UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2024

or

For the transition period from ____ to ____

Commission File Number 333-184948001-39531

Heatwurx,Processa Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

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

Pasadena, CA 91101Hanover, Maryland21076

(Address443) 776-3133

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

(626) 364-5342

(Registrant’s telephone number, including area code)

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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(q)13(a) of the Exchange Act. Y ES [  ]  NO [X]☐

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

YES [  ]  NO [X]

The registrant has 11,017,388number of outstanding shares of the registrant’s common stock outstanding as of September 29, 2017.at May 10, 2024 was 2,858,007.

HEATWURX,

PROCESSA PHARMACEUTICALS, INC.

FORM 10-Q

For the Quarter Ended June 30, 2017

TABLE OF CONTENTS

Part I: Financial Information

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTSItem 1: Financial Statements

HEATWURX, INC.Processa Pharmaceuticals, Inc.

CONSOLIDATED BALANCE SHEETSCondensed Consolidated Balance Sheets

(Unaudited)

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

HEATWURX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONSProcessa Pharmaceuticals, Inc.

(Unaudited)Condensed Consolidated Statements of Operations

(Unaudited)

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

HEATWURX, INC.

CONSOLIDATED STATEMENT OF CASH FLOWSProcessa Pharmaceuticals, Inc.

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

(Unaudited)

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

HEATWURX, INC.Processa Pharmaceuticals, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSCondensed Consolidated Statements of Cash Flows

(Unaudited)

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

PRINCIPAL BUSINESS ACTIVITIES:

Processa Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Organization and BusinessSummary of Significant Accounting Policies

Organization - Heatwurx, Inc. (“Heatwurx,”

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

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BasisOn January 22, 2024, we filed a Certificate of Presentation - These unaudited interimAmendment to our Certificate of Incorporation, as amended with the Secretary of State of Delaware that effected a 1-for-20 reverse stock split of our common stock, par value $0.0001 per share (the “Reverse Stock Split”). Pursuant to the Certificate of Amendment, our issued common stock decreased from 24,706,474 shares to 1,291,000 shares and our outstanding common stock decreased from 24,606,474 to 1,286,000. The Reverse Stock Split did not affect our authorized common stock of 100,000,000 shares or our common stock par value. All shares of common stock, including common stock underlying warrants, stock options, restricted stock awards and restricted stock units, as well as exercise prices and per share information in these condensed consolidated financial statements and related notes are presentedgive retroactive effect to the Reverse Stock Split.

Basis of Presentation

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

Accordingly, they do not include all the information and disclosures required in the annual financial statements by U.S. GAAP.GAAP for complete financial statements. All material intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments considered necessary to present fairly in all material respects the financial position as of June 30, 2017.

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

Interim Financial Statements - These financial statements should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2016, and have been prepared on a consistent basis with the accounting policies described in Note 2 - Summary of Significant Accounting Policies of the Notes to Financial Statementsthereto included in our Annual Report on Form 10-K for the year ended December 31, 2016.  Our accounting policies did not change in2023, as filed with the first three or six monthsSEC. The results of 2017.  Operating resultsoperations for the three and six months ended June 30, 2017interim periods shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2017 or any future period.full year.

Use of estimatesLiquidity - The preparation of

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

Going Concern and Management’s Plan - The Company’s financial statements arehave been prepared using U.S. GAAP and are subject toon a going concern basis, which contemplates the continuity of operations, realization of assets and liquidationthe satisfaction of liabilities and commitments in the normalordinary course of business. The Company faces certain risksWe have incurred losses since inception, are currently devoting substantially all of our efforts toward research and uncertainties thatdevelopment of our NGC drug product candidates, including conducting clinical trials and providing general and administrative support for these operations, and have an accumulated deficit of $78.1million at March 31, 2024. During the three months ended March 31, 2024, we generated a net loss of $2.7 million and used $2.0 million in net cash for operating activities from continuing operations. To date, none of our drug candidates have been approved for sale, and therefore we have not generated any product revenue and do not expect positive cash flow from operations in the foreseeable future.

We have financed our operations primarily through public equity issuances, including an offering we closed on January 30, 2024 where we sold 476,000 shares of our common stock, pre-funded warrants to purchase up to 1,079,555 shares of our common stock, and warrants for the purchase of up to 1,555,555 shares of our common stock for net proceeds of $6.3 million, after deducting placement agent fees and offering-related expenses. Simultaneously with the closing of the sale, the pre-funded warrants were exercised in exchange for 1,079,555 shares of our common stock. We will continue to be dependent upon equity and/or debt financing until we are presentable to generate positive cash flows from its operations.

At March 31, 2024, we had cash and cash equivalents totaling $8.9 million which, based on our current business plans, we believe these funds will satisfy our capital needs into early 2025, including the beginning of our Phase 2 trial of NGC-Cap in many emerging companies regarding product development,breast cancer. Our ability to execute our longer-term operating plans, including future profitability,preclinical studies and clinical trials for our portfolio of drugs depend on our ability to obtain additional funding from the sale of equity and/or debt securities, a strategic transaction or other funding transactions.

We plan to raise additional funds in the future through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, but will only do so if the terms are acceptable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend our current or planned future clinical trial plans, or research and development programs. This may also cause us to not meet obligations contained in certain of our license agreements and put these assets at risk. To the extent that we raise additional capital protectionthrough marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of patentsour existing stockholders will be diluted, and property rights, competition, rapid technological change, government regulations, recruitingthe terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. There can be no assurance that future funding will be available when needed.

Absent additional funding, we believe that our cash and retaining key personnel,cash equivalents will not be sufficient to fund our operations for a period of one year or more after the date that these condensed consolidated financial statements are available to be issued based on the timing and third party manufacturing organizations.

The Company has previously relied exclusively on private placements with a small groupamount of investors to finance its business and operations.  The Company has had little revenue since inception.  For the six months ended June 30, 2017, the Company incurred aour projected net loss from continuing operations of approximately $118,478 and cash to be used approximately $76,288 in net cash from operating activities from continuing.  The Company had total cash on handduring that period of approximately $1,949 as of June 30, 2017. The Company is not able to obtain additional financing adequate to fulfill its commercialization activities, nor achievetime. As a level of revenues adequate to support the Company’s cost structure. The Company does not currently have any revenue under contract nor does it have any immediate sales prospects. The Company has significantly reduced employees and overhead. The decision to cease operations of Dr. Pave, LLC and Dr. Pave Worldwide, LLC was made on December 31, 2015. These business components are captured within discontinued operations as of June 30, 2017 (Note 3). The Company has significantly scaled back operations to maintain only a minimal level of operations necessary to support our licensee and look for potential merger candidates.  It is the Company’s intention to move forward as a public entity and to seek potential merger candidates.  If the Company fails to merge or be acquired by another company, we will be required to terminate all operations.

During the six months ended June 30, 2017, the Company received cash of $75,000 as part of the $2,000,000 senior secured debt offering commenced in February 2015.  Based upon the Company’s current financial, the Company was not able to satisfy the mandatory principal payments in 2017 under the $2,000,000 senior secured debt.  The Company will continue to work with the lenders to explore extension or conversion options, but there is no guarantee the lenders will agree to modify the repayment terms of the notes under conditions that will allow the Company to continue to repay the notes, if at all. As these notes are secured by all the assets of the Company, including intellectual property rights, the Company is in default in regard to interest payments on the notes, and the lenders may call the notes and foreclose on the Company’s assets.

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

The accompanyingcondensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be different should the Companywe be unable to continue as a going concern.concern based on the outcome of these uncertainties described above.

CashUse of Estimates

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

Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes. -Deferred income taxes are recorded for the expected tax consequences of temporary differences between the basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. At March 31, 2024 and December 31, 2023, we recorded a valuation allowance equal to the full recorded amount of our net deferred tax assets since it is more-likely-than-not that such benefits will not be realized. The Company considers all highly liquid investments with an original maturityvaluation allowance is reviewed quarterly and is maintained until sufficient positive evidence exists to support its reversal.

Under ACS 740-270 Income Taxes – Interim Reporting, we are required to project our annual federal and state effective income tax rate and apply it to the year-to-date ordinary operating tax basis loss before income taxes. Based on the projection, no current income tax benefit or expense is expected for 2024 and the foreseeable future since we expect to generate taxable net operating losses.

Concentration of three months or less when purchasedCredit Risk

Financial instruments that potentially subject us to besignificant concentration of credit risk consist primarily of our cash and cash equivalents.

Net income (loss) per share - The Company computes basic We utilize only well-established banks and diluted earnings per share amounts pursuant to ASC 260-10-45. Basic earnings per share is computed by dividing net income (loss) available to common shareholders,financial institutions with high credit ratings. Balances on deposit are insured by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share is computedFederal Deposit Insurance Corporation (FDIC) up to specified limits. Total cash held by dividing net income (loss) available to common shareholders by the diluted weighted average number of shares of common stock during the period.  The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of the first day of the year for any potentially diluted debt or equity.  The computation does not assume conversion, exercise or contingent exercise of securities since that would have an anti-dilutive effect on earnings during the three and six months ended June 30, 2017 and 2016, respectively.our banks at March 31, 2024, exceeded FDIC limits.

Subsequent events - The Company follows the guidance in ASC 855-10-50 for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.

Reclassification - Prior year amounts have been reclassified to conform to the current year presentation. There was no change to the total amounts for the Company’s balance sheets, income statements or statements of cash flows.

Recently IssuedRecent Accounting Pronouncements -

From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). The Company hasWe have implemented all new accounting pronouncements that are in effect and that may impact itsour condensed consolidated financial statements. It hasWe have evaluated any newrecently issued accounting pronouncements that have been issued, and determined that there wasis no material impact on itsour condensed consolidated financial position or results of operations.

3.Note 2 – Stockholders’ Equity

DISCONTINUED OPERATIONS:

Preferred Stock

In

There were no issued or outstanding shares of preferred stock at either March 31, 2024 or December 31, 2023.

Common Stock

During the three months ended March 31, 2024, we issued the following shares of common stock.

During the three months ended March 31, 2023, we issued 421,611 shares of our common stock through several fundraising efforts described below:

Note 3 - Stock-based Compensation

On June 19, 2019, our stockholders approved, and we adopted, the Processa Pharmaceuticals Inc. 2019 Omnibus Equity Incentive Plan (the “2019 Plan”). The 2019 Plan allows us, under the direction of our Board of Directors or a committee thereof, to streamline operationsmake grants of stock options, restricted and expensesunrestricted stock and other stock-based awards to employees, including our executive officers, consultants and directors. The 2019 Plan provides for the Company elected to discontinue the Dr. Pave and Dr. Pave Worldwide entities during 2015.  The financial resultsaggregate issuance of these events are represented in the discontinued operations included in the June 30, 2017 and 2016 financial statements.300,000 shares of our common stock. At March 31, 2024, we have 35,508 shares available for future grants.

Stock Compensation Expense

The operating results of discontinued operations of Dr. Pave and Dr. Pave WorldwideWe recorded stock-based compensation expense for the three month ended March 31, 2024 and six months ended June 30, 2017 and 2016 are summarized below:2023 as follows:

Schedule of Stock-based Compensation Expense

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

Forward-Looking Statements

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

There have been no changes in our critical accounting policies from those describedincluded in such forward-looking statements.

Factors that may cause actual results to differ materially from current expectations include, but are not limited to:

·

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

·

risks associated with the asphalt repair industry, including changes in laws or regulations, increases in taxes, rising insurance premiums, costs of compliance with environmental laws and other governmental regulations;

·

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

·

changes in the competitive environment in the asphalt repair industry;

·

risks related to natural disasters;

·

litigation; and

·

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

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

Recently Issued Accounting Pronouncements

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

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

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

During 2014, we acquired Dr. Pave, LLC a service company offering asphalt repair and restoration utilizing the Heatwurx asphalt repair technology and established a new entity Dr. Pave Worldwide LLC to house our franchise program providing franchisees with the exclusive Heatwurx equipment and processing.  We launched our franchise sales program throughout the U.S. in the third quarter of 2014; however, to date, no franchises have been sold.  The Company decided not to renew its franchise registrations throughout the U.S. do to the extensive costs.  In 2015, we offered license agreements, which grants a license of all Heatwurx equipment and supplies and the use of the Heatwurx intellectual property within a specified territory.  We have one licensee as of June 30, 2017.

We are no longer receiving financial support to continue commercializationevaluated recently issued accounting pronouncements and we do not believe we will be able to obtain financing from another source.  We do not believe we are able to achieve a level of revenues adequate to support our cost structure.  Do to the slow growth in the service sector and the high cost of the franchise registrations, we discontinued the operations of Dr. Pave, LLC and Dr. Pave Worldwide LLC.  In addition, we significantly scaled back operations to maintain only a minimal level of operations necessary to support our licensee and look for potential merger candidates.  The Company sold the remaining equipment and inventory to the licensee during 2016.  Based upon the Company’s current financial position, the Company does not believe it will be able to satisfy the mandatory principal payments.  The Company will work with the lenders to explore extension or conversion options.  Theredetermined that there is no guarantee the lenders will accommodate our requests.  As of June 30, 2017; principal in the amount of $1,037,361 is outstanding and payable under the secured notes.  These notes are secured by all the assets of the Company, including intellectual property rights.  We are in default on the notes, and as a result the Company’s assets may be foreclosed upon.

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

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

Results of operations

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

For the three months ended June 30, 2017 compared to the three months ended June 30, 2016

For the three months ended June 30, 2017, our net loss was approximately $43,000, compared to a net loss of approximately $43,000 including income from discontinued operations of $3,260 for the same period of 2016.  Further description of these losses is provided below.

Revenue

The Company recognized no revenue in the three months ended June 30, 2017 and June 30, 2016. The Company does not anticipate any future revenue from equipment sales during 2017.

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Cost of goods sold

The Company had no cost of goods sold during the three months ended June 30, 2017 and 2016.

Selling, general and administrative

Selling, general and administrative expenses increased to approximately $10,000 for the three months ended June 30, 2017 from approximately $3,000 for the three months ended June 30, 2016. The increase in selling, general and administrative expenses is principally due to the use of consultants for accounting services of approximately $6,000; and an increase in investor relations expenses of $1,000.

Research and Development

The Company had research and development costs during the three months ended June 30, 2017 of approximately $100; a decrease from approximately $6,000 from the three months ended June 30, 2016, as a result of a reduction in legal patent costs.

For the six months ended June 30, 2017 compared to the six months ended June 30, 2016

For the six months ended June 30, 2017, our net loss was approximately $118,000; compare to a net loss of approximately $177,000 including income from discontinued operations of $1,256 for the same period of 2016.  Further description of these losses is provided below.

Revenue

The Company recognized no revenue in the six months ended June 30, 2017 and June 30, 2016. The Company does not anticipate any future revenue from equipment sales during 2017.

Cost of goods sold

The Company had no cost of goods sold during the six months ended June 30, 2017 and 2016.

Selling, general and administrative

Selling, general and administrative expenses decreased to approximately $24,000 for the six months ended June 30, 2017 from approximately $84,000 for the six months ended June 30, 2016. The decrease in selling, general and administrative expenses is principally due to the significant reduction in operating activities which include a decrease in employee expenses of approximately $45,000; a decrease in travel and office expenses of approximately $8,000 which includes commercial insurance, rent and other expenses; and a decrease in legal and investor relations expenses of $7,000.

Research and Development

The Company had research and development costs during the six months ended June 30, 2017 of approximately $200; a decrease from approximately $6,000 for the six months ended June 30, 2016, as a result of significant reduction in patent applications being filed thereby reducing the legal fees associated therewith.  The Company is only utilizing legal representation to maintain the existing patents.