UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2016March 31, 2017
  
 
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                           to                           ..   
For the transition period from          to 
 
Commission File number 000-00935
 
MEDITE CANCER DIAGNOSTICS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware36-4296006
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)(I.R.S. Employer Identification No.)


  
4203 SW 34thStreet, Orlando, FL
32811
(Address of principal executive offices)(Zip Code)
 
(407) 996-9630
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each className of each exchange on which registered
NoneNot Applicable
 
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 ☒ 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 (Sec.232.405(§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 ☐ (not required) ☐ 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rue 12b-2 of the Exchange Act. (Check one):
 
Large Accelerated Filer ☐Accelerated Filer ☐
 
Non-Accelerated Filer ☐Smaller Reporting Company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
 
The number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
 
COMMON STOCK, $0.001 PAR VALUE, At November 14, 2016: 21,269,307AT May 15, 2017: 25,881,987 shares
 

 
 
MEDITE Cancer Diagnostics, Inc. and Subsidiaries
 
FormQUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended September 30, 2016
 
TABLE OF CONTENTS
 
 
Page Page
PART I.  – FINANCIAL INFORMATION
 
   
Item 1.
Financial Statements
F-1
   

a) Condensed Consolidated Balance Sheets – September 30, 2016March 31, 2017 (unaudited) and December 31, 20152016
 F-1
   

b) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss —Loss— Three Months Ended September 30,months ended March 31, 2017 and March 31, 2016 and 2015 (unaudited)
 F-2
   

c) Condensed Consolidated Statements of Operations and Comprehensive Loss – Nine Months Ended September 30, 2016 and 2015 (unaudited)
 F-3
  

d)c) Unaudited Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30,Three months ended March 31, 2017 and March 31, 2016 and 2015 (unaudited)
 F-4F-3
   

e)d) Notes to Unaudited Condensed Consolidated Financial Statements (unaudited) 
 F-5F-4
   
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
1
   
Item 4.
Controls and Procedures
7
   
PART II. — OTHER INFORMATION
 
   
Item 1.
Legal Proceedings
87
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
87
   
Item 3.
Defaults upon Senior Securities
9
8
   
Item 6.
Exhibits
10
8
   
SIGNATURES

 11
EXHIBIT INDEX
Exhibit 31.1    
Section 302 Certification of Chief Executive Officer
Exhibit 31.2   
Section 302 Certification of Chief Financial Officer
Exhibit 32.1   
Section 906 Certification of Chief Executive Officer
Exhibit 32.2    
Section 906 Certification of Chief Financial Officer9 
 
 
-i-
 
 
PART I. — FINANCFIINANCIALAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
 
MEDITE CANCER DIAGNOSTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCEBALANCE SHEETS
(Dollars inIn thousands, except sharesshare and per share amounts)
 
 
March 31, 2017
 
 
December 31,
 
 
September 30,
2016
(Unaudited)
 
 
December 31,
2015
 
 
(unaudited)
 
 
2016
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash
 $32 
 $587 
 $269 
 $108 
Accounts receivable, net of allowance for doubtful accounts of $110 and $83 at September 30, 2016 and December 31, 2015, respectively
  1,611 
  1,798 
Inventories, net
  4,182 
  3,075 
Accounts receivable, net of allowance for doubtful accounts of $124 and $123
  1,331 
  1,346 
Inventories
  3,679 
  3,811 
Prepaid expenses and other current assets
  122 
  186 
  111 
  79 
Total current assets
  5,947 
  5,646 
  5,390 
  5,344 
    
    
Property and equipment, net
  1,870 
  1,941 
  1,547 
  1,557 
In-process research and development
  4,620 
  4,620 
Trademarks, trade names
  1,240 
  1,240 
Goodwill
  4,658 
  4,658 
Other assets
  245 
  273 
  354 
  351 
Total assets
 $18,580 
 $18,378 
 $17,809 
 $17,770 
    
    
Liabilities and Stockholders’ Equity
    
    
    
    
Current Liabilities:
    
    
Accounts payable and accrued expenses
 $3,109 
 $3,306 
Secured lines of credit and current portion of long-term debt
 $3,398 
 $2,857 
  3,096 
  3,214 
Notes due to employees, current portion
  696 
  202 
  448 
  681 
Accounts payable and accrued expenses
  3,066 
  3,032 
Advances – related parties
  152 
  70 
Advances – related party
  147 
  146 
Total current liabilities
  7,312 
  6,161 
  6,800 
  7,347 
    
Long-term debt, net of current portion
  78 
  121 
  60 
Notes due to employees, net of current portion
  166 
  725 
  113 
  135 
Deferred tax liability – long-term
  2,205 
Deferred tax liability
  2,205 
Total liabilities
  9,764 
  9,212 
  9,178 
  9,747 
    
    
Commitments and contingencies
    
    
    
    
Stockholders’ equity :
    
    
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 198,355 shares issued and outstanding (liquidation value of all classes of preferred stock $2,510 and $2,442 as of September 30, 2016 and December 31, 2015, respectively)
  962 
Common stock, $0.001 par value; 35 million shares authorized, 21,269,307 and 21,055,990 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively
  21 
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 198,355 shares issued and outstanding (liquidation value of all classes of preferred stock $2,556 and $2,533 as of March 31, 2017 and December 31, 2016, respectively)
  962 
Common stock, $0.001 par value; 35,000,000 shares authorized, 24,831,987 and 22,421,987 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively
  25 
  23 
Additional paid-in capital
  8,888 
  8,340 
  11,005 
  9,366 
Stock subscription
  - 
  25 
Treasury stock
  (327)
  (327)
ccumulated other comprehensive loss
  (377)
  (609)
Retained earnings (accumulated deficit)
  (351)
  779 
Accumulated other comprehensive loss
  (695)
  (642)
Accumulated deficit
  (2,339)
  (1,384)
Total stockholders’ equity
  8,816 
  9,166 
  8,631 
  8,023 
    
    
Total liabilities and stockholders’ equity
 $18,580 
 $18,378 
 $17,809 
 $17,770 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
F-1
 
 
MEDITE CANCER DIAGNOSTICS,DIAGNOSTICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTSSTATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Dollars inIn thousands, except sharesshare and per share amounts)
 
 
Three Months Ended 
September 30,
 
 
2016
 
 
2015
 
 
Three Months Ended March 31,
 
 
(unaudited)
 
 
2017
 
 
2016
 
 
 
 
 
 
 
Net sales
 $2,339 
 $2,662 
 $1,891 
 $2,131 
Cost of revenues
  1,336 
  1,493 
  1,211 
  1,213 
Gross profit
  1,003 
  1,169 
  680 
  918 
    
    
Operating expenses
    
    
Depreciation and amortization expense
  53 
  30 
  49 
  51 
Research and development
  305 
  222 
  425 
  360 
Selling, general and administrative
  860 
  785 
  782 
  857 
Total operating expenses
  1,218 
  1,037 
  1,256 
  1,268 
Operating loss
  (576)
  (350)
    
    
Operating income (loss)
  (215)
  132 
Other expenses
    
Interest expense, net
  193 
  261 
Loss on extinguishment of notes due to employees
  158 
 - 
Other expense
  28 
  11 
Total other expense, net
  379 
  272 
    
    
Other expense (income)
    
Interest expense
  170 
  46 
Other expenses (income)
  (72)
  11 
Total other expenses
  98 
  57 
Loss before income taxes
  (955)
  (622)
    
    
Income (loss) before income taxes
  (313)
  75 
    
Income tax expense (benefit)
  (7)
  16 
Net income (loss)
  (306)
  59 
Provision for income taxes
  - 
Net loss
  (955)
  (622)
    
    
Preferred dividend
  (23)
  (23)
    
    
Net loss to common stockholders
 $(329)
 $(36)
Net loss available to common stockholders
 $(978)
 $(645)
    
    
Condensed statements of comprehensive loss
    
Net income (loss)
 $(306)
 $59 
Condensed consolidated statements of comprehensive loss
    
Net loss
 $(955)
 $(622)
Other comprehensive income (loss)
    
    
Foreign currency translation adjustments
  177 
  (170)
  (53)
  191 
    
    
Comprehensive loss
 $(129)
 $(111)
 $(1,008)
 $(431)
    
    
Loss per share
    
    
Net loss available to common stockholders
 $(978)
 $(645)
Basic and diluted loss per share
 $(0.02)
 $- 
 $(0.04)
 $(0.03)
Weighted average basic and diluted shares outstanding
  21,269,307 
  20,484,936 
  22,940,543 
  21,055,990 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
  
 
F-2
 
 
MEDITE CANCER DIAGNOSTICS,DIAGNOSTICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTSSTATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Dollars in thousands, except shares and per share amounts)CASH FLOWS
 
 
 
Nine Months Ended 
September 30,
 
 
 
2016
 
 
2015
 
 
 
(unaudited)
 
 
(unaudited)
 
 
 
 
 
 
 
 
Net sales
 $7,286 
 $7,081 
Cost of revenues
  4,095 
  4,028 
Gross profit
  3,191 
  3,053 
 
    
    
Operating expenses
    
    
Depreciation and amortization expense
  154 
  95 
Research and development
  1,086 
  825 
Selling, general and administrative
  2,635 
  2,191 
Total operating expenses
  3,875 
  3,111 
 
Operating loss
  (684)
  (58)
 
    
    
Other expenses (income)
    
    
Interest expense
  570 
  157 
Other (income) expenses
  (111)
  61 
Total other expenses
  459 
  218 
 
    
    
Loss before income taxes
  (1,143)
  (276)
 
    
    
Income tax benefit
  (13)
  (9)
Net loss
  (1,130)
  (267)
 
    
    
Preferred dividend
  (69)
  (69)
 
    
    
Net loss to common stockholders
 $(1,199)
 $(336)
 
    
    
Condensed statements of comprehensive loss
    
    
Net loss
 $(1,130)
 $(267)
Other comprehensive income (loss)
    
    
          Foreign currency translation adjustments
  232 
  (330)
Comprehensive loss
 $(898)
 $(597)
 
    
    
Loss per share
    
    
Basic and diluted loss per share
 $(.06)
 $(.01)
Weighted average basic and diluted shares outstanding
  21,127,811 
  20,051,206 
 
 
Three Months Ended March 31,
 
 
 
2017
 
 
2016
 
Cash flows from operating activities:
 
 
 
 
 
 
Net loss
 $(955)
 $(622)
Adjustments to reconcile net loss to cash used in operating activities
    
    
Depreciation and amortization
 49
  51 
Deferred income taxes
  - 
  - 
Amortization of debt discount and debt issuance costs
  - 
  200 
Stock-based compensation
  10 
  - 
Estimated fair value of warrants issued in connection with secured promissory notes
  121 
  - 
Loss on extinguishment of notes due to employees
  158 
  - 
Changes in assets and liabilities:
    
    
Accounts receivable
  33 
  33 
Inventories
  183 
  (526)
Prepaid expenses and other assets
  (20)
  17 
Accounts payable and accrued expenses
  (224)
  288 
Net cash used in operating activities
  (645)
  (559)
 
    
    
Cash flows from investing activities:
    
    
Purchases of equipment
  (16)
  (15)
Increase in other assets
  - 
  (79)
Net cash used in investing activities
  (16)
  (94)
 
    
    
Cash flows from financing activities:
    
    
Net borrowings on lines of credit
  8 
  (12)
Repayment of secured promissory notes
  (167)
  - 
Repayment of notes due to employees
  (24)
  (27)
Proceeds (repayments) from related party advances, net
  - 
  (20)
Proceeds from sale of common stock, net of issuance costs
  1,097 
  - 
Net cash provided by (used in) financing activities
  914 
  (59)
 
    
    
Effect of exchange rates on cash
  (92)
  225 
Net change in cash
  161 
  (487)
Cash at beginning of period
  108 
  587 
 
    
    
Cash at end of the period
 $269 
 $100 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Cash paid for interest
 $41 
 $46 
Cash paid for income taxes
 $13 
 $8 
 
    
    
Supplemental schedule of non-cash investing and financing activities:
    
    
Reclassification of warrant liability to additional paid in capital
 $- 
 $90 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
F-3
 
 
MEDITE CANCER DIAGNOSTICS,DIAGNOSTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 
 
  Nine Months Ended
September 30,
 
 
 
 2016
 
 
 2015
 
 
 
 (unaudited)
 
 
 (unaudited)
 
Cash flows from operating activities:
 
 
 
 
 
 
Net loss
 $(1,130)
 $(267)
Adjustments to reconcile net loss to net cash used in operating activities
    
    
Depreciation and amortization
  154 
  95 
Amortization of debt discount and debt issuance costs
  358 
  - 
Changes in assets and liabilities:
    
    
Accounts receivable, net
  187 
  689 
Inventories, net
  (1,107)
  (746)
Prepaid expenses and other current assets
  64 
  (54)
Accounts payable and accrued liabilities
  334 
  (109)
Net cash provided by (used in) operating activities
  (1,140)
  (392)
 
    
    
Cash flows from investing activities:
    
    
Purchases of equipment
  (25)
  (19)
Decrease in other assets
  28 
  (154)
Net cash provided by (used in) investing activities
  3 
  (173)
 
    
    
Cash flows from financing activities:
    
    
Net advances (repayments) on lines of credit and long-term debt
  313 
  (791)
Repayment of notes due to employees
  (62)
  (228)
Proceeds from sale of common stock, net issuance costs of $28
  - 
  2,056 
Net advances (repayments) from related parties
  82 
  (25)
Net cash provided by financing activities
  333 
  1,012 
 
    
    
Effect of exchange rates on cash
  249 
  (330)
Net increase (decrease) in cash
  (555)
  117 
Cash at beginning of year
  587 
  230 
 
    
    
Cash at end of the period
 $32 
 $347 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Cash paid for interest
 $140 
 $103 
Cash paid for income taxes
 $8 
 $68 
 
    
    
Supplemental schedule of non-cash financing activity:
    
    
Conversion of preferred stock to common stock
 $- 
 $525 
Settlement of liabilities through issuance of common stock
 $210 
  - 
Reclassification of warrant liability  to additional paid in capital
 $90 
 $- 
Issuance of warrants on secured promissory notes classified as additional paid-in capital and debt discount
 $248 
 $- 
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4
MEDITE CANCER DIAGNOSTICS, INC. AND SUBSIDIARIES
NOTESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except sharesshare and per share amounts)
 
Note 1.Organization
Note 1.          Organization
The Company
 
MEDITE Cancer Diagnostics, Inc. (“MDIT”, “MEDITE”, “we”, “us” or the “Company”) was incorporated in Delaware in December 1998.
 
These statements include the accounts of MEDITE Cancer Diagnostics, Inc. (former CytoCore, Inc.) and its wholly owned subsidiaries, which consists of MEDITE Enterprise, Inc., MEDITE GmbH, Burgdorf, Germany, MEDITE GmbH, Salzburg, Austria, MEDITE Lab Solutions Inc. (formerly MEDITE Inc.), Orlando, USA, MEDITE sp. z o.o., Zilona-Gora, Poland and CytoGlobe, GmbH, Burgdorf, Germany.
 
MEDITE is a medical technology company specialized in the development, manufacturing, and marketing of molecular biomarkers, premium medical devices and consumables for detection, risk assessment and diagnosis of cancerous and precancerous conditions and related diseases. The Company has 7875 employees in threefour countries, a distribution network to about 7080 countries and a wide range of products for anatomic pathology, histology and cytology laboratories is available for sale.
 
Note 2.Summary of Significant Accounting Policies
Note 2.          Summary of Significant Accounting Policies
 
Consolidation, Basis of Presentation and Significant Estimates
 
The accompanying condensed consolidated financial statements for the periods ended September 30,March 31, 2017 and 2016 and 2015 included herein are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-companyintercompany balances and transactions have been eliminated in consolidation.  Such consolidated financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 20162017 or for any other period. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company believes that the disclosures are adequate to make the interim information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements disclosed in the Report on Form 10-K for the year ended December 31, 20152016 filed on April 12. 2016 and the Company’s Form 10-K/A filed on September 6, 201614, 2017 and other filings with the Securities and Exchange Commission.
 
In preparing the accompanying condensed consolidated accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed consolidated financial statements and disclosures of contingencies. Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates.
 
F-4
Going Concern
 
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America,GAAP, which contemplate continuation of the Company as a going concern.  This contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  At September 30, 2016,March 31, 2017, the Company’s cash balance was $32,000$269,000 and its operating losses for the year ended December 31, 20152016 and for the ninethree months ended September 30, 2016March 31, 2017 have used most of the Company’s liquid assets and the negative working capital has grown by approximately $.8 million from December 31, 2015 to September 30, 2016.  Consequently, there isassets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. However, the negative working capital has declined by approximately $600,000 from December 31, 2016 to March 31, 2017.   The Company believes some portionraised additional cash of $1.1 million net of offering costs. from the sale of shares of common stock subsequent to December 31, 2016 through March 31, 2017 and an additional $250,000 from April 1, 2017 through the date of this filing.
The Company has settled three of the liabilities with employeesfive employee notes for $330,000 and warrants and paid the first installment of $94,000 in April 2017. The Company has extended the term of the secured promissory notes and has paid $167,000 of the balance outstanding as of the date of this filing and received notice that one noteholder will convert $50,000 into 100,000 shares of common stock at $0.50. Management believes that the remainder of the balance will be settled in some combination of cash and stock.
Management is actively seeking forms of debt andadditional equity financing.financing contemplated in the $4.25 million stock purchase agreement. The Company is currently negotiatinghas negotiated with certain parties whose obligations are due in the next twelve months to extend payment terms beyond one year. One lender with an outstanding balance of $801,000 has stated that they will not be able to refinance the debt. The default rate of interest will increase three percent.
Accrued salaries, vacation and related expenses at March 31, 2017, includes amounts owed the former CFO of approximately $1.1 million and amounts owed to both Michaela and Michael Ott totaling approximately $152,000.  Included in advances – related parties are amounts owed to the Company’s former CFO of $50,000 at March 31, 2017. The Company is workingowes Ms. Ott 91,136 Euros, ($97,351 as March 31, 2017). The Company has made arrangements to repay these obligations evenly over a 24 month period, starting on extendingOctober 31, 2017. The Company settled the $152,000 obligation through an upfront payment each of $6,750 and a payment plan which settled the amounts owed and established a payment schedule for a period of 18 months starting in October 2017. See Note 8 for further discussion regarding the legal proceedings with the Company’s former CFO.
The Company’s security agreement with its payment terms on employee notes, raisinglender has provided borrowings of 35% of our collateralized assets.  The Company continues to refinance this debt to provide additional equityliquidity.
Management continues to expand its product offerings and refinancing debthas also expanded its sales and other notes.  In addition, the Company may need to slow the pace of some of their new product rollouts.  distribution channels during 2017.
If management is unsuccessful in obtaining new forms of debt orcompleting its equity financing, theymanagement will begin negotiating with some of theirthe Company's major vendors and lenders to extend the terms of their debt and also evaluate certain expenses that have been implemented for the Company’s growth strategy.    However, there can be no assurance that the Company will be successful in these efforts. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
F-5
 
Revenue Recognition  
 
The Company derives its revenue primarily from the sale of medical products and supplies for the diagnosis and prevention of cancer. Product revenue is recognized when all four of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery of the products has occurred or risk of loss transfers to the customer; (3) the selling price of the product is fixed or determinable; and (4) collectability is reasonably assured. The Company generates the majority of its revenue from the sale of inventory. For its German subsidiaries,certain sales, the Company and its customers agree in the sales contract that risk of loss and title transfer upon the Company packing the items for shipment, segregating the items packaged and notifying the customer that their items are ready for pickup. The Company records such sales at time of completed packaging and segregation of the items from general inventory and notification has been confirmed by the customer. The Company’s revenues are primarily concentrated in the United States, Europe, primarily in Germany and Poland, and China.
 
Shipping and handling costs are included in cost of goods sold and charged to the customers based on the contractual terms.
 

Inventories
 
Inventories are stated at the lower of cost or market. Cost is determined using the first-in first-outfirst in first out method (FIFO) and market is based generally on net realizable value.
Inventories consists of parts inventory purchased from outside vendors, raw materials used in the manufacturing of equipment; work in process and finished goods. Management reviews inventory on a regular basis and determines if inventory is still useable. A reserve is established for the estimated decrease in carrying value for obsolete or excess inventory. Once a reserve is established, it is considered a permanent adjustment to the cost basis of the obsolete or excess inventory.
 
Foreign Currency Translation
 
The accounts of the U.S. parent company are maintained in United States Dollar (“USD”). The functional currency of the Company’s German subsidiaries is the EURO (“EURO”). The accounts of the German subsidiaries were translated into USD in accordance with Financial Accounting Standards Board (FASB) ASC Topic 830, “Foreign Currency Matters.” In accordance with FASB ASC Topic 830, allrelevant accounting guidance. All assets and liabilities wereare translated at the exchange rate on the balance sheet dates, stockholders’ equity was translated at the historical rates and statements of operations transactions wereare translated at the average exchange rate for each period. The resulting translation gains and losses are recorded in accumulated other comprehensive loss as a component of stockholders’ equityequity.
 
Research and Development
 
All research and development costs are expensed as incurred. Research and development costs consist of engineering, product development, testing, developing and validating the manufacturing process, and regulatory related costs.
 
Acquired In-Process Research and Development
 
Acquired in-process research and development (“IPR&D”) that the Company acquires through business combinations represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, MEDITE will make a determination as to the then useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization. The Company tests IPR&D for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the IPR&D intangible asset is less than its carrying amount. If the Company concludes it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value is performed. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results.
 
 
F-6
 
Impairment or Disposal of Long-Lived Assets Including Finite Lived Intangibles
At each balance sheet date or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, management of the Company evaluates the recoverability of such assets. An impairment loss is recognized if the amount of undiscounted cash flows is less than the carrying amount of the asset, in which case the asset is written down to fair value. The fair value of the asset is measured by either quoted market prices or the present value of estimated expected future cash flows using a discount rate commensurate with the risks involved. Unless events or circumstances have changed significantly, we generally do not re-test at year end assets acquired from a business combination in the year of acquisition.
 
Impairment of Indefinite Lived Intangible Assets Other Than Goodwill
 
The Company has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if the Company concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Financial Accounting Standards Board Codification Subtopic 350-30.relevant accounting guidance.
 
Goodwill
 
Goodwill is recognized for the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination.  Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31 for us) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.
 
Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit using a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital.
 
The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit.
 
Fair Value of Financial Instruments
The carrying value of accounts receivable, accounts payable, accrued expenses and secured lines of credit and long-term debt approximate their respective fair values due to their short maturities.  The Company issued warrants during the period ended September 30, 2016. These were recognized at their fair value using Level 3 inputs.  We have not determined the fair value of the Notes Due to Employees or Advances – related parties.
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). We measure our assets and liabilities using inputs from the following three levels of the fair value hierarchy:
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.
F-7
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 includes unobservable inputs that reflect our assumptions about what factors market participants would use in pricing the asset or liability. We develop these inputs based on the best information available, including our own data.
Net Loss Per Share
 
Basic loss per share is calculated based on the weighted-average number of outstanding common shares. Diluted loss per share is calculated based on the weighted-average number of outstanding common shares plus the effect of dilutive potential common shares, using the treasury stock method and the if-converted method. MEDITE’s calculation of diluted net loss per share excludes potential common shares as of September 30,March 31, 2017 and 2016 and 2015 as the effect would be anti-dilutive (i.e. would reduce the loss per share).
 
 In accordance with SEC Accounting Series Release 280, theThe Company computes its loss applicable to common stock holders by subtracting dividends on preferred stock, including undeclared or unpaid dividends if cumulative, from its reported net loss and reports the same on the face of itsthe condensed consolidated statement of operations.
F-7
 
Recent Accounting Pronouncements
 
In May 2016,2014, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue with Contracts from Customers.” ASU 2016-12, “Revenue from Contracts2014-09 supersedes the current revenue recognition guidance, including industry-specific guidance. The ASU introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The updated guidance is effective for public entities for interim and annual periods beginning after December 15, 2017 with Customers (Topic 606), Narrow Scope Improvements and Practical Expedients.” The amendments in ASU 2016-12 affect only the narrow aspects of Topic 606 that are outlined in ASU 2016-12. The effective date and transition requirementsearly adoption permitted for the amendments in this Update are the same as the effective date and transition requirements of Update 2014-09, which is discussed below.annual reporting periods beginning after December 15, 2016. The Company has not yet selected a transition method and is currently evaluating the impact of the updated guidance on its consolidated financial statements
 In April 2016, the FASB issued ASU 2016-10 “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing.” The amendments in this Update affect entities with transactions included within the scope of Topic 606. The scope of that Topic includes entities that enter into contracts with customers to transfer goods or services (that are an output of the entity’s ordinary activities) in exchange for consideration. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements of Update 2014-09, which is discussed below. The Company is currently evaluating the impact of the updated guidance on itsCompany’s consolidated financial statements.
 
In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.”  The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The updated guidance is effective for public entities for fiscal years beginning after December 15, 2016. The Company is currently evaluating the impact of the updated guidance, but the Company does not believe that the adoption ofhas adopted ASU 2016-09 will have a significantand it did not impact on its consolidated financial statements.
 
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”). The core principle of ASU 2016-02 is that an entity should recognize on its balance sheet assets and liabilities arising from a lease. In accordance with that principle, ASU 2016-02 requires that a lessee recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying leased asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on the lease classification as a finance or operating lease. This new accounting guidance is effective for public companies for fiscal years beginning after December 15, 2018 (i.e., calendar years beginning on January 1, 2019), including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on the Company’s consolidated financial statements.
 
F-8
 November 2015, the FASB issued Accounting Standards Update No. 2015-17 (ASU 2015-17) “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”.  ASU 2015-17 simplifies the presentation of deferred income taxes by eliminating the separate classification of deferred income tax liabilities and assets into current and noncurrent amounts in the consolidated balance sheet statement of financial position. The amendments in the update require that all deferred tax liabilities and assets be classified as noncurrent in the consolidated balance sheet. The amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods therein and may be applied either prospectively or retrospectively to all periods presented. Early adoption is permitted. We early adopted this standard in the fourth quarter of 2015 on a retrospective basis.
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): “Simplifying the Measurement of Inventory”. The amendments require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. The Company does not expect this amendment to have a material impact on its condensed consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03 - “Interest Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU No. 2015-03”), which changes the presentation of debt issuance costs in financial statements. ASU No. 2015-03 requires an entity to present such costs on the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. The standard’s core principle is that debt issuance costs related to a note are reflected in the balance sheet as a direct deduction from the face amount of that note and amortization of debt issuance costs is reported in interest expense. ASU No. 2015-032015-11 is effective for annual and interim periods beginning after December 31, 2016. The Company adopted this accounting pronouncement during the three months ended March 31, 2017 with no material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the definition of a business. The amendments in this Update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The guidance in this update is effective for fiscal years beginning after December 15, 2015,2017, and interim periods within those fiscal years. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted).  The Company adopted this ASU No. 2015-03 in its December 31, 2015 consolidated financial statements.  Accordingly, $20,000 of debt issuance costs have been presented on the balance sheet as a direct deduction from the related debt liability as of December 31, 2015. There were no debt issuance costs during the nine months ended September 30, 2016.
 
In August 2014,January 2017, the FASB also issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40)2017-04, Intangibles - Goodwill and other (Topic 350): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The amendments in ASU 2014-15 are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures.Simplifying the test for goodwill impairment. The amendments in this standard areUpdate remove the second step of the current goodwill impairment test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This guidance is effective for annual periods ending after December 15, 2016, and interim periods within annual periodsimpairment tests in fiscal years beginning after December 15, 2016. We are evaluating the effect, if any; adoption of ASU No. 2014-15 will have on our condensed consolidated financial statements.2019.
In May 2014, the FASB issued ASU 2014-09, “Revenue with Contracts from Customers.” ASU 2014-09 supersedes the current revenue recognition guidance, including industry-specific guidance. The ASU introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The updated guidance is effective for public entities for interim and annual periods beginning after December 15, 2017.  Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact of the updated guidance on the Company’s consolidated financial statements.
 
 
F-9F-8
 
 
Note 3.Inventories
Note 3.          Inventories
 
The following is a summary of the components of inventories (in thousands):
 
 
  
September 30,
2016
(Unaudited)
 
 
December 31, 
2015
 
Raw materials
 $2,003 
 $1,170 
Work in progress
  194 
  142 
Finished Goods
  2,036 
  1,763 
Reserve for obsolete inventory
  (51)
  - 
 
 $4,182 
 $3,075 
 
 
March 31,
2017 (Unaudited)
 
 
December 31,
2016
 
Raw materials
 $1,252 
 $1,309 
Work in process
  154 
  203 
Finished goods
  2,273 
  2,299 
 
 $3,679 
 $3,811 
 
During the nine months ended September 30, 2016, the Company recorded a reserve for obsolete inventory of approximately $51,000.  No amounts were reserved for obsolete inventory as of December 31, 2015
Note 4.Property and Equipment
  The following is a summary of the components of property and equipment as of (in thousands):
 
 
September 30,
2016
(Unaudited)
 
 
December 31,
2015
 
Land
 $215 
 $209 
Buildings
  1,193 
  1,158 
Machinery and equipment
  1,220 
  1,196 
Office furniture and equipment
  240 
  232 
Vehicles
  54 
  53 
Computer equipment
  91 
  87 
Construction in progress
  231 
  225 
Less: Accumulated depreciation
  (1,374)
  (1,219)
 
 $1,870 
 $1,941 
Note 5.Secured Lines of Credit, Long-Term Debt, and Notes Due to Employees
Note 4.          Secured Lines of Credit, Long-term Debt, and Notes Due to Employees
 
The Company’s outstanding notesnote payable indebtedness was as follows as of (in thousands):
 
 
September30, 
2016
(Unaudited)
 
 
December 31,
2015
 
 
March 31,
2017 (Unaudited)
 
 
December 31,
2016
 
Hannoversche Volksbank credit line #1
 $1,399 
 $1,120 
 $1,354 
 $1,321 
Hannoversche Volksbank credit line #2
  445 
  383 
  414 
  397 
Hannoversche Volksbank term loan #1
  - 
  61 
Hannoversche Volksbank term loan #2
  - 
  24 
Hannoversche Volksbank term loan #3
  141 
  182 
  104 
  117 
Secured Promissory Notes
  650 
  500 
Secured Promissory Note
  483 
  650 
DZ Equity Partners Participation rights
  841 
  818 
  801 
  789 
Total
  3,476 
  3,088 
  3,156 
  3,274 
Discount on secured promissory notes and debt issuance costs
  - 
  (110)
Less current portion of long-term debt
  (3,398)
  (2,857)
  (3,096)
  (3,214)
Long-term debt
 $78 
 $121 
 $60 
 
In July 2006, MEDITE GmbH, Burgdorf, entered into a master credit line #1 with Hannoversche Volksbank. The line of credit agreement #1 with Hannoversche Volksbank with maximum borrowings of Euro 1.1 million ($1.2 million as of September 30,was amended in 2012, 2015 and again in 2016, in which were reduced to Euro 1.1 million ($1.2 million as of September 30, 2016). Thethe credit line was increased toavailability is Euro 1.3 million ($1.51.39 million as of September 30, 2016) in September 2016 without stated maturity date.March 31, 2017). Borrowings on the master line of credit agreement #1 bears interest at a variable rate based on Euribor (Euro Interbank Offered Rate) depending on the type of advance elected by the Company and defined in the agreement. Interest rates depending on the type of advance elected ranged from 3.773.75 – 8.00% during the periodthree months ended September 30, 2016 and the year ended DecemberMarch 31, 2015.2017. The line of credit has no stated maturity date. The line of credit is collateralized by the accounts receivable and inventory of MEDITE GmbH, Burgdorf, and a mortgage on the buildingsbuilding owned by the Company and is guaranteed by Michaela Ott and Michael Ott, stockholders of the Company.
 
F-10
In June 2012, CytoGlobe, GmbH, Burgdorf, entered into a line of credit agreementline #2 with Hannoversche Volksbank. The line of credit granted a maximum borrowing authority of Euro 400,000 ($448,880427,280 as of September 30, 2016)March 31, 2017). Borrowings on the master line of credit agreement #2 bears interest at a variable rate based on Euribor (Euro Interbank Offered Rate) depending on the type of advance elected by the Company and defined in the agreement. Interest rates ranged from 3.773.90 – 8.00% during the period ended September 30, 2016 and the year ended DecemberMarch 31, 2015.2017. The line of credit has no stated maturity date. The line of credit is collateralized by the accounts receivable and inventory of CytoGlobe GmbH, Burgdorf and is guaranteed by Michaela Ott and Michael Ott, stockholders of the Company, and the state of Lower Saxony (Germany) to support high-tech companies in the area.
  
In December 2006, MEDITE GmbH, Burgdorf, entered into a Euro 500,000 ($561,100 as of September 30, 2016) term loan agreement #1 with Hannoversche Volksbank with an interest rate of 3.4% per annum. The loan has been paid in full as of September 2016. The term loan was guaranteed by Michaela Ott and Michael Ott, stockholders of the Company, and a mortgage on the property of the Company. 
In June 2006, MEDITE GmbH, Burgdorf, entered into a Euro 400,000 ($448,880 as of September 30, 2016) term loan #2 with Hannoversche Volksbank with an interest rate of 3.6 % per annum. The loan was paid back in full as of June 2016. The term loan was guaranteed by Michaela Ott and Michael Ott, stockholders of the Company, and was collateralized by subordinated assignments of all of the receivables and inventories of MEDITE GmbH, Burgdorf and also had a subordinated pledge of share term life insurance policies.
        In November 2008, MEDITE GmbH, Burgdorf, entered into a Euro 400,000 ($448,880427,280 as of September 30, 2016)March 31, 2017) term loan #3 with Hannoversche Volksbank with an interest rate of 4.7% per annum. The term loan has a maturity of December 31, 2018, and requires quarterly principal repayments of Euro 13,890 ($15,58714,517 as of September 30, 2016)March 31, 2017). The term loan is guaranteed by Michaela Ott and Michael Ott, stockholders of the Company, and is collateralized by a partial subordinated pledge of the receivables and inventory of MEDITE GmbH, Burgdorf.
 
In March 2009, the Company entered into a participation rights agreement with DZ Equity Partners (“DZ”) in the form of a debenture with a mezzanine lender who advanced the Company up to Euro 1.5 million, ($1.71.6 million as of September 30, 2016)March 31, 2017) in two tranches of Euro 750,000 each ($841,650801,150 as of September 30, 2016)March 31, 2017). The first tranche was paid to the Company at closing with the second tranche being conditioned on MEDITE GmbH, Burgdorf and its subsidiaries hitting certain performance targets. Those targets were not met and the second tranche was never called. The debenture pays interest at the rate of 12.15% per annum and matures atmatured on December 31, 2016, however the timeNotes are not considered in default until June 1, 2017, when the German financial statements for the year ended December 31, 2016 are issued, anticipateddue to be May 31, 2017.filed. The Company has initiated discussions with DZ to renegotiate the terms of the agreement or to convert any part of the balance into stock. DZ has stated that they will not be able to refinance the debt. The default rate of interest will increase three percent.
F-9
 
On December 31, 2015, the Company entered into a Securities Purchase Agreement (the “2015 Purchase Agreement”) with seven (7) individual accredited investors one which serves on the Company’s Board of Directors and is the chairman of the Company’s Audit Committee  (collectively the “Purchasers”), pursuant to which the Company agreed to issue to the Purchasers secured promissory notes in the aggregate principal amount of $500,000 with interest accruing at an annual rate of 15% (the “Note(s)”) and warrants to purchase up to an aggregate amount of 250,000 shares of the common stock, par value $0.001) per share, of the Company (the “Warrant(s)”). See Note 8 with an initial exercise price of $1.60 per share, subject to adjustment and are exerciseable for further discussion ona period of five years.  On March 15, 2016, the Board of Directors approved renegotiated terms to increase the warrants issued to the Purchasers from a total of 250,000 warrants to 500,000 and fixed the exercise price of the warrants to $0.80. The Notes mature on the Notes.earlier of the third month anniversary date following the Closing Date, as defined in the Note, or the third business day following the Company’s receipt of funds exceeding one million dollars from an equity or debt financing, not including the financing contemplated under the 2015 Purchase Agreement. The Notes maturedare secured by the Company’s accounts receivable and inventories held in the United States.  If the Notes are not redeemed by the Company on maturity, the Purchasers are entitled to receive 10% of the principal balance of the Notes outstanding in warrants for every month that the Notes are not redeemed.  On March 31, 2016, these Notes matured and were not repaid.  Therefore the Notes were in default on April 1, 2016.  The Company agreed to pay the Purchasers 10% of the principal balance of the Notes in warrants until the principal balance isNotes are repaid.  See Note 8 for further discussion on WarrantsDuring the three months ended March 31, 2017, the Company issued on50,000 warrants in connection with the Notes.default provision and 100,000 warrants in connection with the January 2017 extension provision (see below), which were valued at $11,443 and $28,167, respectively and recorded it as interest expense in the condensed consolidated statement of operations. The Notes are secured by the Company’s accounts receivable and inventories held in the United States. In January 2017, the Company extended the term of the Notes in default on April 1, 2016 to June 30, 2017 and reduced the price on the warrants issued from $0.80 to $0.50. The Company recorded $64,405 attributed to the repricing of the warrants.
 
F-11
warrants attributed to the Notes of approximately $90,000.  The discount was amortized to interest expense during the three months ended March 31, 2016. We did not have any discount amortization for the period ended March 31, 2017.
 
On May 25, 2016, the Company entered into a Securities Purchase Agreement (the “May Purchase Agreement”) with two (2) individual accredited investors, one of which who serves on the Company’s  Board of Directors (collectively the “May Purchasers”), pursuant to which the Company agreed to issue to the May Purchasers secured promissory notes in the aggregate principal amount of $150,000 (the “May Note(s)”) with an interest rate of 15% and warrants to purchase up to an aggregate amount of 150,000 shares of the common stock, par value $0.001 per share, of the Company (the “May Warrant(s)”). The Notes mature on the earlier of the third (3rd) month anniversary date following the Closing Date or August 25, 2016 and were not repaid.  The May Notes may be converted into Units issued pursuant to the Company’s private financing of up to $5,000,000 (the “Follow On Offering”) Units at a price of $.80/$0.80/Unit (the “Units”) consisting of: (i) a  2 year unsecured convertible note, which converts into shares of common stock at an initial conversion price of $.80$0.80 per share and (ii) a warrant to purchase one half additional share of common stock, with an initial exercise price equal to $.80$0.80 per share (the “Follow On Warrant”). The May Notes are secured by the Company’s accounts receivable and inventories held in the United States.
The Company engaged TriPoint Global Equities, LLC (the “Agent”) as placement agentrecorded a debt discount of $51,000 related to the relative fair value of the warrants on the date of the May Purchase Agreement, which was amortized to interest expense in the consolidated statement of operations during the year ended December 31, 2016. If the May Notes are not redeemed by the Company on maturity, the Purchasers are entitled to receive 10% of the principal balance of the Notes outstanding in warrants for every month that the Notes are not redeemed. In January 2017 the Company extended the term of the Notes in default on April 1, 2016 to June 30, 2017 and reduced the price on the warrants issued from $0.80 to $0.50. On August 25, 2016, these Notes matured and were not repaid.  Therefore the Notes were in default on August 26, 2016. The Company agreed to pay the Purchasers 10% of the principal balance of the May Notes in warrants until the May Notes are repaid. During the three months ended March 31, 2017, the Company issued 45,000 warrants in connection with the sale of securitiesJanuary 2017 extension provision, which were valued at $17,110 and recorded it as interest expense in the offering (the “Offering”) and agreed to pay the Agent (i) cash commissions equal to three percent (3%)consolidated statement of the gross proceeds ($4,500) received by the Company; and (ii) warrants to purchase such number of securities equal to three percent (3%) of the aggregate number of shares of common stock issuable in connection with the Offering (the “Agent Warrant(s)”). The Agent’s Warrants will have the same terms and conditions as the May Warrants purchased by the May Purchasers. At September 30, 2016, a total of 4,500 warrants were issued to TriPoint (See Note 8 for further discussion on warrants).operations.
 
In November 2015 and February 2016, the Company entered into promissory notes totaling $927,000 with certain employees to repay wages earned prior to December 31, 2014 not paid (“Notes Due to Employees").  The Notes Due to Employees are to be paid monthly through September 2019, with no interest due on the outstanding balances.  The monthly amounts increase over the payment term.  The amounts due become immediately due and payable if payments are more than ten days late either one or two consecutive months as defined in the agreement with the employee.  At September

On March 30, 2016, all Notes Due to Employees, except one, are in default and due on demand. Therefore,2017, the Notes Due to Employees in default are presented asCompany negotiated a settlement with three current employees that hold notes, in the condensed consolidated balance sheets.  Certainamount of $580,000 plus accrued vacation. The agreement supersedes all prior agreements with group and was effective December 31, 2016. The Company is to pay these employees may convert anyapproximately $330,000, the first payment of $94,000 was paid in April 2017, the amounts owed duringsecond payment of $94,000 30 days from signing the durationagreement and the final payment of the note to equity at a discounted price as defined in$142,000 60 days from signing the agreement. The Company is currently negotiatingemployees are working with the Company, regarding the timing of the payments discussed above. The Company issued 1,029,734 warrants to purchase common stock at $0.50 a share with a term of 5 years. The fair value of the warrants issued of $389,000 for the three months ended March 31, 2017, was valued based on the Black Scholes model based on a stock price of $0.70, an interest free rate of 1.33% and volatility of 50%. The settlement was accounted for as an extinguishment under the applicable accounting guidance. The Company recorded a loss on extinguishment on notes due to employees whose notes are in default to extend the payment terms.of $158,000.
 
F-10
 Note 6.Related Party Transactions
Note 5.          Related Party Transactions
 
Included in advances – related parties are amounts owed to the Company’s former CFO and former CEO and Chairman of the Board of $50,000 and $70,000 at September 30, 2016March 31, 2017 and December 31, 2015, respectively.2016. Also included in advances – related parties are amounts owed to Ms. Ott of 20,000 Euros, ($21,364 as March 31, 2017) and $75,000 related to two short term bridge loans. The Company paid $20,000 duringhas made arrangements to settle these obligations evenly over a 24 month period, starting on October 31, 2017. In addition, the threeCompany settled obligations related to accrued salaries, vacation and ninerelated expenses totaling $152,000 owed to Mr. and Ms. Ott. The Company will make an upfront payment to each Mr. and Ms. Ott of $6,750 and will pay the remaining amount owed over a period of 18 months ended September 30, 2016, respectively.    At September 30, 2016starting in October 2017  The loans noted above are interest-free loans.
 Accrued salaries, vacation and related expenses at March 31, 2017 and December 31, 2015, the Company owes2016, includes amounts owed to the former CFO of approximately $1$1.1 million, and $937,000 of unpaid wages and accrued vacation, respectively, which is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets. Also included in advances – related parties is 20,000 Euros, ($22,444 as of September 30, 2016) and $80,000 related to two short term bridge loans made toSee Note 8 for further discussion regarding the Company by itslegal proceedings with the Company’s former CEO and current COO of the Company.  This is an interest-free loan and is to be repaid by the Company before December 31, 2016.CFO.
 
The former CEO and current COO Michaela Ott together with Michael Ott, Chairman of the Board and Chief Executive officer of the Company’s wholly owned subsidiaries Medite Enterprise Inc. and Medite GmbH provided an additional $950,000 in a non-interest bearing short term advance at the end of the first quarter 2015 to the Company. This advance was made pending the share placement and was due on demand and repaid in second quarter of 2015.  Included in accounts payable and accrued expenses at September 30, 2016 and at December 31, 2015, are amounts owed to both the Michaela and Michael Ott totaling approximately $133,000 and $90,000, respectively, of accrued wages and car allowances.
F-12
Note 7.Common Stock
Note 6.          Common Stock
 
During the nine month periodthree months ended September 30, 2016,March 31, 2017, the Company issued 213,3172,360,000 shares of common stock for $1,180,000, less $83,400 of issuance costs. In connection with the issuance of common stock, the Company issued 1,180,000 warrants to certain memberspurchase shares of common stock at $0.50, for a term of 5 years. We also issued 50,000 shares from stock subscriptions of $25,000 at December 31, 2016 and issued 25,000 warrants on the Boardsame terms and conditions. During the quarter ended March 31, 2016, the Company did not issue any shares of Directors and other unrelated parties as consideration for $210,000 of accrued director fees and consulting fees.common stock.
 
Note 8.Preferred Stock and Warrants
Note 7.          Preferred Stock and Warrants
 
A summary of the Company’s preferred stock as of September 30, 2016March 31, 2017 and December 31, 20152016 is as follows.
 
 
September 30,
2016
(unaudited)
 
 
 
December 31,
2015
 
 
March 31,
2017
(unaudited)
 
 
 
December 31,
2016
 
 
Shares Issued &
 
 
Shares Issued &
 
 
Outstanding
 
Offering
 
Outstanding
 
Series A convertible
  47,250 
  47,250 
Series B convertible, 10% cumulative dividend
  93,750 
  93,750 
Series C convertible, 10% cumulative dividend
  38,333 
  38,333 
Series E convertible, 10% cumulative dividend
  19,022 
  19,022 
Total Preferred Stock
  198,355 
  198,355 
 
As of September 30, 2016March 31, 2017 and December 31, 2015,2016, the Company had cumulative preferred undeclared and unpaid dividends. In accordance with the Financial Accounting Standard Board’s Accounting Standards Codification 260-10-45-11, “Earnings per Share”,relevant accounting guidance, these dividends were added to the net loss in the net loss per share calculation.
Summary of Preferred Stock Terms
Series A Convertible Preferred Stock
Liquidation Value:$4.50 per share, $212,625
Conversion Price:$10,303 per share
Conversion Rate:0.00044—Liquidation Value divided by Conversion Price ($4.50/$10,303)
Voting Rights:None
Dividends:None
Conversion Period:Any time
Series B Convertible Preferred Stock
Liquidation Value:$4.00 per share, $375,000
Conversion Price:$1,000 per share
Conversion Rate:0.0040—Liquidation Value divided by Conversion Price ($4.00/$1,000)
Voting Rights:None
Dividends:10%—Quarterly—Commencing March 31, 2001
Conversion Period:Any time
Cumulative dividends in arrears at September 30, 2016 were $586,288  
F-13
Series C Convertible Preferred Stock
Liquidation Value:$3.00 per share, $115,000
Conversion Price:$600 per share
Conversion Rate:0.0050—Liquidation Value divided by Conversion Price ($3.00/$600)
Voting Rights:None
Dividends:10%—Quarterly—Commencing March 31, 2002
Conversion Period:Any time
Cumulative dividends in arrears at September 30, 2016 were $171,538  
Series D Convertible Preferred Stock
Liquidation Value:$10.00 per share, $525,000
Conversion Price:$1,000 per share
Conversion Rate:.01—Liquidation Value divided by Conversion Price ($10.00/$1,000)
Voting Rights:None
Dividends:10%—Quarterly—Commencing April 30, 2002
Conversion Period:Any time
Cumulative dividends in arrears at September 30, 2016 were $0  
The Series D Convertible Preferred Stock, including all outstanding accrued dividends of $656,250, was converted to 12,100 shares of the Company’s common stock during the year ended December 31, 2015.
Series E Convertible Preferred Stock
Liquidation Value:$22.00 per share, $418,488
Conversion Price:$800.00 per share
Conversion Rate:.0275—Liquidation Value divided by Conversion Price ($22.00/$800)
Voting Rights:Equal in all respects to holders of common shares
Dividends:10%—Quarterly—Commencing May 31, 2002
Conversion Period:Any time
Cumulative dividends in arrears at September 30, 2016 were $631,548  
 
Warrants outstanding
 
 
 
 
 
Weighted
 
 
Warrants
 
 
Weighted Average Exercise Price
 
 
Aggregate Intrinsic Value
 
 
Weighted Average Remaining Contractual Life (Years)
 
 
 
 
 
Weighted
 
 
 
 
 
Average
 
 

 
 
Average
 
 
Aggregate
 
 
Remaining
 
 
Options and 
 
 
Exercise
 
 
Intrinsic
 
 
Contractual
 

 
Warrants

 
Price
 
 
Value
 
 
Life (Years)
 
Outstanding at December 31, 2015
  400,808 
 $2.29 
  — 
  5.18 
Outstanding at December 31, 2016
  1,396,161 
 $1.08 
  — 
  4.11 
Granted
  734,500 
 $0.80 
  — 
  5.00 
  2,932,024 
  0.50 
  — 
  5.00 
Exercised
  — 
  — 
Expired
  — 
  — 
  — 
Outstanding at September 30, 2016
  1,135,308 
 $1.15 
  — 
  4.58 
Outstanding at March 31, 2017
  4,328,184 
 $0.60 
  — 
  4.60 
 
InDuring the three month period ended March 31, 2017, the Company issued 195,000 warrants in connection with the secured promissory notes issued on December 31, 2015, as discussed in Note 5, the Company issued an aggregatedefault provisions of 250,000 warrants to purchase shares of common stock with a par value of $0.001 for $1.60 per shares.  The exercise price and number of warrants were subject to a change as defined in the agreement.  The warrants are exercisable for a period of five (5) years.   On March 15, 2016, the Board of Directors agreed to renegotiated terms with the warrant holders to remove the anti-dilution and price protection features in the warrant agreement and fixed the exercise price at $.80. The warrants issued with the Notes and the May Notes, which were increased from 250,000 to 500,000.  
F-14
At March 15, 2016 and December 31, 2015, the Company determined the fairvalued at $56,720.  The value of the warrants issued with the secured promissory notes and renegotiated termswere determined using the Black Scholes pricingBlack-Scholes model, and the following assumptions:  an interest free rate of 1.75%, volatility of 50% and a remaining term of 5 years. Based on information known at March 15, 2016 and December 31, 2015, the Company priced the warrants with an assumed stock and exercise price of $0.80.  The fair value of the warrants initially issued with the secured promissory notes and renegotiated terms were both determined to be approximately $90,000 or aggregate value of $180,000.  The aggregate fair value amount of $180,000 has been fully amortized into interest expense at June 30, 2016.
The secured promissory notes issued December 31, 2015 as discussed in Note 5 matured on March 31, 2016 and were not repaid.  Therefore, the secured promissory notes were in default as of the April 1, 2016.  The Company agreed to pay the Purchasers 10% of the $500,000 principal balance in warrants for the months of April 2016 until September 2016.  Therefore, for these months, the Company issued an aggregate 300,000 warrants and recorded interest expense related to the issuance of these warrants, attributable to the secured promissory notes of approximately $105,000. The Company continues to be in default and anticipates issuing additional warrants attributed to this default until such time as the Company can repay the debt or complete the contemplated offering discussed below under Subsequent Events (See Note 10).
 In connection with the secured promissory notes issued on May 25, 2016, as discussed in Note 5, the Company issued an aggregate of 150,000 warrants to purchase shares of common stock with a par value of $0.001 for $0.80 per shares.    The warrants are exercisable for a period of five (5) years. 
At May 25, 2016, the Company determined the fair value of the warrants issued with the secured promissory notes using the Black Scholes pricing model and the following assumptions: an interest free rate of 1.33%, volatility of 50% and a remaining term of 5 years. Based on information known at May 25, 2016,years and a market price of between $0.50 to $0.80 during the three months ended March 31, 2017.
F-11
During January 2017, the Company pricedreached an agreement with all secured promissory noteholders, to extend the warrants with an assumed stock and exercise pricematurity of $0.80. At May 25, 2016, the fair value of the warrants of $51,000 was recorded as a discount on the related secured promissory notes to June 30, 2017, whereby the warrants were repriced from $0.80 a share to $0.50 a share. The notes continue to bear interest at 15% and additional paid-in capital. the secured promissory noteholders continue to receive warrants amounting to 10% of the principal balance, as long as the notes remain outstanding. The Company repriced all warrants issued totaling 1.2 million warrants amounting to a $64,405 incremental value using the Black-Scholes model on January 16, 2017, the date of the amendments at a current market price of $0.36 a share, at an interest free rate of 1.33% and a remaining terms ranging from 4 years to 4 years and 11.5 months.
During the three months and nine months ended September 30, 2016 $31,000 and $51,000 of the discount on debt has been amortized into interest expense, respectively.  The aggregate fair value amount of $51,000 warrants for all the notes has been fully amortized into interest expense at September 30, 2016. The secured promissory notes issued May 25, 2016 as discussed in Note 5 matured on August 25, 2016 and were not repaid.  Therefore, the secured promissory notes were in default as of the August 26, 2016.  The Company agreed to pay the Purchasers 10% of the $150,000 principal balance in warrants for the months of August 2016 through September 2016.  Therefore, for these months,March 31, 2017, the Company issued an aggregate 30,000 warrants and recorded interest expense related to2,360,000 shares of common stock for $1,180,000, less $83,400 of issuance costs. In connection with the issuance of these warrants, attributable to the secured promissory notes of approximately $11,000. The Company continues to be in default and anticipates issuing additional warrants attributed to this default until such time ascommon stock, the Company can repayissued 1,180,000 warrants to purchase shares of common stock at $0.50, for a term of 5 years. We also issued 50,000 shares from stock subscriptions of $25,000 at December 31, 2016 and issued 25,000 warrants on the debt or completesame terms and conditions. On January 16, 2017 the contemplated offering (See Also Note 10).Company also amended the original equity raise closed on December 7, 2016 and issued an additional 411,915 warrants to purchase shares of common stock at an exercise price of $0.50, for a term of 5 years.
 
Note 9.Commitments and Contingencies
Note 8.           Commitments and Contingencies
Legal Proceedings
On November 13, 2016, the Company’s former CFO filed a complaint against the Company and certain officers and directors of the Company in the United States District Court for the Northern District of Illinois, Eastern Division, Case No. 1:16-cv-10554, whereby he is alleging (i) breach of the Illinois Wage and Protection Act, (ii) breach of employment contract and (iii) breach of loan agreement. He is seeking monetary damages up to approximately $1,665,972. The Company has denied the substantive allegations in the complaint and is vigorously defending the suit. Management believes that the claims set forth in the complaint against the Company are without merit. The Company has accrued wages and vacation of approximately $1.1 million and a $50,000 note payable to the former CFO at March 31, 2017 and December 31, 2016. The Company believes that $836,000 was to be converted into common stock as a condition of the merger agreement at $2.00 a share. The presiding Federal Judge has referred the lawsuit to mediation. No settlement was reach during April 2017 meditation. The magistrate judge highly recommended that both parties work towards a settlement and scheduled an update meeting in September 2017.
Note 9.          Segment Information
 
The Company leases 12 vehicles for salesoperates in one operating segment. However, the Company has assets and service employees, deliveryoperations in the United States, Germany and other purposes with varying expiration date through September 2019.Poland. The current minimum monthly payment for these vehicle leases is $5,961following tables show the breakdown of the Company’s operations and assets by region (in thousands):
 
The Company has several operation leases for office, laboratory and manufacturing space. The Company’s operating lease for one of its German facilities can be cancelled by either party with a 3 months’ notice, its Poland facility can be terminated by either party with a six month notice. Monthly rent payments for the German and Poland facilities are Euro 6,200 ($6,950 as of September 30, 2016) and PLN 6,240 ($1,646 as of September 30, 2016), respectively. The Company’s laboratory facility in Chicago, IL terminates June 30, 2018 and requires monthly payments of $1,175. The Company also sublease its former Chicago laboratory facility for $3,948 per month. The lease for this facility terminates October 31, 2016 and requires monthly rent payments of $4,526. The Company’s Orlando facility has escalating rents ranging from $2488 to $2,563 per month and terminates July 31, 2018. The total aggregate monthly lease payments (net of the sublease) required on these leases is $12,837.
 
 
United States
 
 
Germany
 
 
Poland
 
 
Total
 
 
 
March 31,
2017
 
 
December
31, 2016
 
 
March 31,
2017
 
 
December
31, 2016
 
 
March 31,
2017
 
 
December
31, 2016
 
 
March 31,
2017
 
 
December
31, 2016
 
Assets
 $11,637 
 $11,268 
 $6,072 
 $6,264 
 $99 
 $238 
 $17,809
 $17,770 
Property & equipment, net
  65 
  68 
  1,478 
  1,487 
  4 
  2 
  1,547 
  1,557 
Intangible assets
  10,518 
  10,518 
  - 
  - 
  - 
  - 
  10,518 
  10,518 
 
 
       United States
 
 
       Germany
 
 
       Poland
 
 
       Total
 
 
 
March 31, 2017 
 
 March 31, 2016 
 March 31, 2017 
 March 31, 2016 
 March 31, 2017 
 March 31, 2016 
 March 31, 2017 
 March 31, 2016 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Histology Equipment
 $146 
 $87 
 $760 
 $1,106 
 $8 
 $15 
 $914 
 $1,208 
Histology Consumables
  104 
  47 
  573 
  417 
  - 
  - 
  677 
  464 
Cytology Consumables
  - 
  140 
  300 
  319 
  - 
  - 
  300 
  459 
Total Revenues
 $250 
 $274 
 $1,633 
 $1,842 
 $8 
 $15 
 $1,891 
 $2,131 
Net loss
 $(570)
 $(490)
 $(216)
 $(89)
 $(169)
 $(43)
 $(955)
 $(622)
 
 
F-15F-12
 
The Company signed a note with its current accountants in the amount of approximately $185,000 for audit and review services provided through June 30, 2016.  The Company agreed to pay an initial installment of $30,000 upon signing the agreement and $10,000 a month commencing September 2016. The remaining balance is due upon the initiation of the December 31, 2016 audit and no later than December 31, 2016. All amounts owed to the Company's accountants as of September 30, 2016 have been included in accounts payable and accrued expenses on the consolidated balance sheets. The total amount due on the note is $155,000 at September 30, 2016 and an additional $38,000 for quarterly filings and fees outstanding as of September 30, 2016.
Note 10.Subsequent Events
Note 10.          Subsequent Events
 
On October 26, 2016,May 4, 2017, the Board of Directors (the “Board”) of the Company held a meeting whereby itMEDITE Cancer Diagnostics, Inc. (the “Company”) accepted the resignation of Michaela Ott as Chief ExecutiveOperating Officer of the Company, effective immediately. Michaela Ott was then appointed by a unanimous voteFurther, the Board accepted Ms. Ott’s resignation from her position as Managing Director of the Company’s wholly-owned subsidiary, Medite GmbH, as well as managing director of CytoGlobe GmbH, Burgdorf, a wholly owned subsidiary of Medite GmbH, effective immediately. Ms. Ott shall further resign from her position as Managing Director of Medite GmbH, Austria, also a wholly-owned subsidiary of Medite GmbH, effective no later than September 30, 2017. Ms. Ott shall remain on the Board of Directors of the Company. Ms. Ott’s resignations do not arise from any disagreement on any matter relating to the position of Chief Operating OfficerCompany’s operations, policies or practices, or regarding the general direction of the Company or any of its subsidiaries. Ms. Ott shall take all her remaining holiday leave with no further obligation to render services to the Company or its subsidiaries and shall receive her monthly remuneration of EUR 10,000 ($10,682 at March 31, 2017) through September 30, 2017. The Company agrees to pay to Ms. Ott outstanding accrued compensation due to her in the amount of EUR 75,098, to be paid in eighteen monthly installments of EUR 4,172 commencing October 31, 2017, and at the end of each subsequent month thereafter until paid in full. Further, the Company agrees that upon achieving annual revenue of EUR 15 million (16.0 million at March 31, 2017) by no later than December 31, 2020, the same termsCompany shall make a one- time payment to Ms. Ott of EUR 30,000 ($32,046 at March 31, 2017). The payment will be due one month after the adoption of the annual financial statement for the year in which the revenue threshold is exceeded. The Company shall repay to Ms. Ott a loan provided by her to the Company with a current loan value of EUR 91,136 ($97,351 at March 31, 2017). Repayment of the loan shall be made in twenty-four equal monthly installments of EUR 3,797 ($4,056 at March 31, 2017), commencing on October 31, 2017, and conditions ason the last day of each month thereafter until the loan is repaid in full. Ms. Ott agrees to maintain her current employment,personal guarantee to servevarious financial institutions with respect to certain financial obligations of the Company until her resignation or removal.September 30, 2017. The Company shall undertake to provide sufficient security to these financial institutions commencing October 1, 2017, whereby the Company shall secure the release of Ms. Ott’s personal guarantee. The Company shall further transfer to Ms. Ott the direct life insurance policy currently maintained by the Company for the benefit of Ms. Ott.
 
Further, on May 4, 2017, the Board also accepted the resignation of Michael Ott as Chief Operating OfficerChairman of the Company,Board, effective immediately. Mr. Ott shall remain on the Board of Directors of the Company. Mr. Ott further resigned as Managing Director of the Company’s wholly-owned German subsidiary, Medite GmbH, as well as from his position as Managing Director of CytoGlobe GmbH, Burgdorf, a wholly-owned subsidiary of Medite GmbH, effective immediately. Mr. Ott shall resign from his position as Managing Director of Medite sp. z. o.o., Poland, also a wholly-owned subsidiary of Medite GmbH, effective no later than September 30, 2017. Mr. Ott’s resignations do not arise from any disagreement on any matter relating to the Company’s operations, policies or practices, or regarding the general direction of the Company or its subsidiaries. Mr. Ott shall take all his remaining holiday leave and shall receive his monthly remuneration of EUR 10,000 ($10,682 at March 31, 2017) through September 30, 2017. The Company agrees to pay to Mr. Ott outstanding accrued compensation due to him in the amount of EUR 52,473 ($56,052 at March 31, 2017), to be paid in eighteen monthly installments of EUR 2,915 ($3,114 at March 31, 2017) commencing October 31, 2017, and at the end of each subsequent month thereafter until paid in full. Further, the Company agrees that upon achieving annual revenue of EUR 15 million ($16 million at March 31, 2017) by no later than December 31, 2020, the Company shall make a one- time payment to Mr. Ott of EUR 30,000 ($32,046 at March 31, 2017). The payment will be due one month after the adoption of the annual financial statement for the year in which the revenue threshold is exceeded. Mr. Ott agrees to maintain his personal guarantee to various financial institutions with respect to certain financial obligations of the Company until September 30, 2017. The Company shall undertake to provide sufficient security to these financial institutions commencing October 1, 2017 whereby the Company shall secure the release of Mr. Ott’s personal guarantee. The Company shall further transfer to Mr. Ott the direct life insurance policy currently maintained by the Company for the benefit of Mr. Ott.
On May 4, 2017, the Board unanimously elected David E. Patterson, the Company’s Chief Executive Officer of the Company’s wholly owned subsidiaries, MEDITE Enterprises, Inc., and MEDITE GmbH, and CytoGlobe, GmbH.
 The Board further accepted the resignation of Robert F. McCullough, Jr. as Chairman of the Board and unanimously elected Michael OttDirector, to the position of Chairman of the Board to serve until such time as his resignation or removal.
 On November 5, 2016, The Board of the Company held a special meeting and dismissed Robert F. McCullough, Jr. from his position as Chief Financial Officer, Secretary and Treasurer.
The Board, by unanimous consent, appointed David E. Patterson to the position of Chief Executive Officer and Director of the Company to serve until such time as his removal or resignation. Pursuant to Mr. Patterson’s Executive Employment Agreement with the Company, the Commencement Date of Mr. Patterson’s appointment shall be October 31, 2016. He shall receive an annual base salary of $120,000. He shall also be granted 250,000 restricted shares valued at $85,000 of the Company’s common stock (the “Shares”). The Shares will vest in three (3) equal installments on each of the first three annual anniversary dates of Mr. Patterson’s appointment, so long as he remains employed by the Company through each such vesting date. Mr. Patterson shall also be entitled to annual performance bonuses, benefits and vacation in accordance with the Company’s current policy.
The Board further unanimously voted to appoint David E. Patterson to the position of DirectorDirectors of the Company, to serve until his resignation or removal.
 
On November 12, 2016, the Board ofEffective April 28, 2017, the Company held a meeting whereby it appointed our Chief Executive Officer, David E, Patterson,increased the authorized shares from 35,000,000 to the position of Chief Financial Officer/Treasurer/Secretary to serve on an interim basis until a suitable permanent replacement is appointed.
On November 2, 2016, the Company filed a Form D Notice of Exempt Offering of Securities for up to $3,000,000. The Company received $306,000, as an initial funding of this offering at $0.50 a share, 613,830 shares of common stock issued. The offering is subject to a up to 7.5% commission paid to their broker/dealers. plus warrants of 7.5% coverage at $0.50 conversion price per share, with a term of 5 years. The Company has an agreement with one broker/dealer to provide 7% commission paid in cash to them plus warrants of 50% coverage at $0.50 conversion price per share, with a term of 5 years. Total cash commissions paid was $22,484. As of November 14, 2016, these shares have not yet been issued but will be issued shortly after this filing.
50,000,000.
 
The Notes discussed in Note 5 above for $500,000 maturedBoard appointed two officers on March 31, 2016May 4, 2017 who will receive 350,000 shares of restricted common stock with a three year vesting schedule and $150,000 matured on August 25, 2016, respectively and were not repaid. Therefore, the Notes were in defaults asApril 26, 2017 appointed an officer who will receive 200,000 shares of the date of this filing. The Company agreed to pay the Purchasers 10% of the principal balance of the Notes in warrants for the months of October and November 2016restricted common stock with an aggregate total of 115,000. The Company recorded a discount related to the issuance of these warrants attributed to the secured promissory note default of approximately $40. The Company determined the fair value of the warrants issued with the secured promissory notes using the Black Scholes pricing model and the following assumptions:  an interest free rate of 1.33%, volatility of 50% and a remaining term of 5 years. Based on information known at each default period, the Company priced the warrants with an assumed stock and exercise price of $0.80. This discount will be amortized into interest expense during the period of default. As of the date of this filing, the Company had not issued the October warrants totaling 15,000 to the $150,000 secured promissory note holders or the November warrants totaling 50,000 to the $500,000 secured promissory note holders.three year vesting schedule.
 
Note 11.Segment Information
The Company operates in one operating segment. However, the Company has assets and operations in the United States, Germany and Poland. The following tables show the breakdown of the Company’s operations and assets by region (in thousands):
 
 
United States
 
 
Germany
 
 
Poland
 
 
Total
 
 
 
September 30,
2016
 
 
December 31,
2015
 
 
September 30,
2016
 
 
December 31,
  2015
 
 
September 30,
2016
 
 
December 31,
2015
 
 
September 30,
2016
 
 
December 31,
2015
 
Assets
 $11,416 
 $11,826 
 $6,911 
 $6,357 
 $253 
 $195 
 $18,580 
 $18,378 
Property and equipment, net
 $72 
 $84 
 $1,795 
 $1,853 
 $3 
 $4 
 $1,870 
 $1,941 
Intangible assets
 $10,518 
 $10,518 
 $- 
 $- 
 $- 
 $- 
 $10,518 
 $10,518 
Revenue Segment Information Three Months Ended September 30:
 
 
United States
 
 
Germany
 
 
Poland
 
 
Total
 
                           
 
September 30,
2016
 
 
September 30,
2015
 
 
September 30,
2016
 
 
September 30,
2015
 
 
September 30,
2016
 
 
September 30,
2015
 
 
September 30,
2016
 
 
September 30,
2015
 
Revenues
 $182 
 $283 
 $2,137 
 $2,340 
 $20 
 $39 
 $2,339 
 $2,662 
Net income (loss)
 $(376)
 $(708)
 $70 
 $223 
 $- 
 $(54)
 $(306)
 $59 
 
 
United States
 
 
Germany
 
 
Poland
 
 
Total
 
Revenues:
 
September 30, 2016
 
 
September 30, 2015
 
 
September 30, 2016
 
 
September 30, 2015
 
 
September 30, 2016
 
 
September 30, 2015
 
 
September 30, 2016
 
 
September 30. 2015
 
Histology Equipment
 $68 
 $- 
 $1,337 
 $1,225 
 $0 
 $1 
 $1,405 
 $1,226 
Histology  Consumables
  26 
  39 
  613 
  667 
  20 
  33 
  659 
  739 
Cytology Consumables
  88 
  244 
  187 
  448 
  0 
  5 
  275 
  697 
 Total Revenues
 $182 
 $283 
 $2,137 
 $2,340 
 $20 
 $39 
 $2,339 
 $2,662 
Included in Germany are sales of Histology Equipment to China for the three months ended September 30, 2016 of approximately $295 compared to $81 for the same period in 2015.
Revenue Segment Information Nine Months Ended September 30:
 
 
United States
 
 
Germany
 
 
Poland
 
 
Total
 
                           
 
September 30,
2016
 
 
 September 30,
2015
 
 
 September 30,
2016
 
 
 September 30,
2015
 
 
 September 30,
2016
 
 
 September 30,
2015
 
 
 September 30,
2016
 
 
 September 30,
2015
 
Revenues
 $735 
 $928 
 $6,513 
 $6,114 
 $38 
 $39 
 $7,286 
 $7,081 
Net income (loss)
 $(1,353)
 $(552)
 $314 
 $339 
 $(91)
 $(54)
 $(1,130)
 $(267)
 
 
United States
 
 
Germany
 
 
Poland
 
 
Total
 
Revenues:
 
 September 30,
2016
 
 
 September 30, 2015
 
 
 September 30,
2016
 
 
 September 30, 2015
 
 
 September 30,
2016
 
 
 September 30, 2015
 
 
 September 30,
2016
 
 
 September 30, 2015
 
Histology Equipment
 $283 
 $292 
 $3,901 
 $3,280 
 $8 
 $1 
 $4,192 
 $3,573 
Histology  Consumables
  96 
  152 
  1,770 
  1,768 
  27 
  33 
  1,893 
  1,953 
Cytology Consumables
  356 
  484 
  842 
  1,066 
  3 
  5 
  1,201 
  1,555 
 Total Revenues
 $735 
 $928 
 $6,513 
 $6,114 
 $38 
 $39 
 $7,286 
 $7,081 
Included in Germany are sales ofHistology Equipment to China for the nine months ended September 30, 2016 of approximately $980 compared to $380 for the same period in 2015.
 
Item 2. Item 2.          Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Caution Regarding Forward-Looking Statements
 
This report contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: our ability to raise capital; our ability to retain key employees; our ability to engage third party distributors to sell our products; economic conditions; technological advances in the medical field; demand and market acceptance risks for new and existing products, technologies, and healthcare services; the impact of competitive products and pricing; U.S. and international regulatory, trade, and tax policies; product development risks, including technological difficulties; ability to enforce patents; and foreseeable and unforeseeable foreign regulatory and commercialization factors, our ability to develop new products and respond to technological changes in the markets in which we compete, our ability to obtain government approvals of our products, our ability to market our products, changes in third-party reimbursement procedures, and such other factors that may be identified from time to time in our Securities and Exchange Commission ("SEC") filings and other public announcements including those set forth under the caption “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Readers are cautioned not to place undue reliance on our forward-looking statements, as they speak only as of the date made. Except as required by law, we assume no duty to update or revise our forward-looking statements.
 
Overview of MEDITE Cancer Diagnostics, Inc.
 
MEDITE Cancer Diagnostics, Inc. (the “Company”, “it”, “we”, or “us”), formerly CytoCore, Inc., specializes in the marketing and selling of MEDITE core products (instruments and consumables), manufacturing, development manufacturing,of new solutions in histology and cytology and marketing of molecular biomarkers,biomarkers. These premium medical devices and consumables are for detection, risk assessment and diagnosis of cancerous and precancerous conditions and related diseases. Depending upon the type of cancer, segments within the current target market of approximately $5.8 billion are growing at annual rates between 10% and 30%. To use theThe well-established brand of MEDITE Cancer Diagnostics is well received and to haveremains a betterprofessional description of the Company’s business, the Board approved the name change to “MEDITE Cancer Diagnostics, Inc.” As a result, thebusiness. The Company’s trading symbol was changed tois “MDIT”.
 
In 20152016 and 20162017 we focused on implementation of several growth opportunities including enhanced distribution of core products through focused sales and distribution channel(s), newly developed and patent pending assays, new laboratory devices and several marketing projects like the Chinese standardization projects for histology and cytology.  The Company is optimistic about recent marketing efforts focusing on larger laboratory chains.chains and other important strategic relationships. The Company has 78approximately 80 employees in threefour countries, a distribution network to about 70 countries and a wide range of products for anatomic pathology, histology and cytology laboratories available for sale.
 
After the successful market entrance into China in 2014, the Company increased its revenueCompany’s revenues in this market toare approximately $1 million in 2015,$65,000 for the three months ended March 31, 2017 compared to zero$185,000 for the three months ended March 31, 2016. The Company has received $240,000 in 2014.orders for China which they believe they can complete partially in the second quarter and partially in the third quarter. The Company’s delayed financing during 2015 and 2016 and into 2017 has impacted the delivery of sales due to availability of raw materials, parts, and work in progress inventory and the needed investment in that inventory. The Company originally anticipated sales in 2016 of approximately $2 million with the assumption that the timing of the scheduled capital raise would happen earlier in the year. Due to the delay in the capital raise, the Company is revisingrevised its target to $1.3 million. Total sales for the nine monthsyear ended September 30,December 31, 2016 were approximately $980,000$1 million compared to $380,000$897,000 for the same period in 2015.  The Chinese market is growing quickly, and by 2016 the Company expects it will be theone of two largest marketmarkets for its products. By working with its Chinese distributor, UNIC Medical, the Company has successfully received China Food and Drug Administration (“CFDA”) approval for all MEDITE histology laboratory devices at the end of 2014, and for the Cytology device in 2015. The Company is working with UNIC Medicaland are anticipating increased sales team is selling MEDITE products in China with increasing volumes.in the third and fourth quarter of 2017.  Also, together with UNIC, we are part of a government supported project to standardize the histology laboratory process in China. UNIC Medical is using MEDITE equipment and consumables for processing, and developinglaunching new assays. UNIC has taken an active role in branding MEDITE Cancer Diagnostics in China. Medite is working through certain product rollout issues which have impacted its anticipated increase in sales.
 
 
On May 31, 2016, UNIC received CFDA approval as a Class I in vitro diagnostic reagent for MEDITE's "SureThin" cell preservation solution.  As China adaptsadopts Cytopathology standards across the country, the Company expects 'Liquid Based Cytology Tests (LBC)' will be used for the majority of Pap collections for cervical cancer screening. We are prepared to sell the complete SureThin products,product line, including the already approved Processor to this potential market of 485 million women between the ages of 16 and 64 years of age. Management anticipates launching the product in China by the third quarter of 2017 and in the U.S. by the fourth quarter of 2017.
 
The Company’s cytology product line revenue remained at about the same levels in Europe (non-Gyn and Gyn applications) during 2016 and 2017 related to a competitive threat that management believes has been alleviated. The Company is in the process of moving forward the submission of an application to the U.S. Food and Drug Administration (“FDA”) for SureThin Gyn applications. Once approved we can compete with some of the dominant suppliers in this $600 million market and target major strategic lab partners. The impact of the gynecology segment SureThin solution in the US and China market will drive significant new revenue and gross margin improvement opportunities in the later part of 2017.
MEDITE is clearing certain hurdles in obtaining FDA clearance of its SureThin product offering for gyn use in the US. The product is attracting the interest in larger labs that will use both the SureThin non-gyn and gyn applications. The gyn clearance with the sale of the SureThin processor will encourage market growth the Management believes will provide sources for improved sales channels.
The developed and U.S. patented self-collection device SoftKit is targeting the growing POC & POP (point of care or point of people care) market. Growth in this area is due to consumer driven health care requirements and the necessity to support and address incremental patient population needs for screening and on-going diagnostic tests. SoftKit serves as just such a product, addressing this market requirement. SoftKit is planned to be sold through various marketing channels that serve the gynecology physician consumer health and emerging post-acute care as the influence of clinical labs are expanded. Initially the SoftKit is targeted at the uterine cancer/HPV screening market. The next phase of testing will include cervical screening. 
Management believes that 2017 developments, allows us to more fully leverage the products and biomarker solutions from CytoCore component of MEDITE. The first entry will be the introduction of SureCyte+ (fluorogenic) instant staining, offering tremendous lab efficiencies and enhanced patient care through the use of SureCyte+. SureCyte+ is the first of many new offering under the SureCyte brand.
MEDITE’s Breast Cancer Risk Assessment Product is non-invasive, easy, gentle, and highly sensitive, enabling young women between 20 and 45 years of age to obtain their individual breast cancer risk assessment. An automatic and gentle collection device for breast cells together with a newly developed assay is used to determine a woman’s risk to develop breast cancer.  Knowing the individual breast cancer risk will provide relief to a majority of young women who have no elevated risk of developing breast cancer. For those who have a higher risk, it enables them to monitor that risk closer for earlier treatment, if needed. The earlier a precancerous or cancerous situation is detected, the greater the chance for reducing the fatality rate for these conditions.  Product development of BreastPap continued in 2016, reflecting feedback from doctors’ test use of prototype units’ and doctorsdoctor’s office feedback to continuously improve the product prior to launching. During the third quarter, the Company initiated a co-operation with Leibnitz University of Hannover, Germany, on the final design and usability of the BreastPap. The project is scheduled to begin on February 15, 2017. The delay in market introduction is planned by management is due to additional quality assurance measures being performed by the Company .as well as insuring that US feedback from providers are considered. The Company’s BreastPap product is a risk assessment tool planned to detect “abnormal” cells contained inevaluate the women’s breast aspirant.   cancer risk on certain results based on the treatment.    
Upon detection of abnormal cells,receiving the results, women, based upon their physicians’ advice may be candidates for further diagnostic testing.
The developed and patent pending self-collection device SoftKit is targeting the growing POC & POP (point of care or point of people care) market. Growth in this area is due to consumer driven health care requirements and the necessity to support and address incremental patient population needs for screening and on-going diagnostic tests. SoftKit serves as just such a product, addressing this market requirement. SoftKit is planned to be sold through various marketing channels that serve the consumer health and emerging post-acute care as the influence of clinical labs are expanded.
The Company’s cytology product line, revenue grew in Europe (non-Gyn applications) during 2015 and 2016. The Company isBreatPap will undergo further customer testing in the processUS and EU markets. This product has been placed on hold and will be evaluated by Management, so they can focus their attention, and resources on their other product rollouts. Management plans on revisiting this Product by the end of preparing an application to the U.S. Food and Drug Administration (“FDA”) for SureThin Gyn applications and once approved can compete with some of the dominant suppliers in this $600 million market.2017.
 
The Company brought several other innovative products closer to marketability during 2015, and continued during the first and second quarter of 2016 as listed above.  Also, in early 2015, the German priority patent for a fully automated system used in the histology lab, a “Lab-In-One” unit, was granted. This technology, if successfully accepted by the market, has the ability to change the competitive landscape within the industry.
 
During the first quarter of 2016, the Company opened a second German manufacturing facility with approximately 4,000 square feet in Nussloch. This facility is utilizing the local workforce utilizingand their experience for the specialized skills required for manufacturing of the newly developed and updated MicrotomesMicrotome product line and the newly developed Cryostat (instruments used for sectioning tissue biopsies).  During the third quarter 2016, the Company manufactured and delivered from order backlog 12 units. The Company began manufacturing the new Cryostat line during the thirdfirst quarter of 2017 and anticipates the first pre serial series to be available before the end of the second quarter. This enhanced microtome and cryostat production facility will allow MEDITE to meet the anticipated demand for these instruments as well as enhance its worldwide distribution channel through its suppliers including China.
 
The Company operates in one industry segment for cancer diagnostics instruments and consumables for histology and cytology laboratories.
 
Definition:Histology - Cancer diagnostics based on the structures of cells in tissues
 Cytology - Cancer diagnostics based on the structures of individual cells
 
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CancerousCancers and precancerous conditions are defined in terms of structural abnormalities in cells. For this reason cytology is widely used for the detection of such conditions while histology is typically used for the confirmation, identification and characterization of the cellular abnormalities detected by cytology. Other diagnostics methods such as marker-based assays provide additional information that can supplement, but which cannot replace cytology and histology. The trend towards more personalized treatment of cancer increases the need for cytology, histology and assays for identifying and testing the best treatment alternatives. We believe that this segment will therefore be increasingly important for future development of strategies to fight the “cancer epidemic” (World Health Organization: World Cancer Report 2014), which expects approximatelyabout a 50%50 % increase in cancer cases worldwide within the next 20 years.
 
This segment sees a trend toward, and demand for, higher automation for more throughput in bigger laboratories, process standardization, digitalization of cell and tissue slides and computer aided diagnostic systems, while also looking for cost effective solutions. In the US the Patient Protection and Affordable Care Act is a national example for the industry. More people have health insurance and therefore can afford early cancer screening, while at the same time the payers for health care continue looking for cost reductions.
 
MEDITE acts as a one-stop-shop for histology (also known as anatomic pathology) laboratories either as part of a hospital, as part of a chain of laboratories or individually. It is one out of only four companies offering all equipment and consumables for these type of laboratories worldwide. The MEDITE Brandbrand stands for innovative and high quality products – most equipment made in Germany – and competitive pricing.
 
For the cytology market, MEDITE offers a wide range of consumable products and equipment; in particular for liquid-based-cytology which is an important tool in cancer screening and detection in the field of cervical, bladder, breast, lung and other cancer types. WeIt also developed an innovative, new type of easy to use standardized staining solutions, and a very innovative and effective early cancer detection marker-based assay.assays. These new developments are cost effective solutions able to replace more expensive competitive products, and therefore are also becoming the first choice for the growing demand in emerging countries.
 
All of the Company’s operations during the reporting period were conducted and managed within this segment, with management teams reporting directly to our Chief Executive and Operating Officers.Office. For information on revenues, profit or loss and total assets, among other financial data, attributable to our operations, see the unaudited condensed consolidated financial statements included herein. Further during these 2016 and 2017 periods we added key personnel with excellent historical performance in new product commercialization, sales development and internal operations improvement.
 
Outlook
 
Due to promising innovative new products for cancer risk assessment and an increasing number of distributions contracts executed in the last two years, management believes the profitability and cash-flow of the business will grow and improve. However, significant on-going operating expenditures may be necessary to manufacture and market new and existing products to achieve the accelerated sales growth targets outlined in the Company’s business plan. To realize the planned growth potential, management will focus its efforts on 1) finishing1.) Finishing and gaining approval for the products currently under development and 2) increasing2.) Increase direct sales in the United SatesU.S. and continuingcontinue to expand Chinese market sales by broadening the Company’s collaborations with the local distributor UNIC. We also will work on continuously optimizing manufacturing costcapacity to increase our gross margin. Implementation of our plans will be contingent upon securing substantial additional debt and/or equity financing. If we arethe Company is unable to obtain additional capital or generate profitable sales revenues, we may be required to curtail product development and other activities. The condensed consolidated financial statements presented herein do not include any adjustments that might result from the outcome of this uncertainty.
Currently, the Company’s sales primarily are generated in Euro currency. While in 2016 the average USD/Euro exchange rate was 1.10682 for the three months ended March 31, 2016, compared to 1.0655 in and March 31, 2017 a decrease of 0.04132, however the conversion rate at December 31, 2016 was 1.05204 and 1.0682 at March 31, 2017. MEDITE’s sales in USD were lower on a year over year basis as approximately 80% of our sales currently occurs in Euros. The Company is working to lessen the impact of the Euro’s decline versus the dollar by increasing the percentage of overall product sales in the U.S. and other countries such as China whose currency is not pegged to the Euro. 
 
The Company believes the combination of MEDITE Enterprise, Inc. with MEDITE Cancer Diagnostics, Inc.(“Cancer Diagnostics”),CytoCore, Inc. will expedite the development and marketability of Cancer Diagnostic’sCytoCore’s cytology products which include collection devices, image analysis software, special stains and immuno-assays. Currently, the recent launch of new products, the positive impact from several new initiatives, and some recently executed distribution contracts in the United States,U.S., Europe and China are some primary positive factors assisting growth.
 
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growth in its new product introductions. Similar approaches are in place in China and scheduled for the EU.
 
Results of Operations
 
The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements presented in Part I, Item 1 of this Quarterly Report and the notes thereto, and our audited consolidated financial statements and notes thereto, as well as our Management’s Discussion and Analysis contained in our Annual Report on Form 10-K for the year ended December 31, 20152016 filed with the SEC on April 12, 2016 and Form 10-K/A filed on September 6, 2016.14, 2017.
 
Three months ended September 30, 2016March 31, 2017 as compared to the three months ended September 30, 2015March 31, 2016 (in thousand USD)
 
Revenue
 
Revenue for the three months ended September 30, 2016,March 31, 2017, was $2,339$1,891 as compared to $2,662$2,131 for the three months ended September 30, 2015.  The 12% revenue decrease primarily relatesMarch 31, 2016. Due to some seasonality in the Company’s delays in sales. The Company had over $1 million dollars in backlog which they were not able to fillindustry, usually the first quarter of the year is weak because many public customers buy during the period duelast 4 to cash constraints.
 Costs of Revenue
Cost of revenues were $1,336, or 57.12%5 months of the revenuesyear.  Revenues were nominally impacted by the conversion rate between the USD/Euro, or $63 for the three months ended September 30, 2016 asMarch 31, 2017, compared to $1,493 or 56.09% of the revenues for the three months ended September 30, 2015.  The cost of revenue for thesame period was slightly higher with prior period percentages compared to revenue.  The overall decrease in cost of revenue relates to higher sales of manufactured instruments with higher gross margins for the period.
Research and Development
Research and development expenses are an important part of our business to keep our existing products competitive, and to develop new innovative solutions with interesting market potential that will help us grow future revenues. These expenses include research work for cancer marker consumables and developing work, including engineering and industrial design, for histology and cytology laboratories worldwide. Major parts of these expenses are payroll-related costs for in-house scientific research, mechanical and electrical engineering, instrument related software development staff, prototype expenses and material purchased for R&D.
For the third quarter 2016, research and development expenses increased to $305 compared to $222 for the third quarter 2015.  During 2016, the Company hired a project manager to oversee the planned field study for our newly developed cancer assay in China to shorten the time to market.  The new hire is a German-Chinese PhD in Biochemistry. We expect to continue to expend considerable effort and resources to continue to grow our product offerings.
Selling, General and Administrative
For the third quarter ended September 30, 2016, SG&A expenses were $860 as compared to $785 for the third quarter ended September 30, 2015.2016.   The Company has incurred higher costs related to growing the business, in anticipation of the equity financing, including hiring consultants to assist in increasingincreased sales in the United Statescytology product during 2016 period , partially through the US sales doubling during the 2016 period however due to cash constraints during the end of 2016 and evaluating the needs of the Companyearly 2017, cytology products were not available for sale.  MEDITE manufactured lab equipment decreased during 2016.
Operating Loss
The operating loss of $215 for the third quarter of ended September 30, 20162017, compared to an operating income of $132 for the third quarter of September 30, 2015 is due primarily to thesame period in 2016, offset by higher selling, general and administrative expenses and lower revenues for the period discussed above.histology consumables sold during 2017.
 
 
Interest Expense
Interest expenses increased by 270% to $170 in the three months ended September 30, 2016 compared to $46 for the three months ended September 30, 2015, due to interest expense attributed to secured promissory notes issued at December 31, 2015 and May 25, 2016, which matured on March 31, 2016 and August 25, 2016, respectively.  These notes bear interest at 15%, or $25 for the three month period ended September 30, 2016.  Further, interest expense includes $56 of the estimated fair value of warrants issued July through September 2016 as a penalty due to a default on the secured promissory notes.. Further, a discount on the May 25, 2016 secured promissory notes in the amount of $31 was amortized into interest expense during the three months ended September 30, 2016. The warrant expense is considered a non-cash settlement on the defaulted Notes.   The effect of the interest, and fair value of the warrants on the secured promissory notes was an effective yield of 68% for the three months ended September 30, 2016. 
Net Loss
The net loss for the quarter ended September 30, 2016, totaled $306 as compared to net income of $59 for the quarter ended September, 2015. As noted above, the primary reasons for the loss in the third quarter of 2016 was due to lower revenues, increased selling, general and administrative and interest expense.
Nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015 (in thousand USD)
Revenue
Revenue for the nine months ended September 30, 2016, was $7,286 as compared to $7,081 for the nine months ended September 30, 2015, an increase of 3%. The increase in revenue was due to an increase in $619 of both direct and distributor sales of histology equipment offset by a reduction of, $60 and $354 in histology and cytology consumables during the nine months ended September 30, 2016, respectively.
Costs of Revenue
 
Cost of revenues were $4,095,$1,211, or 56.20%64% of the revenues for the ninethree months ended September 30, 2016March 31, 2017, as compared to $4,028$1,213, or 56.88%57% of the revenues for the ninethree months ended September 30, 2015.March 31, 2016. The cost of goods sold as a percentagerevenue consisted of revenue are consistent, year over year.higher manufacturing and fixed costs during 2017 due delays in sourcing parts and some installation issues.
 
Research and Development
 
Research and development expenses are an important part of our business to keep our existing products competitive, and to develop new innovative solutions with interesting market potential that will help us grow future revenues. These expenses include research work for cancer marker consumables and developing work, including engineering and industrial design, for histology and cytology laboratories worldwide. The major components consist of payroll-related costs for in-house scientific research, mechanical and electrical engineering, instrument related software development staff, prototype expenses and material purchased for R&D.
 
For the nine months ended September 30, 2016,first quarter 2017, research and development expenses increased to $1,086$425 compared to $825$360 for the same period in 2015.  During 2016, the Company hired a project manager to oversee the planned field study for our newly developed cancer assay in China to shorten the time to market.  The new hire is a German-Chinese PhD in Biochemistry.first quarter 2016. The Company continues to place a high priority to its research andexpensed approximately $138 of development efforts.
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expense for the three months ended March 31, 2017.
 
Selling, General and Administrative
 
For the nine months ended September 30, 2016,first quarter 2017, SG&A expenses were $,656$782 as compared to $2,191$857 for the nine months ended September 30, 2015.  The nine month ended September 30, 2016 compared to the same period in 2015 expense reflects a recovery of bad debts of $101 for 2015 compared to $38 expense for the same period infirst quarter 2016. The first quarter 2016 period included approximately $45 of professional fees attributed to the restatement of the intangible assets and deferred income tax liability in the financial statements for the year ended December 31, 2015 and higher professional2015.  Professional fees attributed to increase board fees.  The directors fess were increased from $5,000 a director perlower for the quarter to $10,000 a director per quarter, an increase of $60,000. The Company has incurred higher costsended March 31, 2017 specifically related to growinglower audit fees for the business, in anticipation2016 audit and timing of the equity financing, including hiring consultants to assist in increasing sales in the United States and evaluating the needscompletion of the Company.audit through April 2017.
 
Operating Loss
 
The operating loss of $684$576 for the nine months ended September 30, 2016first quarter of 2017, compares to anMEDITE’s operating loss of $58$350 for the same period in 2015,first quarter of 2016, and is directly related to higher generallower sales for the period and administrative expenses relating to higher selling, general and administrative expenses and higher research and development expensescosts discussed above, offset by higher revenue.above.
 
Interest Expense
 
Interest expenses increaseddecreased by 263%26% to $570$193 in the ninethree months ended September 30, 2016March 31, 2017, compared to $157$261 for the ninethree months ended September 30, 2015March 31, 2016, due to the amortization of the debt issuance costs and the amortization of the debt discount attributed to the secured promissory notes issued at December 31, 2015, and May 25, 2016, which matured on March 31, 2016 and August 24, 2016, respectively.2016.  These notes bear interest at 15%, or $65$24 for the 2017 period compared to $19 for the 2016 period and the amortization of the debt issuance costs and debt discount totaled $250$200 for the ninethree months ended September 30, 2016 plusMarch 31, 2016.  The 2017 period did not have any amortization of the $116 attributeddebt issuance costs. During the three months ended March 31, 2017 the Company recorded $64 and $57 to interest expense related to repricing of the warrants related to the secured promissory notes and the fair value of 195,000 warrants issued forrelated to the default.penalty feature in secured promissory notes issued on December 31, 2015 and May 25, 2016.  The effect of the interest, debt issuance costs of $250and debt discount, repricing and the $108penalty warrants on the secured promissory notes was an effective yield of warrant expense are considered non-cash settlement on these Notes.89% and 175% for the three months ended March 31, 2017 and 2016, respectively.
 
Net Loss
 
The net loss for the nine monthquarter ended September 30, 2016,March 31, 2017, totaled $1,130$955, as compared to net loss of $267$622 for the nine monthquarter ended September 30, 2015 is due primaryMarch 31, 2016. The loss for 2016 directly related to alower sales for the period and higher selling, general and administrative expenses and research and development costs anddiscussed above. Decreased interest costs attributed todiscussed above, resulted from the amortization of the debt issuance cost and debt discount with the secured promissory notes discussed above,of $200 in 2016 offset by increases revenues.repricing and warrant issuances discussed above.
 
Liquidity and Capital Resources
 
Due to promising new products and distributions contracts executed in the last two years and management believeschanges with increased focus on the various sales channels and manufacturing and quality systems, management anticipates the profitability and cash flow of the business will grow and improve. However, significant on-going operating expenditures may be necessary to manufacture and market new and existing products to achieve the accelerated sales growth targets outlined in the Company’s business plan. To realize the planned growth potential management will focus its efforts on 1)1.) finishing and gaining approval for the products currently under development and 2) increasing2.) increase direct sales in the USA and continuingcontinue to expand Chinese market sales by broadening the Company’s collaborations with the local distributor UNIC. We also will work on continuously optimizing manufacturing cost to increase our gross margin.
 
For the three months ended March 31, 2017, we used net cash in operations of approximately $645 compared to $559 for the same period in 2016. During 2017, cash used in operations consisted of loss from operations, offset by non-cash transactions for warrants issued related to secured promissory notes. During 2016, cash used in operations consisted of loss from operations, offset by non-cash transactions for warrants issued related to secured promissory notes.
For the three months ended March 31, 2017, net cash used in investing activities were $16 compared to $94 for the same period in 2016.  The improvement in this activity relates to lower purchases of equipment in 2017 compared to 2016.
For the three months ended March 31, 2017, financing activities provided $914 compared $59 used in financing activities for the same period in 2016. The Company sold 2.4 million shares of common stock for $1.1 million during the first quarter of 2017, net of $83 of issuance costs.
The Company must contemplate continuation as a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  At March 31, 2017, the Company’s cash balance was $269 and its operating losses for the three months ended March 31, 2017 and the year ended December 31, 2016, have used most of the Company’s liquid assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. However working capital has improved by approximately $600 from December 31, 2016. The Company raised additional cash of $250 from the sale of equity subsequent to April 1, 2017 through the date of this filing.
The Company has settled three of the five employee notes for $330 and warrants. In April 2017 the Company paid $94 for the first installment and issued warrants to purchase 1,029,734 shares of common stock at $0.50, for a period of 5 years.
During the three months ended March 31, 2017, the Company paid $167 of secured promissory notes, reducing the balance to $483. The Company received notice that one noteholder will convert $50 into 100,000 shares of common stock at $0.50. Management believes that the remainder of the balance will be settled in some combination of cash and stock.
              Management is actively seeking additional equity financing contemplated in the $4.25 million stock purchase agreement. The Company has negotiated with certain parties whose obligations are due in the next twelve months to extend payment terms beyond one year. One lender with an outstanding balance of $801 has stated that they will not be able to refinance the debt. The default rate of interest will increase three percent.
              Accrued salaries, vacation and related expenses at March 31, 2017, includes amounts owed to the former CFO of approximately $1.1 million. See further discussion regarding the legal proceedings with the Company’s former Chief Financial Officer. Also included in accrued salaries, vacation and related expenses are amounts owed to both the Michaela and Michael Ott totaling approximately $152.  Included in advances – related parties are amounts owed to the Company’s former CFO $50 at March 31, 2017.
The Company owes Ms. Ott, 91 Euros, ($97 as March 31, 2017). The Company has established a payment plan whereby the balances owed will be repaid beginning on October 31, 2017, extending between 18 and 24 months.
 
Implementation of our plans will be contingent upon securing substantial additional debt and/or equity financing. If we are unable to obtain additional capital or generate an increase in profitable sales revenues, we may be required to curtail product development and other activities. At September 30, 2016, the Company had approximately, $1.9 million of accrued liabilities which represents unpaid wages and vacation benefits. At December 31, 2015, the Company refinanced $927,000 of these liabilities through notes due to employees which are payable over a three year period and are convertible into equity at a discount defined in the agreement.   At September 30, 2016, the Company was in default on certain notes with employees due to missed monthly payments. The Company has classified all notes, except one note in default as short-term on the Condensed Balance Sheets.  Included in accounts payable and accrued expenses are accrued salaries and benefit expenses due to our former Chief Financial Officer, Robert F. McCullough, Jr. of $1 million. Also, $133,000 is due to Michaela Ott, currently our COO, and Michael Ott, currently our Chairman of the Board and Chief Executive Officer of two of our wholly owned subsidiaries, for unpaid wages and car allowance and vacation. Michaela Ott has also loaned $102,000 to the Company to be repaid by December 31, 2016. The Company believes executives and employees will work with the Company to ease financial strains emanating from amounts currently due and payable. The Company believes some portion of these liabilities will be settled in the common stock of the Company.
The current level of working capital shortfalls has been partially financed by additional advances on our credit lines with a German bank and from recently issued secured promissory notes.   In order to continue growing the business, the Company is planning to raise additional funds through the sale of equity securities or convertible debt.   The Company is also investigating additional bank financing with European institutions which will increase the availability against current collateral of approximately $5 million.  The Company’s security agreement with its lender has provided borrowings of 35% of our collateralized assets.  The Notes discussed above matured on June 30, 2016 and were not repaid.  Therefore, the Notes were in default as of April 1, 2016.  The Company agreedcontinues to pay the Purchasers 10% of the principal balance of the Notes in warrants for the months of April through September 2016 and by the date of this filing, October and November 2016.  Therefore, for the months of April through September 2016, the Company issued 300,000 warrants and recorded interest expense related to the issuance of these warrants, attributable to the secured promissory notes of approximately $105,000. On May 25, 2016, the Company issued $150,000 of additional promissory notes. The May Notes were matured on August 25, 2016. The Company issued warrants for the months of August and September consistent with the terms of the Notes discussed above and by the date of this filing, October 2016 warrants. The Company anticipates that some of the noteholders will convert their matured notes into convertible debt or equity which the company may offer near term. The Company is investigating various sources of debt and equity to assist them in their growth plans andseek to refinance their maturingthis debt obligations. to provide additional liquidity.
 
On May 25, 2016, the Company entered into a Securities Purchase Agreement (the “May Purchase Agreement”) with two (2) individual accredited investors  (collectively the “May Purchasers”), pursuantManagement continues to which the Company agreed to issue to the May Purchasers secured promissory notes in the aggregate principal amount of $150,000 (the “Note(s)”)expand its product offerings and warrants to purchase up to an aggregate amount of 150,000 shares of the common stock, par value $0.001 per share, of the Company (the “May Warrant(s)”). The Notes mature on the earlier of the third (3rd ) month anniversary date following the Closing Date, as defined in the Note, or the third (3rd ) business day following the Company’s receipt of funds exceeding one million dollars ($1,000,000) from an equity or debt financing, not including the financing contemplated under the May Purchase Agreement. The Notes may be converted into Units issued pursuant to the Company’s private financing of up to $5,000,000 (the “Follow On Offering”) Units at a price of $.80/Unit (the “Units”) consisting of: (i) a  2 year unsecured convertible note, which converts into shares of common stock at an initial conversion price of $.80 per sharehas also expanded its sales and (ii) a warrant to purchase one half additional share of common stock, with an initial exercise price equal to $.80 per share (the “Follow On Warrant”), in accordance with Article 2 set forth in the Notes. On November 2, 2016, the Company filed a Form D Notice of Exempt Offering of Securities for up to $3,000,000. The Company received $306,000, as an initial funding of this offering at $0.50 a share, 613,830 shares of common stock issued The offering is subject to a up to 7.5% commission paid to their broker/dealers totaling $22,484 plus warrants of 7.5% coverage at $0.50 conversion price per share, with a term of 5 years. The Company has an agreement with one broker/dealer to provide 7% commission paid in cash to them plus warrants of 50% coverage at $0.50 conversion price per share, with a term of 5 years.distribution channels during 2017.
 
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In summary, the Company is working on extending its payment terms on employee notes, settling with its former CFO, raising additional equity and refinancing debt and other noteholders.  In addition, the Company has slowed the pace of some of their new product rollouts.  If management is unsuccessful in obtaining new forms of debt orcompleting its equity financing, they will begin negotiating with some of their major vendors and lenders to extend the terms of their debt and also evaluate certain expenses that have been implemented for the Company’s growth strategy.    However, there can be no assurance that the Company will be successful in these efforts. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. As a result
In summary, management believes current working capital is sufficient to fund current operations. The Company intends to continue growing using current working capital, however the growth of all these factors and conditionsthe Company could be slowed down if we are unable to obtain debt and/or equity financing.  Consequently, there is substantial doubt about our ability to continue as a going concern.
 
Off-Balance Sheet Arrangements
 
As of September 30, 2016,March 31, 2017, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
 
Item 4. 4.          ConControlstrols and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
Our chief executive officerChief Executive Officer and our interim chief financial officer,Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15€13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, our chief executiveChief Executive and chief financial officersChief Financial Officers have concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that the information we are required to disclose in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and accumulated and communicated to our management, including our chief executive officerChief Executive Officer and interim chief financial officer,Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
Part II. Other Information
 
Item 1.Item 1.          Legal Proceedings.
 
MEDITE Lab Solutions, Inc. sold four shipmentsOn November 13, 2016, the Company’s former CFO filed a complaint against the Company and certain officers and directors of CoverTape to Richard-Allan Scientificthe Company in the Anatomical PathologyUnited States District Court for the Northern District of Illinois, Eastern Division, Case No. 1:16-cv-10554, whereby he is alleging (i) breach of Thermo Fisher Scientific Inc. Of those shipments, Richard-Allan refused to pay for $115,275 worththe Illinois Wage and Protection Act, (ii) breach of already-received CoverTape, asserting that the CoverTape was non-conforming, which assertion MEDITE emphatically denies, and for which MEDITE has provided counter-evidence. Richard-Allan also failed to purchase further quantities as agreed between the parties. After attempting to resolve the matter through consultation, MEDITE is prepared to initiate binding arbitration to recover the $115,275 and $1,073,700 contractually available to MEDITE for Richard-Allan's failure to purchase further quantities under theemployment contract and $72,000 for inventory produced specific(iii) breach of loan agreement. He is seeking monetary damages up to the contractual terms.approximately $1,665,972. The Company has reserveddenied the substantive allegations in the complaint and is vigorously defending the suit. Management believes that the claims set forth in the complaint against the Company are without merit. The Company has accrued wages and vacation of approximately $1.1 million and a portion$50,000 note payable to the former CFO at March 31, 2017. The Company believes that $836,000 was to be converted into common stock as a condition of the outstanding balancemerger agreement at December 31, 2015$2.00 a share.
On April 26, 2017 mediation with a court appointed Magistrate Judge occurred. The mediation ended with detail of $115,275 and ofsettlement parameters. The Magistrate dismissed the OEM branded stock of $72,000, pending final resolution of this matter.meeting with specific instructions to both sides to settle the lawsuit. If needed a September 7, 2017 update meeting with the Magistrate Judge is scheduled. Both sides will continue to work towards an equitable settlement prior to September 7, 2017.
 
Item 2.Item 2.          Unregistered Sales of Equity Securities and Use of Proceeds.
 
During the nine month period ended September 30, 2016,On March 7, 2017 the Company issued 213,317filed a $4,250,000 Form D to issue up to 8.5 million shares of common stock and approximately 2.2 million warrants to certain members of the Board of Directors and other unrelated parties as consideration for $210,000 of accrued director and consulting fees.
On November 2, 2016, the Company filed a Form D Notice of Exempt Offering of Securities for up to $3,000,000. The Company received $306,000, as an initial funding of this offeringissue common stock at $0.50 a share, 613,830share. From January through March 31, 2017 the Company received $1.2 million proceeds for the sale of 2.4 million shares of common stock at a purchase price of $0.50, with 50% of the shares issued, The offering is subjector 1.2 million warrants to a up to 7.5% commission paid to their broker/dealers totaling $22,484 plus warrants of 7.5% coveragepurchase common shares at $0.50, conversion price per share, with a term of 5 years. The Company has an agreementincurred $83,400 of cash commissions and will issue 90,375 warrants associated with one broker/dealer to provide 7% commission paid in cash to them plus warrantsthe sale of 50% coverage at $0.50 conversion price per share, with a term of 5 years.these securities.
  
We issued the foregoing securities in reliance on the safe harbor and exemptions from registration provided by Section 4(a)(2) and Regulation D of the Securities Act of 1933, as amended.
During the nine months ended September 30, 2015, the Company sold 711,250 shares of common stock to the President of UNIC Medical, a distributor-customer of the Company, at a per share price of $1.60, pursuant to Regulation S of the Securities Act of 1933. This person is a foreign national.
We issued the foregoing securities in reliance on the safe harbor and exemptions from registration provided by Regulation S of the Securities Act of 1933, as amended. No investor who participated in the offering was a U.S. citizen, and the offering was conducted by the officers and directors of the Company without the participation of any underwriters, and no commissions were paid to any person.
Item 3.Defaults upon Senior Securities.
On December 31, 2015, the Company entered into a Securities Purchase Agreement (the “2015 Purchase Agreement”) with seven (7) individual accredited investors, one which serves on the Company’s Board of Directors and is the chairman of the Company’s Audit Committee  (collectively the “Purchasers”), pursuant to which the Company agreed to issue to the Purchasers secured promissory notes in the aggregate principal amount of $500,000 with interest accruing at an annual rate of 15% (the “Note(s)”) and warrants to purchase up to an aggregate amount of 250,000 shares of the common stock, par value $0.001 per share, of the Company (the “Warrant(s)”). See Note 8 for further discussion on warrants issued on the Notes.   The Notes matured on March 31, 2016 and were not repaid. Therefore, the Notes were in default on April 1, 2016.  The Company agreed to pay the Purchasers 10% of the principal balance of the Notes in warrants until the principal balance is repaid. See Note 8 for further discussion on warrants issued on the Notes.  The Notes are secured by the Company’s accounts receivable and inventories held in the United States.
On May 25, 2016, the Company entered into a Securities Purchase Agreement (the “May Purchase Agreement”) with two (2) individual accredited investors, one of which who serves on the Company’s  Board of Directors (collectively the “May Purchasers”), pursuant to which the Company agreed to issue to the May Purchasers secured promissory notes in the aggregate principal amount of $150,000 (the “May Note(s)”) with an interest rate of 15% and warrants to purchase up to an aggregate amount of 150,000 shares of the common stock, par value $0.001 per share, of the Company (the “May Warrant(s)”). The Notes mature on the earlier of the third (3rd) month anniversary date following the Closing Date or August 25, 2016 and were not repaid. The May Notes may be converted into Units issued pursuant to the Company’s private financing of up to $5,000,000 (the “Follow On Offering”) Units at a price of $.80/Unit (the “Units”) consisting of: (i) a  2 year unsecured convertible note, which converts into shares of common stock at an initial conversion price of $.80 per share and (ii) a warrant to purchase one half additional share of common stock, with an initial exercise price equal to $.80 per share (the “Follow On Warrants”).
In November 2015 and February 2016, the Company entered into promissory notes totaling $927,000 with certain employees to repay wages earned prior to December 31, 2014 not paid (“Notes Due to Employees").  The Notes Due to Employees are to be paid monthly through September 2019, with no interest due on the outstanding balances.  The monthly amounts increase over the payment term.  The amounts due become immediately due and payable if payments are more than ten days late either one or two consecutive months as defined in the agreement with the employee.  At September 30, 2016, all Notes Due to Employees are in default and due on demand, except one. Therefore, the Notes Due to Employees in default are presented as current in the condensed consolidated balance sheets.  Certain employees may convert any of the amounts owed during the duration of the note to equity at a discounted price as defined in the agreement. The Company is currently negotiating with the employees whose notes are in default to extend payment terms.
 
ItemItem 3.          Defaults upon Senior Securities.
On January 10, 2017, the Board of Directors agreed to renegotiate the terms of the 2015 Notes and 2016 Notes (collectively the “Notes”) with the consent of the 2015 Purchasers and 2016 Purchasers (collectively the “Note Holders”), which was obtained on January 16, 2017, as follows:
●The Note Holders agreed to waive the defaults and extend the Notes for the earlier of six months or the receipt of a $3,000,000 investment into the Company pursuant to a future private equity offering, whichever occurs first (the “Extension”).
●Upon the Company’s receipt of the first $1,000,000 invested (including the capital raised to date in a prior private equity offering), the Note Holders will be repaid one third of their principal investment. On March 31, 2017, the Company paid approximately $167,000 of the outstanding Notes.
●Upon the Company’s receipt of the second and third $1,000,000, respectively, the Note Holders will be repaid one third of their principal investment on each $1,000,000 raised.
●
The exercise price on the Warrants were adjusted from $0.80 to $0.50.
●If the Notes are not paid back in full on the six month extension date, the Note Holders will each receive additional warrants equal to 50% of their respective investments, exercisable at $0.50, as a penalty. 
●The interest payments on the Notes will continue to accrue on the remaining balance of the unpaid Notes, and the additional warrants of 10% of the amount of Notes outstanding, previously penalty warrants, shall continue to accrue pursuant to the Notes.
●The Note Holders will have the option to convert their Notes to equity either before or at the six month extension end date into units offered in any future private equity offering of the Company.
Item 6.Exhibits
 
Exhibit
Number 
Description
10.1Form of First Amendment to Amended and Restated Securities Purchase Agreement
   
31.1 Section 302 certification by the principal executive officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
   
31.2 Section 302 certification by the principalchief financial officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
   
32.1 Section 906 certification by the principal executive pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
   
32.2 Section 906 certification by the principalchief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
   
101.INS XBRL Instance
   
101.SCH XBRL Taxonomy Extension Schema
   
101.CAL XBRL Taxonomy Extension Calculation
   
101.DEF XBRL Taxonomy Extension Definition
   
101.LAB XBRL Taxonomy Extension Labels
   
101.PRE XBRL Taxonomy Extension Presentation
 
SIGNATURESSIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 MEDITE Cancer Diagnostics, Inc.
  
Date:  November 14, 2016May 15, 2017/s/ David E. Patterson
 David E. Patterson
 Chief Executive Officer
  
Date: November 14, 2016May 15, 2017/s/.David E. Patterson Susan Weisman
      David E. PattersonSusan Weisman
 Chief Financial Officer
 
 
 
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