted. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) - Restricted Cash,” (“ASU 2016-18”). ASU 2016-18 requires a statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment. The effective date will be the first quarter of fiscal year 2020, with early adoption permitted in 2017. Adoption is not expected to have a material effect on the Company’s consolidated financial statements.
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Except as noted above, the guidance issued by the FASB during the current year is not expected to have a material effect on the Company’s consolidated financial statements.
Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be a cash equivalent.
Accounts Receivable
The Company performs periodic credit evaluations of its customers’distributors’ financial conditions and generally does not require collateral. The Company reviews all outstanding accounts receivable for collectability on a quarterly basis. An allowance for doubtful accounts is recorded for any amounts deemed uncollectable. Uncollectibility is determined based on the determination that a distributor will not be able to make payment and the time frame has exceeded one year. The Company does not accrue interest receivablereceivables on past due accounts receivable.
Concentrations of Credit Risk
The Company, from time to time during the years covered by these consolidated financial statements, may have bank balances in excess of its insured limits. Management has deemed this a normal business risk.
Revenue Recognition
Revenue from the sale of the Company’s products is recognized upon shipment of such products to its customers. The Company recognizes revenue from contracts on a straight-line basis, over the terms of the contract. The Company recognizes revenue from grants based on the grant agreement, at the time the expenses are incurred.
Significant Customers
During the nine months ended September 30, 2017 and 2016, all of the Company’s revenues were from four and three customers, respectively. Revenue from these customers totaled $136,750 and $369,000 for the nine months ended September 30, 2017 and 2016, respectively. All accounts receivable are fully reserved at September 30, 2017.
Inventory Valuation
All inventories are stated at lower of cost or net realizable value, with cost determined substantially on a “first-in, first-out” basis. Selling, general, and administrative expenses are not inventoried, but are charged to expense when incurred. At September 30, 2017As of March 31, 2022 and December 31, 2016,2021, our inventories were as follows (in thousands):follows:
|
| (in thousands) |
| |||||||||||||
September 30, | December 31, |
| March 31, 2022 |
| December 31, 2021 |
| ||||||||||
2017 | 2016 |
|
|
|
|
| ||||||||||
Raw materials | $ | 795 | $ | 795 |
| $ | 1,254 |
| $ | 1,255 |
| |||||
Work in process | 83 | 115 | ||||||||||||||
Work-in-progress |
| 69 |
| 69 |
| |||||||||||
Finished goods | 108 | 141 |
| 32 |
| 32 |
| |||||||||
Inventory reserve | (409 | ) | (278 | ) |
|
| (785 | ) |
|
| (785 | ) | ||||
Total | $ | 577 | $ | 773 | ||||||||||||
|
|
|
|
| ||||||||||||
Total inventory |
| $ | 570 |
|
| $ | 571 |
|
The company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold.
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Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years. Leasehold improvements are amortized at the shorter of the useful life of the asset or the remaining lease term. Depreciation and amortization expense isare included in general and administrative expense on the statement of operations. Expenditures for repairs and maintenance are expensed as incurred. Property and equipment are summarized as follows at September 30, 2017March 31, 2022 and December 31, 2016 (in thousands):2021:
|
| (in thousands) |
| |||||||||||||
September 30, | December 31, |
| March 31, 2022 |
| December 31, 2021 |
| ||||||||||
2017 | 2016 |
|
|
|
|
| ||||||||||
Equipment | $ | 1,378 | $ | 1,378 |
| $ | 1,049 |
| $ | 1,048 |
| |||||
Software | 740 | 740 |
| 652 |
| 652 |
| |||||||||
Furniture and fixtures | 124 | 124 |
| 41 |
| 41 |
| |||||||||
Leasehold Improvement | 199 | 199 | ||||||||||||||
Leasehold improvements |
| 12 |
| 12 |
| |||||||||||
Construction in progress |
|
| 21 |
|
|
| 8 |
| ||||||||
2,441 | 2,441 |
|
|
|
|
| ||||||||||
Less accumulated depreciation and amortization | (2,385 | ) | (2,315 | ) | ||||||||||||
Total | $ | 56 | $ | 126 | ||||||||||||
Subtotal |
| 1,775 |
| 1,761 |
| |||||||||||
Less accumulated depreciation |
|
| (1,747 | ) |
|
| (1,747 | ) | ||||||||
|
|
|
|
| ||||||||||||
Property, equipment and leasehold improvements, net |
| $ | 28 |
|
| $ | 14 |
|
Depreciation expense related to property and equipment for the three months ended March 31, 2022 and 2021 was not material.
Debt Issuance Costs
Debt issuance costs are capitalized and amortized over the term of the associated debt. Debt issuance costs are presented in the balance sheet as a direct deduction from the carrying amount of the that debt liability consistent with the debt discount.
Other Assets
Other assets primarily consist of short- and long-term deposits for various tooling inventory that are being constructed for the Company and deferred financing costs.
Patent Costs (Principally Legal Fees)
Costs incurred in filing, prosecuting, and maintaining patents are recurring, and expensed as incurred. Maintaining patents are expensed as incurred as the Company has not yet received U.S. FDA approval and recovery of these costs is uncertain. Such costs aggregated approximately $15,000 and $9,000were not material for the ninethree months ended September 30, 2017March 31, 2022 and 2016, respectively.2021.
Leases
A lease provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company determines if an arrangement is a lease at inception. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.
Where an operating lease contains extension options that the Company is reasonably certain to exercise, the extension period is included in the calculation of the right-of-use assets and lease liabilities.
The discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company utilizes its secured borrowing rate. Right-of-use assets include any lease payments required to be made prior to commencement and exclude lease incentives. Both right-of-use assets and lease liabilities exclude variable payments not based on an index or rate, which are treated as period costs. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants. See Note 7 – Commitments and Contingencies.
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Accrued Liabilities
Accrued liabilities as of March 31, 2022 and December 31, 2021 are summarized as follows (in thousands):follows:
September 30, 2017 | December 31, 2016 | |||||||
Accrued compensation | $ | 2,037 | $ | 1,656 | ||||
Accrued professional fees | 74 | 161 | ||||||
Deferred rent | — | 13 | ||||||
Accrued warranty | 44 | 58 | ||||||
Accrued vacation | 151 | 175 | ||||||
Accrued interest | 449 | — | ||||||
Accrued dividends | 316 | 296 | ||||||
Other accrued expenses | 579 | 311 | ||||||
Total | $ | 3,650 | $ | 2,670 |
|
| (in thousands) |
| |||||
| March 31, 2022 |
|
| December 31, 2021 |
| |||
|
|
|
|
|
|
| ||
Compensation |
| $ | 573 |
|
| $ | 621 |
|
Professional fees |
|
| 41 |
|
|
| 98 |
|
Stock Subscription Payable |
|
| - |
|
|
| 351 |
|
Interest |
|
| 232 |
|
|
| 261 |
|
Vacation |
|
| 42 |
|
|
| 39 |
|
Preferred dividends |
|
| 299 |
|
|
| 349 |
|
Other accrued expenses |
|
| 41 |
|
|
| 49 |
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 1,228 |
|
| $ | 1,768 |
|
Deferred Stock Subscription Payable
Cash received from investors for common stock shares that have not yet been issued is recorded as a liability, which is presented within Accrued Liabilities on the consolidated balance sheet.
Revenue Recognition
ASC 606, Revenue from Contracts with Customers, establishes a single and comprehensive framework which sets out how much revenue is to be recognized, and when. The core principle is that a vendor should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. Revenue will now be recognized by a vendor when control over the goods or services is transferred to the customer. In contrast, revenue-based revenue recognition around an analysis of the transfer of risks and rewards; this now forms one of a number of criteria that are assessed in determining whether control has been transferred. The application of the core principle in ASC 606 is carried out in five steps:
· | Step 1 – Identify the contract with a customer: a contract is defined as an agreement (including oral and implied), between two or more parties, that creates enforceable rights and obligations and sets out the criteria for each of those rights and obligations. The contract needs to have commercial substance and it is probable that the entity will collect the consideration to which it will be entitled. | |
· | Step 2 – Identify the performance obligations in the contract: a performance obligation in a contract is a promise (including implicit) to transfer a good or service to the customer. Each performance obligation should be capable of being distinct and is separately identifiable in the contract. | |
· | Step 3 – Determine the transaction price: transaction price is the amount of consideration that the entity can be entitled to, in exchange for transferring the promised goods and services to a customer, excluding amounts collected on behalf of third parties. | |
· | Step 4 – Allocate the transaction price to the performance obligations in the contract: for a contract that has more than one performance obligation, the entity will allocate the transaction price to each performance obligation separately, in exchange for satisfying each performance obligation. The acceptable methods of allocating the transaction price include adjusted market assessment approach, expected cost plus a margin approach, and the residual approach in limited circumstances. Discounts given should be allocated proportionately to all performance obligations unless certain criteria are met and reallocation of changes in standalone selling prices after inception is not permitted. | |
· | Step 5 – Recognize revenue as and when the entity satisfies a performance obligation: the entity should recognize revenue at a point in time, except if it meets any of the three criteria, which will require recognition of revenue over time: the entity’s performance creates or enhances an asset controlled by the customer, the customer simultaneously receives and consumes the benefit of the entity’s performance as the entity performs, and the entity does not create an asset that has an alternative use to the entity and the entity has the right to be paid for performance to date. |
The Company did not recognize material revenues during the three-month periods ended March 31, 2022 or 2021. The Company’s revenues do not require significant estimates or judgments. The Company is not party to contracts that include multiple performance obligations or material variable consideration.
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Contract Balances
The Company defers payments received as revenue until earned based on the related contracts on a straight-line basis, over the terms of the contract.and applying ASC 606 as required. As of September 30, 2017,March 31, 2022 and December 31, 2021, the Company has received prepayments for deviceshad $514,000 and disposables and$337,000 in deferred that revenue, in the amount of $156,000.respectively.
Significant Distributors
As of March 31, 2022, accounts receivable outstanding was $165,000, the outstanding amount was netted against a $126,000 allowance, leaving a balance of $39,000 which was from two distributors. As of December 31, 2021, accounts receivable outstanding was $172,000; the outstanding amount was netted against a $126,000 allowance, leaving a balance of $46,000, which was from two distributors.
Research and Development
Research and development expenses consist of expenditures for research conducted by the Company and payments made under contracts with consultants or other outside parties and costs associated with internal and contracted clinical trials. All research and development costs are expensed as incurred.
Income Taxes
The provision for income taxes is determined in accordance with ASC 740, “Income Taxes”. The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expense are expected to be settled in our income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company uses the liability method of accounting for income taxes. Under this method, deferredhas filed its 2021 federal and state corporate tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Management provides valuation allowances against the deferred tax assets for amounts that are not considered more likely than not to be realized.
returns. The Company is currentlyhas entered into an agreed upon payment plan with the IRS for delinquent withpayroll taxes. The Company has an established payment arrangement for its federal and applicable state tax returns filings. Some of the federal income tax returns are currently under examination by the U.S. Internal Revenue Service (“IRS”). None of the Company’sdelinquent state income tax returns are currently under review by state authorities.taxes with the State of Georgia. Although the Company has been experiencing recurring losses, it is obligated to file tax returns for compliance with IRS regulations and that of applicable state jurisdictions. At September 30, 2017 and DecemberMarch 31, 2016,2022, the Company hashad approximately $37 and $33$61.6 million of net operating losses respectively.carryforward available. This net operating loss will be eligible to be carried forward for tax purposes at federal and applicable states level. A full valuation allowance has been recorded related the deferred tax assets generated from the net operating losses.
Uncertain Tax Positions
The Company assesses each incomerecognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position using a two-step process. A determination is first made as to whether it isdeemed more likely than not thatof being sustained, the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more-likely-than-not criteria, the benefit recorded in the financial statements equalsCompany recognizes the largest amount of tax benefit that is greater than 50%50.0% likely to beof being ultimately realized upon its ultimate settlement. At September 30, 2017The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and December 31, 2016 there were no uncertain tax positions.penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations.
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Warrants
The Company has issued warrants, which allow the warrant holder to purchase one share of stock at a specified price for a specified period of time. The Company records equity instruments including warrants issued to non-employees based on the fair value at the date of issue. The fair value of warrants classified as equity instruments at the date of issuance is estimated using the Black-Scholes Model. The fair value of warrants classified as liabilities at the date of issuance is estimated using the Monte Carlo Simulation or Binomial model.
Stock Based Compensation
The Company recordsaccounts for its stock-based awards in accordance with ASC Subtopic 718, “Compensation – Stock Compensation”, which requires fair value measurement on the grant date and recognition of compensation expense relatedfor all stock-based payment awards made to options granted to non-employees based onemployees and directors. The Company determines the fair value of the award.
Compensation cost is recorded as earned for all unvested stock options outstanding atusing the beginningBlack-Scholes model. The fair value of the first yearrestricted stock awards is based upon the grantquoted market price of the common shares on the date of grant. The fair value estimates,of stock-based awards is expensed over the requisite service periods of the awards. The Company accounts for forfeitures of stock-based awards as they occur.
The Black-Scholes option pricing model requires the input of certain assumptions that require the Company’s judgment, including the expected term and for compensation cost for all share-based payments granted or modified subsequently based onthe expected stock price volatility of the underlying stock. The assumptions used in calculating the fair value estimates.of stock-based compensation represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change resulting in the use of different assumptions, stock-based compensation expense could be materially different in the future.
ForDerivatives
The Company reviews the nine months ended September 30, 2017terms of convertible debt issued to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and 2016 share-based compensationaccounted for options attributableseparately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to employees, officersbe bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
Bifurcated embedded derivatives are initially recorded at fair value and Board members were approximately $56,000 and $72,000. These amounts have been includedare then revalued at each reporting date with changes in the Company’s statementsfair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of operations. Compensation costs for stock options which vest over timeall the bifurcated derivative instruments. The remaining proceeds, if any, are recognizedthen allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the vesting period. Aslife of September 30, 2017, the Company had approximately $53,000 of unrecognized compensation costs relatedinstrument through periodic charges to granted stock options that will be recognized over the remaining vesting period of approximately three years.interest expense.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The guidance for fair value measurements, ASC820, ASC 820, Fair Value Measurements and Disclosures, establishes the authoritative definition of fair value, sets out a framework for measuring fair value, and outlines the required disclosures regarding fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company uses a three-tier fair value hierarchy based upon observable and non-observable inputs as follows:follow:
The Company records its derivative activities at fair
The following
The following is a summary of changes to Level 3 instruments during the
4. STOCKHOLDERS’ DEFICIT Common Stock
The Company has authorized
During the three months ended March 31,
Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock with a Series C Convertible Preferred Stock The board
Stock”). Pursuant to the Series C certificate of designations, shares of Series C preferred stock are convertible into common stock by their holder at any time and may be mandatorily convertible upon the achievement of specified average trading prices for the Company’s common stock. At
Holders of the Series C preferred stock are entitled to quarterly cumulative dividends at an annual rate of 12.0% until 42 months after the original issuance date (the “Dividend End Date”), payable in cash or, subject to certain conditions, the Company’s common stock.
The Series C preferred stock generally has no voting rights except as required by Delaware law. Upon the Company’s liquidation or sale to or merger with another corporation, each share will be entitled to a liquidation preference of $1,000, plus any accrued but unpaid dividends. In addition, the purchasers of the Series C preferred stock received, on a pro rata basis, warrants exercisable to purchase an aggregate of approximately
Series C1 Convertible Preferred Stock
The board designated 20,250 shares of At March 31, 2022 and December 31, 2021, there were 1,049.25 shares outstanding with a conversion price of $0.50 per share, such that each share of Series C1 preferred stock would convert into approximately 2,000 shares of the Company’s common stock, for a total convertible of 2,098,500 common stock shares. The Series C1 preferred stock has terms that are substantially the same as the Series C preferred stock, except that the Series C1 preferred stock does not pay dividends (unless and to the extent declared on the common stock) or at-the-market “make-whole payments” and, while it has the same anti-dilution protections afforded the Series C preferred stock, it does not automatically reset in connection with a reverse stock split or conversion of our outstanding convertible debt.
Series C2 Convertible Preferred Stock On August 31, 2018, the Company entered into agreements with certain holders of the Company’s Series C1 Preferred Stock, including the chairman of the Company’s board of directors, and the Chief Operating Officer and a director of the Company pursuant to which those holders separately agreed to exchange each share of the Series C1 Preferred Stock held for one (1) share of the Company’s newly created Series C2 Preferred Stock. In total, for 3,262.25 shares of Series C1 Preferred Stock to be surrendered, the Company issued 3,262.25 shares of Series C2 Preferred Stock. At March 31, 2022 and December 31, 2021, shares of Series C2 had a conversion price of $0.50 per share, such that each share of Series C preferred stock would convert into approximately 2,000 shares of the Company’s common stock, for a total convertible of 6,524,500 common stock shares. The terms of the Series C2 Preferred Stock are substantially the same as the Series C1 Preferred Stock, except that (i) shares of Series C1 Preferred Stock may not be convertible into the Company’s common stock by their holder for a period of 180 days following the date of the filing of the Certificate of Designation (the “Lock-Up Period”); (ii) the Series C2 Preferred Stock has the right to vote as a single class with the Company’s common stock on an as-converted basis, notwithstanding the Lock-Up Period; and (iii) the Series C2 Preferred Stock will automatically convert into that number of securities sold in the next Qualified Financing (as defined in the Exchange Agreement) determined by dividing the stated value ($1,000 per share) of such share of Series C2 Preferred Stock by the purchase price of the securities sold in the Qualified Financing. Series D Convertible Preferred Stock The Board designated 6,000 shares of preferred stock as Series D Preferred Stock, 763 of which remained outstanding as of March 31, 2022 and December 31, 2021. On January 8, 2021, the Company entered into a Stock Purchase Agreement with certain accredited investors (“the Series D Investors”) pursuant to all obligations under the Series D Certificate of Designation. The Series D Investors included the Chief Executive Officer, Chief Operating Officer and a director of the Company. In total, for $763,000 the Company issued 763 shares of Series D Preferred Stock, 1,526,000 common stock shares, 1,526,000 common stock warrants, exercisable at $0.25, and 1,526,000 common stock warrants, exercisable at $0.75. Each Series D Preferred Stock is convertible into 3,000 common stock shares. The Series D Preferred Stock will have cumulative dividends at the rate per share of 10% per annum. The stated value and liquidation preference on the Series D Preferred Stock is $763. The 763 Series D Preferred Shares are convertible into debt at the option of the holder during a prescribed time period. If the Series D Preferred Shares are converted, the Series D preferences are surrendered and the debt is then secured by the Company’s assets. As of March 31, 2022, none of the 763 Series D Preferred Shares have been converted to secured debt.
Each share of Series D Preferred is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing the Stated Value by $0.25, subject to certain adjustments set forth in the Series D Certificate of Designation (the “Series D Conversion Price”). The conversion of Series D Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holder of the Series D Preferred. If the average of the VWAPs (as defined in the Series D Certificate of Designation) for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series D Conversion Price and the average daily trading volume of the Common Stock on the primary trading market exceeds 1,000 shares per trading day during the Measurement Period (subject to adjustments), the Company may redeem the then outstanding Series D Preferred, for cash in an amount equal to aggregate Stated Value then outstanding plus accrued but unpaid dividends. During the three months ended March 31, 2022, the Company issued 23,109 common stock shares for the payment of accrued Series D Preferred Stock dividends. As of March 31, 2022, the Company had accrued dividends of $14,306. Series E Convertible Preferred Stock The Board designated 5,000 shares of preferred stock as Series E Preferred Stock, 968 and 1,736 of which remained outstanding as of March 31, 2022 and December 31, 2021, respectively. Each share of Series E Preferred is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing the Stated Value by $0.25, subject to certain adjustments set forth in the Series E Certificate of Designation (the “Series E Conversion Price”). The conversion of Series E Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holder of the Series E Preferred. If the average of the VWAPs (as defined in the Series E Certificate of Designation) for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series E Conversion Price and the average daily trading volume of the Common Stock on the primary trading market exceeds 1,000 shares per trading day during the Measurement Period (subject to adjustments), the Company may redeem the then outstanding Series E Preferred, for cash in an amount equal to aggregate Stated Value then outstanding plus accrued but unpaid dividends. Each share of Series E Preferred Stock has a par value of 0.001 per share and a Stated Value equal to $1,000, subject to increase set forth in its Certificate of Designation. Each holder of Series E Preferred Stock is entitled to receive cumulative dividends of 8% per annum, payable annually in cash or, following the listing of the Company’s common stock on certain Canadian trading markets and at the option of the Company, shares of common stock. During the three months ended March 31, 2022, the Company issued 3,070,000 common stock shares for the conversion of 768 shares of Series E Convertible Preferred Stock. During the three months ended March 31, 2022, the Company issued 12,432 common stock shares for the payment of Series E Preferred Stock dividends accrued. As of March 31, 2022, the Company had accrued dividends of $71,099. Series F Convertible Preferred Stock The Board designated 1,500 shares of preferred stock as Series F Preferred Stock, 1,411 and 1,426 of which were issued and outstanding as of March 31, 2022 and December 31, 2021, respectively. During 2021, the Company entered into a Stock Purchase Agreement with certain accredited investors (“the Series F Investors”). In total, for $1,436,000 the Company issued 1,436 shares of Series F Preferred Stock. Each Series F Preferred Stock is convertible into 4,000 common stock shares. The Series F Preferred Stock is entitled to cumulative dividends at the rate per share of 6% per annum. The stated value on the Series F Preferred Stock is $1,411.
Each share of Series F Preferred is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing the Stated Value by $0.25, subject to certain adjustments set forth in the Series F Certificate of Designation (the “Series F Conversion Price”). The conversion of Series F Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holder of the Series F Preferred. If the average of the VWAPs (as defined in the Series F Certificate of Designation) for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series F Conversion Price and the average daily trading volume of the Common Stock on the primary trading market exceeds 1,000 shares per trading day during the Measurement Period (subject to adjustments), the Company may redeem the then outstanding Series F Preferred, for cash in an amount equal to aggregate Stated Value then outstanding plus accrued but unpaid dividends. During the three months ended March 31, 2022, the Company issued 60,000 common stock shares for the conversion of 15 shares of Series F Convertible Preferred Stock. During the three months ended March 31, 2022, the Company issued 158,662 common stock shares for the payment of annual Series F Preferred Stock dividends. Additionally, During the three months ended March 31, 2022, the Company issued 255,401 common stock shares for the payment of a one-time, non-recurring 15% dividend to the Series F Preferred shareholders (as required by the Series F Certificate of Designation in the event the Company did not uplist to the NASDAQ stock exchange or file its clinical data intended for FDA approval of LuViva by December 31, 2021). As of March 31, 2022, accrued dividends totaled $1,998. Series F-2 Convertible Preferred Stock The Company was oversubscribed for its Series F Convertible Preferred Stock, resulting in the requirement to file an additional Certificate of Designation for Series F-2 Convertible Preferred Stock with substantially the same terms as the Series F Convertible Preferred Stock. The Board designated 3,500 shares of preferred stock as Series F-2 Preferred Stock, 3,237 of which were issued and outstanding as of March 31, 2022 and December 31, 2021. During 2021, the Company entered into a Stock Purchase Agreement with certain accredited investors (“the Series F-2 Investors”). In total, for $678,000 the Company issued 678 shares of Series F-2 Preferred Stock. In addition, the Company exchanged outstanding debt of $2,559,000 for 2,559 shares of Series F-2 Preferred Stock. Each Series F-2 Preferred Stock is convertible into 4,000 common stock shares. The Series F-2 Preferred Stock will have cumulative dividends at the rate per share of 6% per annum. The stated value on the Series F-2 Preferred Stock is 3,237. Each share of Series F-2 Preferred is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing the Stated Value by 0.25, subject to certain adjustments set forth in the Series F-2 Certificate of Designation (the “Series F-2 Conversion Price”). The conversion of Series F-2 Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holders of the Series F-2 Preferred. If the average of the VWAPs (as defined in the Series F-2 Certificate of Designation) for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series F-2 Conversion Price and the average daily trading volume of the Common Stock on the primary trading market exceeds 1,000 shares per trading day during the Measurement Period (subject to adjustments), the Company may redeem the then outstanding Series F-2 Preferred, for cash in an amount equal to aggregate Stated Value then outstanding plus accrued but unpaid dividends. During the three months ended March 31, 2022, the Company issued 95,535 common stock shares for the payment of annual Series F-2 Preferred Stock dividends. Additionally, During the three months ended March 31, 2022, the Company issued 368,505 common stock shares for the payment of a one-time, non-recurring 15% dividend to the Series F-2 Preferred shareholders (as required by the Series F-2 Certificate of Designation in the event the Company did not uplist to the NASDAQ stock exchange or file its clinical data intended for FDA approval of LuViva by December 31, 2021). As of March 31, 2022, accrued dividends totaled $91,592.
Powerup (Series G Convertible Preferred Stock) During January 2021, the Company finalized an investment by Power Up Lending Group Ltd. Power Up invested $78,500, net to the Company is $75,000, for 91,000 shares of Series G preferred stock with additional tranches of financing up to $925,000 in the aggregate over the terms of the Series G preferred stock. Series G will be non-voting on any matters requiring shareholder vote. The Series G Preferred Stock will have cumulative dividends at the rate per share of 8% per annum. At any time during the period indicated below, after the date of the issuance of shares of Series G preferred stock, the Company will have the right, at the Company’s option, to redeem all of the shares of Series G preferred stock by paying an amount equal to: (i) the number of shares of Series G preferred stock multiplied by then stated value (including accrued dividends); (ii) multiplied by the corresponding percentage as follows: Day 1-60, 105%; Day 61-90, 110%; Day 91-120, 115%; and Day 121-180, 122%. After the expiration of the 180 days following the issuance date, except for mandatory redemption, the Company shall have no right to redeem the Series G preferred stock. Mandatory redemption occurs within 24 months. In addition, if the Company does not redeem the Series G preferred stock, then Power Up will have the option to convert to common stock shares. The variable conversion price will be the value equal to a discount of 19% off of the trading price; which is calculated as the average of the three lowest closing bid prices over the last fifteen trading days. The conversion of Series G Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holder of the Series G Preferred. The Company has redeemed all of the Series G preferred stock and the balance is paid. During February 2021, the Company finalized an investment by Power Up Lending Group Ltd. Power Up invested $53,500, net to the Company is $50,000, for 62,000 shares of Series G preferred stock with additional tranches of financing up to $925,000 in the aggregate over the terms of the Series G preferred stock. Series G will be non-voting on any matters requiring shareholder vote. The Series G Preferred Stock will have cumulative dividends at the rate per share of 8% per annum. At any time during the period indicated below, after the date of the issuance of shares of Series G preferred stock, the Company will have the right, at the Company’s option, to redeem all of the shares of Series G preferred stock by paying an amount equal to: (i) the number of shares of Series G preferred stock multiplied by then stated value (including accrued dividends); (ii) multiplied by the corresponding percentage as follows: Day 1-60, 105%; Day 61-90, 110%; Day 91-120, 115%; and Day 121-180, 122%. After the expiration of the 180 days following the issuance date, except for mandatory redemption, the Company shall have no right to redeem the Series G preferred stock. Mandatory redemption occurs within 24 months. In addition, if the Company does not redeem the Series G preferred stock then Power Up will have the option to convert to common stock shares. The variable conversion price will be the value equal to a discount of 19% off of the trading price; which is calculated as the average of the three lowest closing bid prices over the last fifteen trading days. The conversion of Series G Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holder of the Series G Preferred. Due to the mandatory redemption feature of the Series G preferred stock, the total amount of 125,000 was recorded as a liability. On June 4, 2021, the Company redeemed the January 2021 investment of $75,000 for $114,597, this $39,597 difference was recorded as interest expense. On July 8, 2021, the Company redeemed the February 2021 investment of $50,000 for $78,094. The difference of 28,094 was recorded as interest expense. As of March 31, 2022 and December 31, 2021, the amount outstanding was nil.
Warrants
The following table summarizes transactions involving the Company’s outstanding warrants to purchase common stock for the
5. STOCK OPTIONS
The
There was no stock option activity during the three months ended March 31, 2022. The following table summarizes the Company’s outstanding and exercisable stock options as of March 31, 2022:
The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price as of March 31, 2022 and the exercise price, multiplied by the number of options. As of
The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The Black-Scholes option pricing model and the following weighted-average assumptions were used to estimate the fair value of
6. LITIGATION AND CLAIMS
From time to time, the Company may be involved in various legal proceedings and claims arising in the ordinary course of business. Management believes that the dispositions of these matters, individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial condition. However, depending on the amount and timing of such disposition, an unfavorable resolution of some or all of these matters could materially affect the future results of operations or cash flows in a particular
As of
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The
The table below presents the maturities of operating lease liabilities as of March 31, 2022:
The table below presents the weighted-average remaining lease term and discount rate used in the calculation of operating lease right-of-use assets and lease liabilities:
Related Party Contracts
On June 5, 2016, the Company entered into a license agreement with Shenghuo Medical, LLC pursuant to which the Company granted Shenghuo an exclusive license to manufacture, sell and distribute LuViva in Taiwan, Brunei Darussalam, Cambodia, Laos, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
On September 6, 2016, the Company entered into a royalty agreement with one of its directors, John Imhoff, and another stockholder, Dolores Maloof, pursuant to which the Company sold to them a royalty of future sales of single-use cervical guides for LuViva. Under the terms of the royalty agreement, and for consideration of $50,000, the Company will pay them an aggregate perpetual royalty initially equal to $0.10, and from and after October 2, 2016, equal to $0.20, for each disposable that the Company sells (or that is sold by a third party pursuant to a licensing arrangement with the Company).
On January 22, 2020, the Company entered into a promotional agreement with
On March 10, 2021, the Company entered into a consulting agreement with Richard Blumberg. As a result of the consulting agreement Mr. Blumberg provided $350,000, which was recorded to subscription receivable, to the Company in exchange for the following: (1) on September 26, 2021, 900,000 3-year warrants with an exercise price of $0.30 and 400,000 common stock shares; (2) on March 26, 2022, 900,000 3-year warrants with an exercise price of $0.40 and 400,000 common stock shares; (3) on September 26, 2022, 900,000 3-year warrants with an exercise price of $0.50 and 400,000 common stock shares; and (4) on March 26, 2023, 900,000 3-year warrants with an exercise price of $0.60 and 400,000 common stock shares. During the year ended December 31, 2021, the consulting agreement was amended to clarify that $350,000 is not intended to be debt and will not be required to be repaid in cash. Additionally, issuance of the warrants is now predicated on the Company receiving funding receipts of $1,000,000, whether from a financing, series of financing, or gross sales. The amended agreement clarified that the warrants issued to Mr. Blumberg are compensation for services, which involve obtaining financing. The Company will recognize expense for the services equal to the fair value of the warrants issued to Mr. Blumberg as the services are provided, which will coincide with the successful execution of a financing agreement over $1,000,000. Other Commitments On July 24, 2019, Shandong Yaohua Medical Instrument Corporation (“SMI”), agreed to modify its existing agreement. Under the terms of this modification, the Company agreed to grant (1) exclusive manufacturing rights, excepting the disposable cervical guides for the Republic of Turkey, and the final assembly rights for Hungary, and (2) exclusive distribution and sales for LuViva in jurisdictions, subject to the following terms and conditions. First, SMI shall complete the payment for parts, per the purchase order, for five additional LuViva devices. Second, in consideration for the $885,144 that the Company received, SMI will receive 12,147 common stock shares. Third, SMI shall honor all existing purchase orders it has executed to date with the Company, in order to maintain jurisdiction sales and distribution rights. If SMI needs to purchase cervical guides, then it will do so at a cost including labor, plus ten percent markup. The Company will provide 200 cervical guides at no cost for the clinical trials. Fourth, the Company and SMI will make best efforts to sell devices after CFDA approval. With an initial estimate of year one sales of 200 LuViva devices; year two sales of 500 LuViva devices; year three sales of 1,000 LuViva devices; and year four sales of 1,250 LuViva devices. Fifth, SMI shall pay for entire costs of securing approval of LuViva with the Chinese FDA. Sixth, SMI shall arrange, at its sole cost, for a manufacturer in China to build tooling to support manufacturing. In addition, SMI retains the right to manufacture for China, Hong Kong, Macau and Taiwan, where SMI has distribution and sales rights. For each single-use cervical guide sold by SMI in the jurisdictions, SMI shall transfer funds to escrow agent at a rate of $1.90 per device chip. If within 18 months of the license’s effective date, SMI fails to achieve commercialization of LuViva in China, SMI shall no longer have any rights to manufacture, distribute or sell LuViva. Commercialization is defined as: filing an application with the Chinese FDA for the approval of LuViva; any assembly or manufacture of the devices or disposables that begins in China; and purchase of at least 10 devices and disposables for clinical evaluations and regulatory use and or sales in the jurisdictions.
On August 12, 2021, the Company executed an amendment to its agreement with SMI, which established a payment schedule for the balance owed by SMI to the Company for outstanding purchase orders. The remaining balance owed for outstanding purchase orders was $23,445 as of March 31, 2022. Under the terms of the amended agreement, the parties agreed that if by October 30, 2022, SMI fails to achieve commercialization of LuViva in China, SMI shall no longer have any rights to manufacture, distribute or sell LuViva. Contingencies The current outbreak of the Coronavirus SARS-CoV-2, the pathogen responsible for COVID-19, which has already had an impact on financial markets, could result in additional repercussions to the Company’s operating business, including but not limited to, the sourcing of materials for product candidates, manufacture of supplies for preclinical and/or clinical studies, delays in clinical operations, which may include the availability or the continued availability of patients for trials due to such things as quarantines, conduct of patient monitoring and clinical trial data retrieval at investigational study sites. The future impact of the outbreak is highly uncertain and cannot be predicted, and the Company cannot provide any assurance that the outbreak will not have a material adverse impact on the Company’s operations or future results or filings with regulatory health authorities. The extent of the impact to the Company, if any, will depend on future developments, including actions taken to contain the coronavirus. The Russia-Ukraine conflict and the sanctions imposed in response to this crisis could result in repercussions to our operating business, including delays in obtaining regulatory approval to market our products in Russia. The future impact of the conflict is highly uncertain and cannot be predicted, and we cannot provide any assurance that the conflict will not have a material adverse impact on our operations or future results or filings with regulatory health authorities. 8. NOTES PAYABLE
Short Term Notes Payable
At
On During 2019, the Company
The following table summarizes short-term notes payable, including related parties:
The short-term notes payable due to related parties was $31,285 at March 31, 2022 and $40,000 of the $88,000 balance at December 31, 2021. 9. SHORT-TERM CONVERTIBLE DEBT Short-term Convertible Notes Payable Auctus On December 17, 2019, the Company entered into a securities purchase agreement and convertible note with Auctus. The convertible note issued to Auctus will be In connection with the first tranche of $700,000, the Company issued 7,500,000 warrants to
On May 27, 2020, the Company received the second tranche in the amount of $400,000, from the December 17, 2019 securities purchase agreement and convertible note with Auctus. The net amount paid to the Company was $313,000 This second tranche is part of the convertible note issued to Auctus for a total of $2.4 million of which $700,000 has already been provided by Auctus. The note maturity date is May 27, 2022 and the note accrues interest at a rate of ten percent (10%). The note may not be prepaid in whole or in part except as otherwise explicitly allowed. Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of the lessor of 24% or the maximum permitted by law (the “default interest”). The variable conversion prices shall equal the lesser of: (i) the lowest trading price on the issue date, and (ii) the variable conversion price. The variable conversion price shall mean 95% multiplied by the market price (the market price means the average of the five lowest trading prices during the period beginning on the issue date and ending on the maturity date), minus $0.04 per share, provided however that in no event shall the variable conversion price be less than $0.15. If an event of default under this note occurs and/or the note is not extinguished in its entirety prior to December 17, 2020 the $0.15 price shall no longer apply. The last tranche of $1.3 million will be received within 60 days of the S-1 registration statement becoming effective. The conversion price of the
Convertible
On The following table summarizes the Short-term Convertible Notes Payable, including debt in default (in thousands):
On June 2, 2021, we entered into
The
On
On July 24, 2019, Dr. Faupel and Mr. Cartwright agreed to an addendum to the On February 19, 2021, the Company entered into new promissory notes replacing the original notes from September 4, 2018, with Mark Faupel and Gene Cartwright. For Dr. Cartwright the principal amount On February 19, 2021, the Company exchanged $100,000 and $85,000 of long-term debt for Dr. Cartwright and Dr. Faupel in exchange for 100 and 85 shares of Series F2 Preferred Stock, respectively.
The table below summarizes the detail of the exchange agreement:
On March 22, 2021, the Company entered into an exchange agreement with Richard Fowler. As of December 31, 2020, the Company owed Mr. Fowler $546,214 ($412,624 in deferred salary and $133,590 in accrued interest). The Company
Future debt obligations as shown below include: $284,867, $163,376, and $146,400 for a total of $594,643 for Dr. Cartwright, Dr. Faupel, and Mr. Fowler, respectively. Future debt obligations as of March 31, 2022 for debt owed to related parties is as follows (in thousands):
Small Business Administration Loan On May 4, 2020, the Company received a loan from the Small Business Administration (SBA) pursuant to the Paycheck Protection Program (PPP) as part of the 10% Senior Unsecured Convertible Debenture On May 17, 2021, the Company issued 10% Senior Unsecured convertible debentures to investors, which mature on May 17, 2024 (the “Maturity Date”). The Company subscribed $1,130,000 of the $1,000 convertible debentures. The terms of the debentures are as follows: 1) the principal amount of some or all of the convertible debentures and accrued interest are convertible into common stock
At March 31, 2022 and December 31, 2021, the balance due on the 10% Senior Secured Convertible Debenture was $1,130,000 and total accrued interest was $28,250 and $73,326, respectively. The bond payable discount and unamortized debt issuance costs as of
6% Unsecured Promissory Note
On During the year ended December 31, 2021, the Company
11. INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per share attributable to common stockholders, amounts are computed by dividing the net income (loss) plus preferred stock dividends and deemed dividends on preferred stock by the weighted average number of shares outstanding during the
Diluted net income (loss) per share attributable to common stockholders amounts are computed by dividing the net income (loss) plus preferred stock dividends, deemed dividends on preferred stock, after-tax interest on convertible debt and convertible dividends by the weighted average number of shares outstanding during the
The following table sets forth pertinent data relating to the computation of basic and diluted net loss per share attributable to common shareholders (in thousands, except for per-share data):
For period of net loss, basic and diluted earnings per share Troubled Debt Restructurings - 2022 During the three months ended March 31, 2022, two of the Company’s creditors forgave $41,232 of debt. The reductions in the outstanding balances met the criteria for troubled debt. The basic criteria are that the borrower is troubled, i.e., they are having financial difficulties, and a concession is granted by the creditor. As of March 31, 2022, the troubled debt restructurings in total would have decreased the net loss by $41,232, with no impact to net loss per Troubled Debt Restructurings - 2021 During the three months ended March 31, 2021, the Company
12. SUBSEQUENT EVENTS Auctus Exchange Agreement
On Series D Exchange Agreements Subsequent to March 31, 2022, the Company entered into various agreements with Series D Preferred shareholders, pursuant to which each holder separately agreed to exchange their Series D Preferred shares into the Company’s common shares (in accordance with their existing Series D Preferred Share Agreements). In addition, the holders agreed to exchange 650,000 common stock warrants with a Common Stock Issuances Subsequent to March 31, 2022, we issued 1,864,000 shares of common stock for the Subsequent to March 31, 2022, we issued 1,360,000 shares of
Subsequent to
Subsequent to March 31, 2022, we issued 650,000 shares of common stock for warrant exercises.
Subsequent to March 31, 2022, we 22,829 shares of common stock for Series D Preferred dividends. Subsequent to March 31, 2022, we issued 43,470 shares of common stock for Series E Preferred dividends. Subsequent to March 31, 2022, we issued 16,987 shares of common stock for Series F Preferred dividends.
ITEM 2.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those that may be set forth under
The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this report. OVERVIEW
We are a medical technology company focused on developing innovative medical devices that have the potential to improve healthcare. Our primary focus is the sales and marketing of our LuViva® Advanced Cervical Scan non-invasive cervical cancer detection device. The underlying technology of LuViva primarily relates to the use of biophotonics for the non-invasive detection of cancers. LuViva is designed to identify cervical cancers and precancers painlessly, non-invasively and at the point of care by scanning the cervix with light, then analyzing the reflected and fluorescent light.
LuViva provides a less invasive and painless alternative to conventional tests for cervical cancer screening and detection. Additionally, LuViva improves patient well-being not only because it eliminates pain, but also because it is convenient to use and provides rapid results at the point of care. We focus on two primary applications for LuViva: first, as a cancer screening tool in the developing world, where infrastructure to support traditional cancer-screening methods is limited or non-existent, and second, as a triage following traditional screening in the developed world, where a high number of false positive results cause a high rate of unnecessary and ultimately costly follow-up tests.
We are a Delaware corporation, originally incorporated in 1992 under the name “SpectRx, Inc.
Since our inception, we have raised capital through the public and private sale of debt and equity, funding from collaborative arrangements, and grants.
Our prospects must be considered in light of the substantial risks, expenses and difficulties encountered by entrants into the medical device industry. This industry is characterized by an increasing number of participants, intense competition and a high failure rate. We have experienced Our product revenues to date have been limited. In
Based on discussions with our distributors, we currently hold and expect to generate additional purchase orders for approximately $1.0 to $1.5 million in LuViva devices and disposables in 2022 and expect those purchase orders to result in actual sales of $0.5 to $1.0 million in 2022, representing what we view as current demand for our products. We cannot be assured that we will generate all or any of these additional purchase orders, or that existing orders will not be canceled by the distributors or that parts to build product will be available to meet demand, such that existing orders will result in actual sales. Because we have a short history of sales of our products, we cannot confidently predict future sales of our products beyond this time frame and cannot be assured of any particular amount of sales. Accordingly, we have not identified any particular trends with regard to sales of our products. In order to increase demand for LuViva, the Company
In the United States, the Company is actively pursuing FDA approval by initiating a In China, the Chinese NMPA (National Medical Products Approval) study has begun at four clinical sites. According to enrollment tracking reports sent to us by our Chinese partner SMI on March 11, 2022, testing of 150 patients has been completed in the ongoing clinical trial for Chinese National Medical Products Administration (NMPA) approval. The In Europe, the Company
CRITICAL ACCOUNTING POLICIES
Our material accounting policies, which we believe are the most critical to
Revenue Recognition: Step 1 – Identify the contract with a customer: a contract is defined as an agreement (including oral and implied), between two or more parties that creates enforceable rights and obligations and sets out the criteria for each of those rights and obligations. The contract needs to have commercial substance and it is probable that the entity will collect the consideration to which it will be entitled. Step 2 – Identify the performance obligations in the contract: a performance obligation in a contract is a promise (including implicit) to transfer a good or service to the customer. Each performance obligation should be capable of being distinct and is separately identifiable in the contract.
Step 3 – Determine the transaction price: transaction price is the amount of consideration that the entity can be entitled to, in exchange for transferring the promised goods and services to a customer, excluding amounts collected on behalf of third parties. Step 4 – Allocate the transaction price to the performance obligations in the contract: for a contract that has more than one performance obligation, the entity will allocate the transaction price to each performance obligation separately, in exchange for satisfying each performance obligation. The acceptable methods of allocating the transaction price include adjusted market assessment approach, expected cost plus a margin approach, and the residual approach in limited circumstances. Discounts given should be allocated proportionately to all performance obligations unless certain criteria are met and reallocation of changes in standalone selling prices after inception is not permitted. Step 5 – Recognize revenue as and when the entity satisfies a performance obligation: the entity should recognize revenue Valuation of Deferred Taxes: We account for income taxes in accordance with the liability method. Under the liability method, we recognize deferred assets and liabilities based upon anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. We establish a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be utilized against future taxable income. Valuation of Equity Instruments Granted to Employee, Service Providers and Investors: On the date of issuance, the instruments are recorded at their fair value as determined using either the Black-Scholes valuation model or Monte Carlo Simulation model.
Allowance for Accounts Receivable: We estimate losses from the inability of our Inventory Valuation: All inventories are stated at lower of cost or net realizable value, with cost determined substantially on a “first-in, first-out” basis. Selling, general, and administrative expenses are not inventoried, but are charged to expense when purchased. RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED
Sales and General and Administrative Expense: General and administrative expenses were $386,000 for the three months ended
Interest Expense: Interest expense during the three months ended March 31, 2022 was $101,000, compared to $141,000 during the three months ended March 31, 2021, a decrease of $40,000, or 28%. The decrease was due a decrease in debt, resulting in lower interest recognized for outstanding notes payable and Loss Due to Change in Fair Value of Derivative Liability: Loss due to change in fair value of the derivative liability during the three months ended March 31, 2022 was $6,000, compared to an $88,000 loss recorded during the three months ended March 31, 2021. The decrease was primarily due to changes to our stock price during each of the three-month periods, which impacted the fair value of the derivative liability. Gain from extinguishment of debt: Gain from extinguishment of debt during the three months ended March 31, 2022 was $41,000, compared to a gain from extinguishment of debt of $87,000 during the three months ended March 31, 2021, a decrease of $46,000, or 53%. The decrease was due to a Change in Fair Value of
Net
There was no income tax benefit recorded for the three months ended March 31, 2022 and 2021, due to recurring net operating losses. A full valuation allowance has been recorded related the deferred tax assets generated from the net operating losses. LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have raised capital through the public and private sale of debt and equity, funding from collaborative arrangements, and grants.
Our major cash flows for the
During 2021, the Company received equity investments in the amount of $2,114,000 and incurred fees due on these investments of $139,000. The Company also issued the finders 98,000 of the Company’s common stock shares and 643,700 warrants for the Company’s common stock shares. These investors received a total of 1,436 and 3,237 shares of Series F and Series F-2 preferred stock, respectively. If the Investor elects to convert their Series F or Series F-2 preferred stock, each Series F or Series F-2 preferred stock shares converts into During 2021, the Company finalized an investment by Power Up Lending Group Ltd.
Contingencies Based on the current outbreak of the The future impact of the
The Russia-Ukraine conflict and our operations or future results or filings with regulatory health authorities.
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements, no special purpose entities, and no activities that include non-exchange-traded contracts accounted for at fair value.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company under the supervision and with the participation of management, including the Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial officer), evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were not effective as of The effectiveness of any system of controls and procedures is subject to certain limitations, and, as a result, there can be no assurance that our controls and procedures will detect all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be attained. Changes in Internal Control There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company may be involved in various legal proceedings and claims arising in the ordinary course of business. Management believes that the disposition of these matters, individually or in the aggregate, is not expected to have a material adverse effect on the Company’s financial condition. See Note 6 to the financial
ITEM 1A. RISK FACTORS
ITEM 2. UNREGISTERRED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4.
_____________ *Filed herewith
SIGNATURES
Date: May 16, 2022
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