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, 2017March 31, 2018
  
  
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                           to                           ..   
 
Commission File number 000-00935
 
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)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 (§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 10, 2017: 28,855,580June 21, 2018: 59,372,868 shares
 
 

 
 
 
MEDITE Cancer Diagnostics, Inc.
 
QUARTERLY REPORT ON FORM 10-Q
 
TABLE OF CONTENTS
 
  Page 
   
     
   
     
  F-1 
     
  F-2 
     
  F-4F-3 
     
  F-5F-4 
     
 1 
     
 75
 
     
   
     
 76
 
     
 86
 
     
 97
Item 5.Other Information.9 
     
 107
 
     
 118
 
 
 

 
-i-
 

 
PART I. — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
 
MEDITE CANCER DIAGNOSDIAGNOSTITCICS,S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
 
September 30, 2017
 
 
December 31,
 
 
March 31,
 
 
December 31,
 
 
(unaudited)
 
 
2016
 
 
2018
 
 
2017
 
Assets
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash
 $1,654 
 $108 
 $153 
 $73 
Restricted cash
  393 
  - 
  94 
  417 
Accounts receivable, net of allowance for doubtful accounts of $143 and $123
  672 
  1,346 
Accounts receivable, net of allowance for doubtful accounts of $452 and $439
  643 
  453 
Inventories
  3,624 
  3,811 
  2,657 
  2,403 
Prepaid expenses and other current assets
  256 
  79 
  328 
  118 
Total current assets
  6,599 
  5,344 
  3,875 
  3,464 
    
    
Property and equipment, net
  1,563 
  1,557 
  1,759 
  1,778 
In-process research and development
  4,620 
  4,620 
Trademarks, trade names
  1,240 
  1,240 
Goodwill
  4,658 
  4,658 
Other assets
  348 
  351 
  256 
  196 
Total assets
 $19,028 
 $17,770 
 $16,408 
 $15,956 
    
    
Liabilities and Stockholders’ Equity
    
    
    
    
Current Liabilities:
    
    
Accounts payable and accrued expenses
 $3,548 
 $3,164 
 $3,279 
 $3,252 
Secured lines of credit and current portion of long-term debt
  83 
  3,214 
Note payable and accrued interest
  63 
  - 
Current portion of long-term debt
  50 
Notes due to employees, current portion
  335 
  681 
  326 
Advances – related parties
  251 
  288 
Advances – related party
  142 
  154 
Total current liabilities
  4,280 
  7,347 
  3,797 
  3,782 
Long-term debt, net of current portion and debt discounts
  4,459 
  60 
Long-term debt, net of current portion
  5,157 
  4,869 
Notes due to employees, net of current portion
  68 
  135 
  25 
  45 
Deferred tax liability
  2,205 
  1,485 
Total liabilities
  11,012 
  9,747 
  10,464 
  10,181 
    
    
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 $2,601 and $2,533 as of September 30, 2017 and December 31, 2016, respectively)
  962 
Common stock, $0.001 par value; 100,000,000 shares authorized, 28,855,580 and 22,421,987 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
  29 
  23 
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 $2,647 and $2,624 as of March 31, 2018 and December 31, 2017, respectively)
  962 
Common stock, $0.001 par value; 100,000,000 shares authorized, 47,906,081 and 28,906,081 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively
  48 
  29 
Additional paid-in capital
  13,522 
  9,366 
  15,227 
  13,750 
Stock subscription
  - 
  25 
Treasury stock
  (327)
  (327)
Accumulated other comprehensive loss
  (601)
  (642)
  (369)
  (444)
Accumulated deficit
  (5,569)
  (1,384)
  (9,597)
  (8,195)
Total stockholders’ equity
  8,016 
  8,023 
  5,944 
  5,775 
    
    
Total liabilities and stockholders’ equity
 $19,028 
 $17,770 
 $16,408 
 $15,956 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
 
F-1
 
 
MEDITE CANCER DIAGNOSTICS, ICANNCC.ER DIAGNOSTICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
 
Three Months Ended 
September 30,
 
 
Three Months Ended March 31,
 
 
2017
(unaudited)
 
 
2016
(unaudited)
 
 
2018
 
 
2017
 
 
 
 
 
 
 
Net sales
 $1,686 
 $2,339 
 $1,505 
 $1,891 
Cost of revenues
  1,317 
  1,336 
  1,170 
  1,211 
Gross profit
  369 
  1,003 
  335 
  680 
    
    
Operating expenses
    
    
Depreciation and amortization expense
  110 
  53 
  71 
  49 
Research and development
  423 
  305 
  305 
  425 
Selling, general and administrative
  1,248 
  860 
  919 
  782 
Total operating expenses
  1,781 
  1,218 
  1,295 
  1,256 
Operating loss
  (1,412)
  (215)
  (960)
  (576)
    
    
Other expenses
    
Other (income) expenses
    
Interest expense, net
  200 
  170 
  447 
  193 
Other income, net
  (7)
  (72)
Loss on extinguishment of notes due to employees
  - 
  158 
Other (income) expense, net
  (5)
  28 
Total other expense, net
  193 
  98 
  442 
  379 
    
    
Loss before income taxes
  (1,605)
  (313)
  (1,402)
  (955)
    
    
Income tax provision (benefit)
  - 
  (7)
Provision for income taxes
  - 
Net loss
  (1,605)
  (306)
  (1,402)
  (955)
    
    
Preferred dividend
  (22)
  (23)
  (23)
    
    
Net loss available to common stockholders
 $(1,627)
 $(329)
 $(1,425)
 $(978)
Loss per share
    
    
Net loss available to common stockholders
 $(1,425)
 $(978)
Basic and diluted loss per share
 $(0.06)
 $(0.02)
 $(0.04)
Weighted average basic and diluted shares outstanding
  27,695,967 
  21,269,307 
  39,174,599 
  22,940,543 
    
    
Condensed consolidated statements of comprehensive loss
    
    
Net loss
 $(1,605)
 $(306)
 $(1,402)
 $(955)
Other comprehensive income (loss)
    
    
Foreign currency translation adjustments
  (118)
  177 
  75 
  (53)
Comprehensive loss
 $(1,723)
 $(129)
 $(1,327)
 $(1,008)
 
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 STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Dollars in thousands, except shares and per share amounts)CASH FLOWS
 
 
 
Nine Months Ended 
September 30,
 
 
 
2017
 
 
2016
 
 
 
(unaudited)
 
 
(unaudited)
 
 
 
 
 
 
 
 
Net sales
 $4,854 
 $7,286 
Cost of revenues
  3,756 
  4,095 
Gross profit
  1,098 
  3,191 
 
    
    
Operating expenses
    
    
Depreciation and amortization expense
  213 
  154 
Research and development
  1,177 
  1,086 
Selling, general and administrative
  3,258 
  2,635 
 
    
    
Total operating expenses
  4,648 
  3,875 
Operating loss
  (3,550)
  (684)
 
    
    
Other expenses
    
    
Interest expense
  460 
  570 
Loss on extinguishment of notes payable due to employees
  158 
  - 
Other (income) expenses, net
  13 
  (111)
Total other expenses, net
  631 
  459 
 
    
    
Loss before income taxes
  (4,181)
  (1,143)
 
    
    
Income tax provision (benefit)
  4 
  (13)
Net loss
  (4,185)
  (1,130)
 
    
    
Preferred dividend
  (68)
  (69)
 
    
    
Net loss to common stockholders
 $(4,253)
 $(1,199)
 
    
    
Loss per share
    
    
Basic and diluted loss per share
 $(0.17)
 $(0.06)
Weighted average basic and diluted shares outstanding
  25,389,152 
  21,127,811 
 
    
    
Condensed statements of comprehensive loss
    
    
Net loss
  (4,185)
  (1,130)
Other comprehensive income (loss)
    
    
Foreign currency translation adjustments
  41 
  232 
 
    
    
Comprehensive loss
 $(4,144)
 $(898)

 
    
 
 
 
 
Three Months Ended March 31,
 
 
2018
 
 
2017
 
Cash flows from operating activities:
 
 
 
 
 
 
Net loss
 $(1,402)
 $(955)
Adjustments to reconcile net loss to cash used in operating activities
    
    
Depreciation and amortization
  71 
  49 
Amortization of debt discounts and debt issuance costs
  177 
  - 
Stock-based compensation
  43 
  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 operating assets and liabilities:
    
    
Accounts receivable
  (176)
  33 
Inventories
  (186)
  183 
Prepaid expenses and other assets
  (263)
  (20)
Accounts payable and accrued expenses
  95 
  (224)
Net cash used in operating activities
  (1,641)
  (645)
 
    
    
Cash flows from investing activities:
    
    
Purchases of equipment
  (2)
  (16)
Net cash used in investing activities
  (2)
  (16)
 
    
    
Cash flows from financing activities:
    
    
Net borrowings on lines of credit
  - 
  8 
Repayment of secured promissory notes
  - 
  (167)
Repayment of notes due to employees
  (21)
  (24)
Proceeds from convertible debt, net
  1,464 
  - 
Repayments on related party advances
  (15)
  - 
Proceeds from sale of common stock, net of issuance costs
  - 
  1,097 
Net cash provided by financing activities
  1,428 
  914 
 
    
    
Effect of exchange rates on cash
  (28)
  (92)
Net change in cash and restricted cash
  (243)
  161 
Cash and restricted cash at beginning of period
  490 
  108 
Cash and restricted cash at end of the period
 $247 
 $269 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Cash paid for interest
 $91 
 $41 
Cash paid for income taxes
 $- 
 $13 
 
    
    
Reconciliation of cash and restricted cash at end of period:
    
    
Cash
 $153 
 $269 
Restricted cash
  94 
  - 
 
 $247 
 $269 
Supplemental schedule of non-cash investing and financing activities:
    
    
Common stock issued with debt
 $1,425 
 $- 
Accrued liabilities exchanged for convertible note payable
 $100 
 $- 
Estimated fair value of warrants recorded as debt discount
 $28 
 $- 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
 
F-3
 
 
MEDITE CANCER DIAGNOSTICSCA,NCER DIAGNOSTICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Nine Months Ended
September 30,
 
 
 
2017
 
 
2016
 
Cash flows from operating activities:
 
 
 
 
 
 
Net loss
 $(4,185)
 $(1,130)
Adjustments to reconcile net loss to cash used in operating activities
    
    
Depreciation and amortization
  213 
  154 
Provision for doubtful accounts
  108 
  - 
Stock-based compensation
  281 
  - 
Amortization of debt discounts
  7 
  358 
Amortization of shares issued for consulting services
  55 
  - 
Estimated fair value of warrants issued in connection with secured promissory notes
  196 
  - 
Loss on extinguishment of notes due to employees
  158 
  - 
Changes in assets and liabilities:
    
    
Accounts receivable
  665 
  187 
Inventories
  560 
  (1,107)
Prepaid expenses and other assets
  (120)
  64 
Accounts payable and accrued expenses
  207 
  334 
Net cash used in operating activities
  (1,855)
  (1,140)
 
    
    
Cash flows from investing activities:
    
    
Purchases of equipment
  (43)
  (25)
Decrease in other assets
  - 
  28 
Net cash (used in) provided by investing activities
  (43)
  3 
 
    
    
Cash flows from financing activities:
    
    
Proceeds from convertible debt, net
  4,669 
  - 
Restricted cash
  (393)
  - 
Net (repayment) borrowings on lines of credit
  (2,442)
  313 
Repayment of secured promissory notes
  (333)
  - 
Repayment of notes payable due to employees
  (182)
  (62)
Proceeds from related party advances, net
  - 
  82 
Proceeds from sale of common stock, net of issuance costs
  2,344 
  - 
Net cash provided by financing activities
  3,663 
  333 
 
    
    
Effect of exchange rates on cash
  (219)
  249 
Net change in cash
  1,546 
  (555)
Cash at beginning of period
  108 
  587 
Cash at end of the period
 $1,654 
 $32 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Cash paid for interest
 $156 
 $140 
Cash paid for income taxes
 $34 
 $8 
 
    
    
Supplemental schedule of non-cash investing and financing activities:
    
    
Reclassification of warrant liability to additional paid in capital
 $- 
 $90 
Settlement of liabilities through issuance of common stock
 $- 
 $275 
Issuance of common stock for services
 $55 
 $-
 
Issuance of warrants on secured promissory notes classified as additional paid-in capital and debt discount
 $- 
 $248 
Issuance of common stock subscribed
 $25 
 $- 
Conversion of secured promissory note plus accrued interest into common stock
 $58 
 $- 
Secured promissory notes exchanged for convertible notes payable
 $133 
 $- 
Loan fees settled through common stock
 $75 
 $- 
Estimated fair value of warrants recorded as debt discount
 $631 
 $- 
Conversion of accrued interest on secured promissory notes into common stock
 $102 
 $- 
Increase of convertible debt for settlement of DZ debt
 $356 
 $- 
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4
MEDITE CANCER DIAGNOSTICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except share and per share amounts)
 
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. and its wholly owned subsidiaries, which consists of MEDITE Enterprise, Inc., MEDITE GmbH, Burgdorf, Germany, MEDITE GmbH, Salzburg, Austria, MEDITE Lab Solutions Inc., Orlando, USA MEDITE sp. z o.o., Zilona-Gora, Poland. In 2017 the Company made the decision to integrate CytoGlobe into Medite GmbH.  CytoGlobe had been operating as a separate company focused on cytology products (equipment and consumables) with separate personnel and financial reporting that was consolidated into Medite GmbH.  As the CytoGlobe GmbH, Burgdorf, Germany.brand became less important over time and customers purchased both cytology and histology products from Medite, it no longer made sense to keep CytoGlobe as a separate company.  Therefore, it was integrated from a financial, operational and product portfolio perspective into Medite GmbH.
 
MEDITE is a medical technology company specialized in the development, manufacturing, and marketing of molecular biomarkers, premium medical devices, consumables and consumablesmolecular biomarkers for detection, risk assessment and diagnosis of cancerous and precancerous conditions and related diseases. The Company has 7457 employees in fourtwo countries, a distribution network to about 80 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
 
Consolidation, Basis of Presentation and Significant Estimates
 
The accompanying condensed consolidated financial statements for the periods ended September 30,March 31, 2018 and 2017 and 2016 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 intercompany 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, 20172018 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, 20162017 filed on April 14, 2017May 17, 2018 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.
 
Going Concern
 
WeThe accompanying condensed consolidated financial statements have incurred significantbeen prepared in conformity with 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 March 31, 2018, the Company’s cash balance was $153,000 and its operating losses for the year ended December 31, 2017 and negative cash flows from operations. The Company incurred net losses of approximately $1.6 million and $0.3 million and $4.2 million and $1.1 million for the three and nine months ended September 30, 2017 and 2016, respectively, and had an accumulated deficitMarch 31, 2018 have used most of approximately $5.6 million and $1.4 million as of September 30, 2017 and December 31, 2016, respectively. In addition, operating activities used cash of approximately $1.9 million and $1.1 million for the nine months ended September 30, 2017 and 2016, respectively.Company’s liquid assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
However, the Company has approximately $78,000 in working capital as of March 31, 2018 compared to negative working capital of approximately $318,000 on December 31, 2017.  The Company raised additional cash of $2.3$1.5 million net of offering costs from the saleissuance of 5,060,000 shares of common stock subsequent to December 31, 2016 through September 30, 2017. Management is actively seeking additional equity financing
On September 26, 2017, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with GPB Debt Holdings II, LLC (“GPB”), pursuant to which the Company issued to GPB a secured convertible promissory note and received gross proceeds of $4.9 million. The Company is required to make interest-only payments fornotes payable starting in the first 23 months after September 26, 2017 with quarterly principal payments beginning on month 24 at a ratequarter of 10% of the face value of the2018 (see Note with the remaining 60% due on September 26, 2020. The proceeds were used to pay (i) the outstanding balance of various credit facilities due to Hannoveresche Volksbank in the amount of $2.3 million, (ii) the outstanding balance of a settlement with VR Equity in the amount of $0.5 million and (iii) the outstanding balance on secured promissory notes in the amount of $0.3 million. In addition, issued subordinated notes to 3 other investors for net proceeds of $0.4 million with similar terms as the Purchase Agreement. See Note 4 for additional details of the transactions.4).
 
 
 
F-5F-4
 
 
Management continues to expand its product offerings and has also expanded its sales and distribution channels during 2017. Management believes it will be able to reduce its operating losses through an increase in its revenues and reduction in manufacturing costs through process efficiencies. No assurances can be given that management will be successful in meeting its revenue targets and reducing its operating loss.
The condensed consolidated financial statements included herein have been prepared on a going concern basis, which contemplates continuity of operations and the realization of assets and the repayment of liabilities in the ordinary course of business. Management evaluated the significance of the Company’s operating loss and determined that the Company’s current operating plan and sources of capital would be sufficient to alleviate concerns about the Company’s ability to continue as a going concern.2018.
 
In the future, we may require sources of capital in addition to cash on hand to continue operations and to implement our strategy. If our operations do not become cash flow positive, we may be forced to seek equity investments or debt arrangements. No assurances can be given that we will be successful in obtaining such additional financing on reasonable terms, or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, results of operations and financial condition. In addition, if funds are available, the issuance of equity securities or securities convertible into equity could dilute the value of shares of our common stock and cause the market price to fall, and the issuance of debt securities could impose restrictive covenants that could impair our ability to engage in certain business transactions.
 
Restricted Cash
The Company is required to maintain restricted cash balances equal to 6 months of interest payments on the secured convertible promissory note to GPB.
Revenue Recognition  
 
The Company derives its revenue primarily from the sale of medical products and supplies for the diagnosis and prevention of cancer. Product
The company recognizes revenue isfor the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
Consumables revenues consist of single-use products and are recognized whenat a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment. Instruments revenues typically consist of longer-lived assets that, for the substantial majority of sales, are recognized at a point in time in a manner similar to consumables. The Company exercises judgment in determining the timing of revenue by analyzing the point in time or the period over which the customer has the ability to direct the use of and obtain substantially all four of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) deliveryremaining benefits 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.asset. The Company generates the majorityexpenses contract costs that would otherwise be capitalized and amortized over a period of its revenue from the sale of inventory. For 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.less than one year.
 
Shipping and handling costs are included in cost of goods sold and charged to the customers based on the contractual terms.
 
Payments from customers for most instruments, consumables and services are typically due in a fixed number of days after shipment or delivery of the product. For certain international equipment orders a prepayment is required. The balance of the customer deposits is reflected in our accrued liabilities and was $215,088 as of March 31, 2018.
See Note 8 for revenue disaggregated by type and by geographic region as well as further information about remaining performance obligations.
Inventories
 
Inventories are stated at the lower of cost or market.net realizable value. Cost is determined using the first 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;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 USU.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 relevant accounting guidance. All assets and liabilities are translated at the exchange rate on the balance sheet dates, stockholders’ equity was translated at the historical rates and statements of operations transactions are 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’ equity.
 
F-5
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.
F-6
 
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.
 
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 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.
 
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, 2018 and 2017 and 2016 as the effect would be anti-dilutive (i.e. would reduce the loss per share).
 
The 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 the condensed consolidated statement of operations. The Company includes convertible securities into theirEPS calculation when reporting net income through the "if-converted" method whereby the securities are assumed converted and an earnings per incremental share is computed.
 
Convertible securities outstanding for the entire period are assumed converted at the beginning of the period. Convertible securities issued during the period are treated as if they were converted at the date of issuance. The earnings per incremental share is the after-tax foregone interest expense divided by the number of shares of common stock that would have been issued from the conversion weighted for the period they would have been outstanding.
 
 
 
F-7F-6
 
 
Recent Accounting Pronouncements
 
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 with early adoption permitted for annual reporting periods beginning after December 15, 2016. The Company will implementadopted the modified retrospective transition method of ASU 2014-09 effective January 1, 2018 and does not believe that there will be awas no material change to its current business practices upon implementation.
 
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.
 
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows - Restricted Cash (Topic 230)”. This new standard requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance is effective for annual and interim reporting periods beginning after December 15, 2017 and requires retrospective application. The Company is currently assessingadopted this standard in the impact that adopting ASU 2016-18 will have onfirst quarter of 2018 by using the retrospective method, which required the following disclosures and changes to the presentation of its consolidated financial statements: cash and restricted cash reported on the consolidated statements and related disclosures.of cash flows now includes restricted cash of $417,000 as of December 31, 2017, as well as previously reported cash.
 
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, 2017, and interim periods within those years. Management does not anticipate theThe implementation to have ahad no material impact on the Company’s consolidated financial statements.
 
In January 2017, the FASB also issued ASU 2017-04, “Intangibles - Goodwill and other (Topic 350): Simplifying the test for goodwill impairment”. The amendments in this Update 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 impairment tests in fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact the adoption of ASU 2017-04 will have on the Company’s consolidated financial statements.
Note 3.          Inventories
The following is a summary of the components of inventories (in thousands):
 
In July 2017, the FASB issued a two-part ASU No. 2017-11, “(Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception.” The ASU will (1) “change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features” and (2) improve the readability of ASC 480-10 by replacing the indefinite deferral of certain pending content with scope exceptions. The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. 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 completed a transaction with a down round feature and has chosen to early adopt ASU 2017-11 for the current period.
 
 
March 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
 
(Unaudited)
 
 
 
 
Raw materials
 $1,445 
 $1,220 
Work in process
  48 
  44 
Finished goods
  1,164 
  1,139 
 
 $2,657 
 $2,403 
 
 
F-8F-7
 
Note 3.          Inventories
The following is a summary of the components of inventories (in thousands):
 
 
September 30,
2017
(Unaudited)
 
 
December 31,
2016
 
Raw materials
 $1,315 
 $1,309 
Work in process
  145 
  203 
Finished goods
  2,164 
  2,299 
 
 $3,624 
 $3,811 
 
Note 4.          Debt
 
The Company’s outstanding debt was as follows as of (in thousands):
 
 
 
September 30,
2017 (Unaudited)
 
 
December 31,
2016
 
Hannoversche Volksbank credit line #1
 $- 
 $1,321 
Hannoversche Volksbank credit line #2
  - 
  397 
Hannoversche Volksbank term loan #3
  - 
  117 
Secured promissory note
  83 
  650 
DZ Equity Partners Participation rights
  - 
  789 
GPB convertible note payable
  5,356 
  - 
Subordinated convertible notes payable
  573 
  - 
Total  
  6,012
  3,274 
Less:
    
    
Loan Fees and Original Issue Discount
  (1,470)
  - 
Less current portion of debt, net
  (83)
  (3,214)
Long-term debt
 $4,459 
 $60 
 
 
March 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
 
 (Unaudited)
 
 
 
 
Secured promissory note
  50 
  50 
Subordinated convertible notes payable
  1,085 
  932 
GPB Debt Holdings II, LLC convertible note payable
  5,356 
  5,356 
2018 Convertible notes payable
  1,425 
  - 
Total  
  7,916 
  6,338 
Discounts on convertible notes payable
  (2,709)
  (1,419)
Less current portion of long-term debt
  (50)
  (50)
Long-term debt
 $5,157 
 $4,869 
 
GPB Debt Holdings II, LLC (“GPB”) Convertible Note Payable
On September 26, 2017, the Company entered into the Purchase Agreement with GPB, pursuant to which the Company issued to GPB (i) a secured convertible promissory note in the aggregate principal amount of $5,356,400 (the “GPB Note”) at a purchase price equal to 97.5% of the face value of the of the original $5 million GPB Note and an additional discount of 300,000 Euro ($356,400 at September 26, 2017) attributed to the purchase and settlement of the 750,000 Euro ($890,325 at September 26, 2017) note with VR Equity Partners formerly DZ Equity Partners (“DZ”) by GPB and considered an additional purchase discount, with the Company receiving net proceeds of $4.7 million and (ii) a warrant to purchase an aggregate of 4,120,308 shares of common stock of the Company (the “Warrant”). The Company allocated the proceeds received to the GPB Note and the warrants on a relative fair value basis at the time of issuance. The total debt discount will be amortized over the life of the GPB Note to interest expense. The estimated relative fair value of the warrants was $520,052. Amortization expense of the debt discount, which includes original issue discount, loan fees and the warrant value, during the threeyear ended December 31, 2017 and ninethe three months ended September 30, 2017March 31, 2018 was $6,358. $131,822 and $114,438, respectively. The GPB Note matures on the 36th month anniversary date following the Closing Date, as defined in the GPB Note (the “Maturity Date”). The GPB Note is secured by a senior secured first priority security interest on all of the assets of the Company and its subsidiaries evidenced b yby a security agreement (the “Security Agreement”). Each subsidiary also entered into a guaranty agreement pursuant to which the subsidiaries have guaranteed all obligations of the Company to the GPB. The GPB Note bears interest at a rate of 13.25% per annum (which interest is increased to 18.25% upon an Event of Default). The GPB Note is initially convertible at a price of $0.65 (the “Conversion Price”) into 8,240,615 shares of common stock. There was no discount relate to the conversion feature. The exercise price of the Warrant is subject to a ratchet downside protection with a $0.30 per share floor price in the event the Company issues additional equity securities, and subject to adjustments for stock splits, dividends, combinations, recapitalizations and the like. The GPB Note is being amortized quarterly at a rate of 10% of the face value of the Note beginning on month 24, with the remaining 60% due at the Maturity Date. There is a flat 3% success fee which allows for the prepayment of the GPB Note and applies to the payment of principal during the Term through the Maturity Date. The GPB Note contains customary events of default. The GPB Notes containNote contains certain covenants, such as restrictions on the incurrence of indebtedness, the existence of liens, the payment of restricted payments, default, redemptions, and the payment of cash dividends and the transfer of assets. GPB also has a right of participation for any Company offering, financing, debt purchase or assignment for 36 months after the closing date. The Company is required to maintain a 6 month6-month interest reserve of $354,862.$417,000 in restricted cash. The shares underlying the convertible debtGPB Note and the warrantsWarrants are to be registered by the Company through a registration rights agreement within 60 days and the registration statement is to be declared effective within 180 days. Failure to file, or to meet other criteria defined as the event date will required the Company to pay 2% of the registrable securities times the price at the event date per month, up to 12% in cash payments. On February 5, 2018, the Company entered into a Forbearance Agreement with GBP that provides relief until July 1, 2018 of the Company’s requirement to maintain an interest reserve and to complete a registration rights agreement and provides relief until April 1, 2018 of the Company’s requirement to make interest payments.  According to the Forbearance Agreement, interest payments must be current by December 31, 2018.
 
 
 
F-9F-8
 
 
In July 2006, MEDITE GmbH, Burgdorf, entered into a master credit line #1 with Hannoversche Volksbank. The line of credit was amended in 2012, 2015 and again in 2016. Borrowings on the master line of credit agreement #1 bore 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 3.75 – 8.00% during the period ended September 30, 2017. The line of credit is collateralized by the accounts receivable and inventory of MEDITE GmbH, Burgdorf, and a mortgage on the building owned by the Company and was guaranteed by Michaela Ott and Michael Ott, stockholders of the Company. This master credit line was repaid with the proceeds of the GPB Note and the collateral and guarantees released.Securities Purchase Agreement
 
In June 2012, CytoGlobe, GmbH, Burgdorf, entered into a credit line #2 with Hannoversche Volksbank. Borrowings on the master line of credit agreement #2 bore 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 3.90 – 8.00% during the period ended September 30, 2017. The line of credit was collateralized by the accounts receivable and inventory of CytoGlobe GmbH, Burgdorf and was 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. This credit line was repaid with the proceeds of the GPB Note and the collateral and guarantees released.
In November 2008, MEDITE GmbH, Burgdorf, entered into a Euro 400,000 ($472,510 as of September 30, 2017) term loan #3 with Hannoversche Volksbank with an interest rate of 4.7% per annum. The term loan was guaranteed by Michaela Ott and Michael Ott, stockholders of the Company, and was collateralized by a partial subordinated pledge of the receivables and inventory of MEDITE GmbH, Burgdorf. This term loan was repaid with the proceeds of the GPB Note and the collateral and guarantees released.
In March 2009, the Company entered into a participation rights agreement with DZ in the form of a debenture with a mezzanine lender who advanced the Company up to Euro 1.5 million, ($1.8 million as of September 30, 2017) in two tranches of Euro 750,000 each ($885,960 as of September 30, 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 bore interest at the rate of 12.15% per annum. The rate of interest increased three percent, to 15.15% on June 1, 2017. GPB purchased the participation rights agreement with DZ and settled the debt owed by the Company and included the balance in the GPB Note.
On December 31, 2015, the Company entered into a Securities Purchase Agreement (the “2015 Purchase Agreement”) with seven individual accredited investors  (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 common stock of the Company (the “Warrant(s)”) with an initial exercise price of $1.60 per share, subject to adjustment and are exercisable for a 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 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 are 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 Notes are repaid.  During the nine month period ended September 30, 2017, the Company issued 50,000 warrants in connection with the default provision and 270,000 warrants in connection with the January 2017 extension provision (see below), which were valued at $11,443 and $76,083, respectively, and recorded it as interest expense in the condensed consolidated statements 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. One noteholder did not extend the term of the notes and the Company defaulted on July 1, 2017 and received 33,333 warrants to purchase shares of common stock which the Company valued at that date at $8,741.
Using the proceeds from the GPB Note, the Company repaid $166,667 ofhas an outstanding Notes. In addition, Notes totaling $133,333 converted into subordinated convertible notes at a purchase price of 97.5% of the Face Value of the $136,752 notes with substantially the same terms as the GPB Note. In connection, the Company issued 105,194 warrants to purchase common stock with a term of 5 years and an exercise price of $0.60 per share with a ratchet downside protection of $0.30 exercise price per share floor. The Company allocated the value of these notes and the warrants on a relative fair value basis at the time of issuance. The total debt discount will be amortized over the life of these notes to interest expense. The estimated relative fair value of the warrants was $13,277. Amortization expense of the debt discount, which includes original issue discount and the warrant value, during the three and nine months ended September 30, 2017 was insignificant.
F-10
Another Notenote payable with a principal and accrued interest balance of $63,250 remains unpaid andthat is not considered in default as the Company received notification to freeze this account. The remaining
2018 Convertible Notes with an aggregate balance of $83,333 will be repaid once the Company receives final paperwork from the investors for authorization for repayment. The accrued interest on the remaining Notes of $25,250 is expected to be converted into 50,500 shares of common stock.
 
On May 25, 2016,February 6, 2018, the Company entered intoestablished a Securities Purchase Agreement (the “May Purchase Agreement”) with two individual accredited investors, oneprivate placement of which who serves on the Company’s  Board of Directors (collectively the “May Purchasers”), pursuantconvertible notes and common stock 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)”)raise approximately $1,500,000, with an interest rateover-allotment option for an additional $750,000. The convertible notes have a conversion price of 15% and warrants to purchase up to an aggregate amount of 150,000$0.075 per share. The investors received shares of common stock of the Company (the “May Warrant(s)”).based on an assumed purchase price of $0.075 per share and the investor is not required to pay any additional consideration for the shares of common stock. As of March 31, 2018 the Company had received $1,325,000 and converted $100,000 of accrued liabilities and issued 19,000,000 shares of common stock. The May Notes may be converted into Units issued pursuantconvertible notes mature five years from the closing date, have an interest rate of 12%, are secured obligations of the Company, senior to other outstanding indebtedness and are expressly subordinate to the Company’s private financingindebtedness with GPB Debt Holdings II, LLC.
Of the total $1,425,000 received and converted, the Company received $950,000 and converted $100,000 of up to $5,000,000 (the “Follow On Offering”) Units at a price of $0.80/Unit (the “Units”) consisting of: (i) a  2 year unsecured convertible note, which converts intoaccrued liabilities from related parties, including Board members, and issued 14,000,000 shares of common stockstock.
In order to account for this instrument, we had to determine if it had an embedded beneficial conversion feature (“BCF”), which is measured at an initialthe commitment date by allocating a portion of the proceeds equal to the intrinsic value of that feature (not the fair value) to APIC. This allocation will result in a discount on the convertible instrument. The intrinsic value is calculated as the difference between the effective conversion price of $0.80 per share and (ii) a warrant to purchase one half additional share of common stock, with an initial exercise price equal to $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 recorded a debt discount of $51,000 related to the relative fair value of the warrants oncommon stock into which the datesecurity is convertible, multiplied by the number of shares into which the security is convertible.
If the intrinsic value of the May Purchase Agreement, which was amortizedBCF is greater than the proceeds allocated to interest expense in the consolidated statement of operations duringconvertible instrument, 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%amount of the principal balancediscount assigned to the BCF is limited to the amount of proceeds allocated to the Notes outstanding in warrants for every month that the Notes are not redeemed. On August 25, 2016, these Notes matured and were not repaid.  Therefore the Notes were in default on August 26, 2016.convertible instrument. The Company agreednet carrying amount should be accreted from zero to pay the Purchasers 10% of the principal balance of the May Notes in warrants until the May Notes are repaid.  In January 2017, the Company extendedits face value over the term of the Notes in default to June 30, 2017 and reducedconvertible debt.
For this instrument the price onBCF was greater than the warrants issued from $0.80 to $0.50. Duringproceeds so therefore the three and nine month periods ended September 30, 2017, the Company issued 0 and 80,000 warrants in connection with the January 2017 extension provision, which were valued at $0 and $27,058 and recorded it as interestconvertible notes of $1,425,000 had an initial debt discount of $1,425,000. Amortization expense in the consolidated statements of operations. One noteholder did not extend the term of the notes and the Company defaulted on July 1, 2017 and issued 33,333 warrants to purchase shares of common stock which the Company valued at that date at $8,741 and recorded the amount as interest expense. One noteholder converted a $50,000 note plus accrued interest of $8,417 into 116,833 shares of common stock on June 30, 2017.
Accrued interest of $101,917 associated with the Notes and the May Notes was converted into 203,834 shares of common stock at a value of $0.50 per sharedebt discount during the three monthsmonth period ended September 30, 2017.March 31, 2018 was $45,417.
Subordinated Convertible Notes
 
On September 27, 2017, the Company received $425,000 and issued $435,897 subordinated convertible debt with an original issue debt discount of $10,897 and with similar terms as the GPB Note. The Company issued 335,306 warrants to purchase shares of common stock with a term of 5 years and an exercise price of $0.60 per share, with a ratchet down side protection of $0.30. The Company allocated the value of these notes and the warrants on a relative fair value basis at the time of issuance. The total debt discount will be amortized over the life of these notes to interest expense. The estimated relative fair value of the warrants was $42,321. Amortization expense of the debt discount, which includes original issue discount and the warrant value, during the threeyear ended December 31, 2017 and ninethe three months ended September 30,March 31, 2018 was $1,351 and $8,975, respectively.
In December 2017, the Company received $350,000 and issued $358,974 subordinated convertible debt with an original issue debt discount of $8,974 and with similar terms as the GPB Note. The Company issued 276,135 warrants to purchase shares of common stock with a term of 5 years and an exercise price of $0.60 per share, with a ratchet down side protection of $0.30. The Company allocated the value of these notes and the warrants on a relative fair value basis at the time of issuance. The total debt discount will be amortized over the life of these notes to interest expense. The estimated relative fair value of the warrants was insignificant.$28,531. Amortization expense of the debt discount, which includes original issue discount and the warrant value, during the year ended December 31, 2017 and the three month period ending March 31, 2018 was $0 and $5,511 respectively.
 
In November 2015 and February 2016, January 2018, the Company entered into promissoryreceived $150,000 and issued $153,847 subordinated convertible debt with an original issue debt discount of $3,847 and with similar terms as the GPB Note. The Company issued 118,343 warrants to purchase shares of common stock with a term of 5 years and an exercise price of $0.60 per share, with a ratchet downside protection of $0.30. The Company allocated the value of these notes totaling $927,000 with certain employees to repay wages earned prior to December 31, 2014 not paid (“Notes Due to Employees").and the warrants on a relative fair value basis at the time of issuance. The Notes Due to Employees are tototal debt discount will be paid monthly through September 2019, with no interest due on the outstanding balances.  The monthly amounts increaseamortized over the payment term.life of these notes to interest expense. The amounts due become immediately dueestimated relative fair value of the warrants was approximately $28,000. Amortization expense of the debt discount, which includes original issue discount and payable if payments are more than ten days late either one or two consecutivethe warrant value, during the three months as defined in the agreement with the employee. ended March 31, 2018 was $2,600.
F-9
Employee Notes Payable
On March 30, 2017, the Company entered intoagreed to pay certain employees approximately $330,000 in connection with a settlements with three current employees that holdsettlement of outstanding promissory notes in the amount of $580,000 plusand accrued vacation. The agreement supersedes all prior agreements with the group and was effective December 31, 2016.vacations. 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 of $389,000 was to pay these employees approximately $330,000,amortized in full during 2017. Per the terms of the agreement, the first payment of $94,000 was paid in April 2017, the second payment of $94,000 was due 30 days from signing the agreement and the final payment of $142,000 was due 60 days from signing the agreements, however the remaining payments remained due at September 30, 2017. March 31, 2018.In November 2017, the employees have agreed to renegotiate the March 30, 2017 agreement in good faith with the Company as to a future payment plan mutually agreeable by all parties.  The Company issued 1,029,734 warrants to purchase common stock at $0.50This negotiation was put on hold in 2018 until the Company’s cash situation improved, and discussions resumed in June.  It is expected that a share with a term of 5 years. The fair value of the warrants issued of $389,000 for the nine months ended September 30, 2017, was valued based on the Black Scholes model based on a stock price of $0.70, an interest free rate of 1.33%new agreement will be completed 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 payable due to employees of $158,000.implemented during 2018.
  
F-11
Note 5.          Related Party Transactions
 
Included in advances – related parties are amounts owed to the Company’s former CFO and Chairman of the Board of $50,000 at September 30, 2017March 31, 2018 and December 31, 2016.2017. Also included in advances – related parties are amounts owedof 49,162 Euros, ($60,573 as March 31, 2018) to MichaelaMs. Ott stockholder and former CEO of the Company, of 20,000 Euros, ($23,626 as September 30, 2017) and 75,000 Euros ($88,596 as of September 30, 2017) related to two short term bridge loans. The Company has made arrangements to settle these obligations to Ms. Ott evenly over a 24 month period, starting on October 31, 2017. In addition, the Company settled obligations related to accrued salaries, vacation and related expenses totaling $152,000 owed to Michael Ott, stockholder and former COO of the CompanyMr. and Ms. Ott. The Company madewill 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 scheduled to startstarting in October 2017.  The Company is reviewingsigned additional agreements to settle the debt owed from the US entity wherewhen the wages were earned versus the German entity. The Company is working with Mr. and Ms.has paid Michaela Ott to get these payments paid as of$13,978 for the date of this filing due to the changes requested by Michaela and Michael Ott.  
The loans noted above are interest-free loans. The Company paid Mr. and Ms. Ott the agreed upon severance payments however the upfront payment was paid in November 2017. Total severance payments totaled $118,810. Mr. Ott and Ms. Ott remain as Directors of the Company and continue to work with the Company.
On June 30, 2017, one secured noteholder, an affiliate of a member of our Board of Directors, converted a $50,000 secured promissory note plus accrued interest of $8,417 into 116,833 shares of common stock. The Company issued 50,000 warrants to purchase shares of common stock at a price of $0.50, with a term of five years. See further discussion related to secured promissory notes in Note 4.
On February 12, 2016, one of the Purchasers of a $100,000 secured promissory note and holder of 50,000 (increased to 100,000 warrants as of Decemberthree months ended March 31, 2016) warrants to purchase shares of common stock at the time of his election, was elected to the Board of Directors to serve as Director and Chairman of the Company’s audit committee. Total warrants due to this director2018 related to the above secured promissory notes for original issuance, modifications, default periodamount owed. The balance due to Michaela Ott at March 31, 2018 is $60,573 related to the wages owed. During the three months ended March 31, 2018, the Company has paid Michael Ott $9,544 and the modification period at September 30, 2017 was 260,000 warrants to purchase common stock. On September 27, 2017, the remaining balance of $66,667outstanding at March 31, 2018 was converted into a subordinated convertible note discussed in Note 4 of $68,376 subordinated convertible debt and received 52,597 warrants to purchase shares of common stock at $0.60 a share. The Company issued 48,000 shares of common stock for $24,000 of accrued interest at $0.50. See relative fair value and additional discussion in Note 4.$41,356.
 
At September 30, 2017 Accrued salaries, vacation and related expenses at March 31, 2018 and December 31, 2016, the Company has accrued $70,000 and $55,000, respectively to the above Director and Chairman of the audit committee for services for 2016 as a member of the Board of $35,000 and an additional $20,000 for audit committee services2017, includes amounts for the year ended December 31, 2016 and $15,000 for the audit committee services for the nine months ended September 30, 2017.
Includedformer CFO of approximately $1.1 million, which is included in accounts payable and accrued expense includes $18,508 due to its current CFO’s company for past services performed as a consultant toexpenses in the Company at September 30, 2017.
The Company has accrued wages and vacation of approximately $1.1 million payable to the former CFO at September 30, 2017 and December 31, 2016. In August 2017, the Company offered a settlement for the legal matter with a settlement term sheet whereby a formal settlement agreement and forbearance agreement must be entered with the court. Pursuant to the settlement proposal, the Company is to issue a combination of stock, warrants and payments over a period of up to three years.accompanying condensed consolidated balance sheets. See Note 87 for further discussion regarding the legal proceedings with the Company’s former CFO.
 
Note 6.          Common Stock
Effective April 28, 2017, the Company increased the authorized shares from 35,000,000 to 50,000,000. On August 1, 2017 theThe Company received written consent$950,000 and converted $100,000 of the holders of the majority of theaccrued liabilities from related parties, including Board members, and issued and outstanding shares of our Common Stock, to amend the 2017 Employee/Consultant Common Stock Compensation Plan and to file a  Certificate of Amendment to our Certificate of Incorporation (the “Certificate of Incorporation”) to increase the Company’s authorized common stock, par value $0.001 per share (the “Common Stock”), from 50,000,000 shares to 100,000,000 shares, (the “Amendment”) and keep the authorized shares of preferred stock, par value $0.001 per share (the “Preferred Stock”), unchanged.
During the nine months ended September 30, 2017, the Company issued 5,060,00014,000,000 shares of common stock for $2,530,000, less $186,000 of issuance costs. In connection with(see Note 4).
Note 6.          Stockholders’ Equity
Common stock during the issuance of common stock,three months ended March 31, 2018, the Company issued 2,530,000 warrantsa private placement of convertible notes and common stock to purchaseraise approximately $1,500,000, with an over-allotment option for an additional $750,000 (see Note 4). As of March 31, 2018, the Company had received $1,325,000 and converted $100,000 of accrued liabilities and issued 19,000,000 shares of common stock at $0.50, for a termstock.
Of the total $1,425,000 received and converted, the Company received $950,000 and converted $100,000 of 5 years. We also issued 50,000 sharesaccrued liabilities from stock subscriptions of $25,000 at December 31, 2016board members, and issued 25,000 warrants on the same terms and conditions. During the nine months ended September 30, 2016, the Company issued 292,167 shares to settle certain liabilities totaling $274,870.
F-12
On March 7, 2017 the Company filed a $4,250,000 Form D to issue up to 8.5 million14,000,000 shares of common stock and approximately 2.2 million warrants to issue common stock at $0.50 a share. The Company had extended this offering through September 29, 2017.
The Board appointed two officers on May 4, 2017, who received 350,000 shares of restricted common stock with a three year vesting schedule. In addition, on April 26, 2017, the Company appointed an officer who received 200,000 shares of restricted common stock with a three year vesting schedule. On June 9, 2017 the Company issued 160,000 shares of restricted common stock with a vesting schedule through December 31, 2019. Amortization associated with restricted stock to officers and management, including shares issued in 2016, is $50,484 and $113,569 for the three and nine months ended September 30, 2017, respectively. In addition, the Company issued 50,000 shares of common stock to an investor relations firm in June 2017 at a value of $0.50 per share for services through September 30, 2017. For the three and nine months ended September 30, 2017, the Company recorded $18,750 and $25,000, respectively included in selling, general and administrative expenses for professional fees for investor relations expense.
Accrued interest of $101,917 associated with the Notes and the May Notes was converted into 203,834 shares of common stock at a value of $0.50 per share. See Note 4 for additional discussions. On June 30, 2017, one secured noteholder, an affiliate of a member of our Board of Directors converted a $50,000 secured promissory note for $50,000 plus $8,417 of accrued interest into 116,833 shares of common stock. The Company issued 50,000 warrants to purchase shares of common stock at a price of $0.50, with a term of five years. See additional discussion in Note 4.
In September 2017, the Company issued 182,927 of shares of common stock valued at $75,000 for compensation to its broker related to the GPB Note. The value was recorded as a debt discount, see Note 4.
Note 7.          Options,Preferred Stock and Warrants
A summary of the Company’s preferred stock as of September 30, 2017 and December 31, 2016 is as follows.
 
 
September 30,
2017
(unaudited)
 
 
 
December 31,
2016
 
 
 
Shares Issued &
 
 
Shares Issued &
 
Offering
 
Outstanding
 
 
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, 2017 and December 31, 2016, the Company had cumulative preferred undeclared and unpaid dividends of $1,480,082 and $1,411,946, respectively. In accordance with the relevant accounting guidance, these dividends were added to the net loss in the net loss per share calculation.
Options
The Company’s 2017 Employee/Consultant Common Stock Compensation Plan (the “Plan”) for the issuance of up to 3,000,000 options to grant common stock to the Company’s employees, directors and consultants was adopted pursuant to the written consent of holders of a majority of the Company’s common stock obtained as of March 7, 2017 and was considered approved on April 21, 2017. The Company amended the Plan on August 1, 2017 and was considered approved on September 1, 2017 to include certain technical changes and increased the shares from 3,000,000 to 5,000,000. At September 30, 2017, the Company issued 2.1 million of non-qualified stock options with a term of 10 years, with a strike price above the market on the date of issuance of $0.50, to vest one-third upon issuance, one-third at the beginning of the calendar year of service, or January 1, 2018 and one-third on January 1, 2019, to the Board of Directors valued at $520,307 using the Black Scholes Model. Included in selling, general and administrative in the accompanying condensed consolidated statement of operations and comprehensive loss for the period is $173,436 for the three and nine months ended September 30, 2017, related to the non-qualified options issued to the Board of Directors.
 
 
Options
 
 
Weighted Average Exercise Price
 
 
Aggregate Intrinsic Value
 
 
Weighted Average Remaining Contractual Life (Years)
 
Outstanding at December 31, 2016
  - 
 $- 
   
  - 
Granted
  2,100,000 
  0.50 
   
  10.00 
Exercised
   
   
   
   
Expired
   
   
   
   
Outstanding at September 30, 2017
  2,100,000 
 $0.50 
   
  10.00 
F-13
 
Warrants outstanding
 
 
Warrants
 
 
Weighted Average Exercise Price
 
 
Aggregate Intrinsic Value
 
 
Weighted Average Remaining Contractual Life (Years)
 
Outstanding at December 31, 2016
  1,396,161 
 $1.08 
   
  4.11 
Granted
  9,746,123 
  0.55 
   
  4.79 
Exercised
   
   
   
   
Expired
   
   
   
   
Outstanding at September 30, 2017
  11,142,284 
 $0.59 
   
  4.53 
 
During the three and nine month periodsperiod ended September 30, 2017,March 31, 2018, the Company issued 141,667 and 466,666118,343 warrants in connectionrelated to the January 2018 subordinated loan with the default provisionsa relative fair value of the Notes and the May Notes, which were valued at $34,365 and $132,065.approximately $28,000.  The value of the warrants were determined using the Black-Scholes model, at an interest free rate of 1.33%, volatility of 50%402% and a remaining term of 5 years and a market price of between $0.50 to $0.80$0.30 during the three and nine months ended September 30, 2017.March 31, 2018 (see Note 4).
 
On September 26, 2017,March 2, 2018, the Company closed on a loan with GPB discussed in Note 4. The Company issued 4,120,308granted 1,062,500 warrants with a relative fair value of $520,052 and an initial exercise price of $0.60 per share (the “Exercise Price”). The Exercise Price is subject to a ratchet downside protection with a $0.30 per share floor price in the event the Company issues additional equity securities, and subject to adjustments for stock splits, dividends, combinations, recapitalizations and the like. The Warrants is exercisable for a period of five years (the “Term”) and provides for cashless exercise it at the time of exercise a registration statement registering the underlying securities is not available. The Warrant is not to be exercisable until 6 months after the closing date. In connection with the GPB Note, The Company issued 375,000 warrants to purchase common stock at $0.60 to its broker related to the GPB Note on similar terms as provided to GPB. The estimated fair value of the warrants was $52,421, which was recorded as a debt discount.
On September 27, 2017, the Company closed on subordinated loans, including Notes converted into subordinated loans discussed in Note 4 with similar terms and conditions. The Company issued an aggregate of 440,500 of warrants with a relative fair value of $55,598, with an initial exercise price of $0.60 per share (the “Exercise Price”). The Exercise Price is subject to a ratchet downside protection with a $0.30 per share floor price in the event the Company issues additional equity securities, and subject to adjustments for stock splits, dividends, combinations, recapitalizations and the like. The Company is required to maintain a 6 month interest reserve of $37,938. In connection with the loans, the Company issued 24,375 warrants to purchase common stock at $0.60 to its broker. The estimated fair value of the warrants was $3,407, which was recorded as a debt discount.
In January 2017, the Company reached an agreement with all secured promissory noteholders, to extend the maturity of the 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 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 nine months ended September 30, 2017, the Company issued 5,060,000 shares of common stock for $2,530,000, less $186,000 of issuance costs. In connection with the issuance of common stock, the Company issued 2,530,000 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 same terms and conditions. On January 16, 2017 the 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,$0.075 to TriPoint Global Equities LLC for a term of 5 years. The Company issued 176,625 warrants to purchase common stock to brokersservices related to the above transaction for 2017.issuance of a private placement of convertible notes (see Note 4). The estimated fair value is included in the debt discount of the 2018 convertible notes (see Note 4).
 
 
 
 
F-14F-10
 
 
Note 8.7.           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 September 30, 2017 and December 31, 2016.2017. The presiding Federal Judge has referred the lawsuit to mediation. No settlement was reach during the April 2017 meditation. The Company has proactively initiated settlement offer. In August 2017, the parties reached a Settlement Term Sheet whereby a final forbearance and settlement agreement must be filed with the magistrate judge. On November 8, 2017 the Plaintiff filed a motion to compel settlement with a meeting before a magistrate judge on November 14, 2017.
 
On February 20, 2018, the magistrate judge denied Plaintiff’s motion. On March 8, 2018, Plaintiff again filed a Motion to Enforce Settlement Agreement which has been opposed by the Company. On April 22, the judge ruled in favor of the Company and denied plaintiff’s motion to compel.
On May 15, 2018, a complaint was filed in the United States District Court of Northern California against the individual directors of the Company by Robert McCullough, Jr, and Dr. Zhongxi Zheng. The Company was named as a Nominal Defendant. The complaint alleges various claims including Breach of Fiduciary Obligations, Abuse of Control, Unjust Enrichment, Fraud, Intentional Misrepresentation and Negligent Representation. The suit seeks certain declaratory relief, injunctive relief and an accounting. Management believes these claims are frivolous and without any merit whatsoever, and are being filed for the sole purpose of harassing the named Defendants and to leverage a more beneficial settlement in the suit discussed in the paragraph above. Further, management believes that the suit was filed in a court having no personal jurisdiction over any of the named Defendants, The Company and individual directors will vigorously defend against this suit and seek to have it immediately dismissed. If successful, Defendants will seek attorneys’ fees and appropriate sanctions.
F-11
Note 9.8.          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
 
 
United States
 
 
Germany
 
 
Total
 
 
September 30,
2017
 
 
December
31, 2016
 
 
September 30,
2017
 
 
December
31, 2016
 
 
September 30,
2017
 
 
December
31, 2016
 
 
September 30,
2017
 
 
December
31, 2016
 
 
March 31,
 
 
December
 
 
March 31,
 
 
December
 
 
March 31,
 
 
December
 
Assets
 $12,928 
 $11,268 
 $6,055 
 $6,264 
 $45 
 $238 
 $19,028 
 $17,770 
  2018 
  31, 2017 
  2018 
  31, 2017 
  2018 
  31, 2017 
Total Assets
 $10,858 
 $11,179 
 $5,550 
 $4,777 
 $16,408 
 $15,956 
Property & equipment, net
  52 
  68 
  1,511 
  1,487 
  - 
  2 
  1,563 
  1,557 
  99 
  108 
  1,660 
  1,670 
  1,759 
  1,778 
Intangible assets
  10,518 
  - 
  10,518 
  10,518 
  - 
  10,518 
 
 
 
        United States
 
 
        Germany
 
 
        Poland
 
 
        Total
 
 For the three months ended
 
September 30, 2017 
 
 
September 30, 2016
 
 
September 30, 2017
 
 
September 30, 2016
 
 
September 30, 2017
 
 
September 30, 2016
 
 
September 30, 2017
 
 
September 30, 2016
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Histology Equipment
 $36 
 $68 
 $763 
 $1,337 
 $12 
 $- 
 $811 
 $1,405 
Histology Consumables
  82 
  26 
  495 
  613 
  - 
  20 
  577 
  659 
Cytology Consumables
  - 
  88 
  298 
  187 
  - 
  - 
  298 
  275 
Total Revenues
 $118 
 $182 
 $1,556 
 $2,137 
 $12 
 $20 
 $1,686 
 $2,339 
Net loss
 $(830)
 $(376)
 $(884)
 $70 
 $109 
 $- 
 $(1,605)
 $(306)
 
        United States
 
 
        Germany
 
 
        Poland
 
 
        Total
 
 
United States
 
 
Germany
 
 
Total
 
For the nine months ended
 
September 30, 2017 
 
 
September 30, 2016
 
 
September 30, 2017
 
 
September 30, 2016
 
 
September 30, 2017
 
 
September 30, 2016
 
 
September 30, 2017
 
 
September 30, 2016
 
 
March 31,
 
  2018 
  2017 
  2018 
  2017 
  2018 
  2017 
Revenues:
 
 
 
    
Histology Equipment
 $220 
 $283 
 $1,743 
 $3,901 
 $25 
 $8 
 $1,691 
 $4,192 
 $28 
 $146 
 $688 
 $768 
 $716 
 $914 
Histology Consumables
  322 
  96 
  1,735 
  1,770 
  - 
  27 
  2,354 
  1,893 
  92 
  104 
  588 
  573 
  680 
  677 
Cytology Consumables
  - 
  356 
  809 
  842 
  - 
  3 
  809 
  1,201 
  - 
  109 
  300 
  109 
  300 
Total Revenues
 $542 
 $735 
 $4,287 
 $6,513 
 $25 
 $38 
 $4,854 
 $7,286 
 $120 
 $250 
 $1,385 
 $1,641 
 $1,505 
 $1,891 
Net loss
 $(2,067)
 $(1,353)
 $(2,021)
 $314 
 $(97)
 $(91)
 $(4,185)
  (1,130)
 $(949)
 $(570)
 $(453)
 $(385)
 $(1,402)
 $(955)
 
 
F-15F-12
 
 
Note 10.9.          Subsequent Events
 
On October 16, 2017April 26, 2018, the Company filed a Form Dconsummated the closing of Securities Purchase Agreements (the “Purchase Agreements”) with two accredited investors, both of whom are directors of the Company (“Purchasers”), pursuant to issue upwhich the Company issued to $6.9 million of convertiblethe Purchasers secured promissory notes in the aggregate principal amount of $610,000 (the “Notes”) in consideration of an aggregate of $580,000 in cash, and approximately 5.3 million warrants$30,000 of which constitutes the conversion of accrued liabilities owed by the Company to issueone of the Purchasers. The Notes mature on the 60th month anniversary date following the Closing Date, as defined in the Notes (the “Maturity Date”). Accrued interest shall be paid in restricted common stock at $0.60 a share.
On November 5, 2017, the Board of Directors (the “Board”) of the Company held calculated at a meeting whereby David E. Patterson informedvalue of $0.075 per share and on the Boardbasis of his decision to retire as Chief Executive Officera 360-day year and shall accrue and compound monthly. The Notes are secured by security agreements (the “Security Agreements”) and shall represent perfected senior liens on all of the assets of the Company and resign his position as Chairmanits subsidiaries and will be subordinate to the obligation entered into with GPB Debt Holdings II, LLC and the affiliated subordinate investors on September 26, 2017. The Notes shall bear interest at a rate of 12% per annum. In addition, and in accordance with the terms of the Board and Board memberPurchase Agreements, the Purchasers are to be issued 8,133,334 shares of the Company, all effective immediately. Mr. PattersonCompany’s restricted common stock based on an assumed purchase price at $0.075 per share (the “Shares”). The Purchasers shall receive three equal monthly paymentshave piggy-back registration rights with each payment being equalrespect to his monthly salary, and all future restricted stock grants in the amount of 166,667 shares pursuant to his employment agreement shall fully vest as of January 1, 2018, and be issued in consideration for assisting the Company through a transition period.Shares.
 
Thereafter, Stephen Von Rump was appointed by a unanimous vote of the Board to the position of Chief Executive Officer of the Company uponUnder the same terms and conditions as his current employment,described above, on May 9, 2018, the Company consummated the closing of Securities Purchase Agreements (the “Purchase Agreements”) with two accredited investors, pursuant to serve until his resignation or removal.
The Board thereafter, by unanimous consent, appointed current Board member, William Austin Lewis IV,which the Company issued to the positionPurchasers secured promissory notes in the aggregate principal amount of Chairman$250,000 (the “Notes”) in consideration of an aggregate of $250,000 in cash, and the BoardPurchasers are to be issued an aggregate of Directors3,333,333 shares of Company to serve until such time as his removal or resignation.restricted common stock based upon an assumed purchase price at $0.075 per share.
 
On November 12, 2107, the Board of Directors of the Company held a meeting whereby they appointed Joel Kanter, age 61, to the position of Director to serve until such time as his resignation or termination. Mr. Kanter’s appointment fills the vacancy created by the resignation of David E. Patterson.
 
 
F-16F-13
 
 
Item 22.           .          ManagementManagement’s’s Discussion and Analysis of Financial Condition and Results of Operations
 
CautionCautionary Statement Regarding Forward-Looking Statements
 
This reportdocument 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-lookingForward-looking statements by their nature address matters that 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.degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:include, but are not limited to: 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; USU.S. and international regulatory, trade, and tax policies; product development risks, including technological difficulties; ability to enforce patents; and foreseeablenumerous other matters of national, regional and unforeseeable foreign regulatoryglobal scale, including those of a political, economic, business and commercialization factors,competitive nature.   These uncertainties may cause our abilityactual future results 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 timematerially different than those expressed 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, 2016.forward-looking statements. 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 cautionedWe do 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 dutyundertake to update or revise our forward-looking statements.
 
Overview of MEDITE Cancer Diagnostics, Inc.
 
MEDITE Cancer Diagnostics, Inc. (the “Company”, “MEDITE”, “it”, “we”, or “us”), formerly CytoCore, Inc., specializes in the marketingdevelops, manufactures, markets and selling ofsells MEDITE corebranded products (instruments and consumables), manufacturing, developmentin the areas of new solutions in histology and cytology and marketing of molecular biomarkers.cytology. 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%. The well-established brand of MEDITE is well receivedwidely known and remains a professional description of the Company’s business. The Company’s trading symbol is “MDIT”.
 
In 2016 and 2017 the Company focused on implementation of several growth opportunities including enhanced distribution of core products through focused sales and distribution channels, newly developed and patent allowedpatented assays, new laboratory devices and several marketing projects like the introduction of SureThin cytology products for cervical cancer screening in the U. S.  The Company is optimistic about recent marketing efforts focusing on larger laboratory chains and other important strategic relationships.SureCyte C1 fluorogenic stain worldwide.  The Company has approximately 7464 employees in threetwo countries, a distribution network toin over 80 countries and a wide range of products for anatomic pathology, histology and cytology laboratories available for sale.
 
On June 13, 2018 the Company successfully completed its major 3-year audit for the ISO 9001 quality standard, and its certification was renewed for another 3 years.  This is a direct result of our renewed focus on product and process quality over the past year.
China is an important market to the Company and they are working through manufacturingwe have addressed several product quality issues addresseddescribed under Revenue and Results of Operations discussed elsewhere within this Report.  TheChina is an important market to the Company believes they haveand in 2017 we addressed most of theseveral product quality, service and training issues in China. The Company sent a technician to China for approximately four weeks to retrain and review the policies and procedures relating to the products being serviced by UNIC in China.  We also addressed various issues, including product related and warranty issues related to prior deliveries.issues.  Sales in China were negligible during the first quarter of 2018, but the Company has booked over $200,000 so far in the second quarter and the outlook for the three and nine months ended September 30, 2017 were $15,000 and $45,000 comparedyear is to $288,000 and $980,000 for the three and nine months ended September 30, 2016.continue growing that trend.
 
The Company’s cytology product line revenue remained at about the same levels in Europe (non-Gyn and Gyn applications) revenue was lower in Europe during 2016the first quarter of 2018 because product was not available to ship to meet demand, due to working capital constraints and 2017.late delivery from suppliers. The Company is in the process of moving forward the submission of an application to the US Food and Drug Administration (“FDA”) for SureThin Gyn applications, and in the meantime will sell to clinical labs via Lab Developed Tests under CMS/CLIA regulations.applications. The Company will be able to compete with 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 market will drive significant new revenue and gross margin improvement opportunities in the early part of 2018.
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moving forward.
  
The patented self-collection device SoftKit is targetingtargets the growing POC & POP (Point of Care or Point of Person)Care) market. Growth in this area is due to consumer drivenconsumer-driven health care requirements and the necessity to support and address incremental patient population needs for screening and on-goingongoing diagnostic tests. SoftKit is planned to be sold through various marketing channels that serve the gynecology physician consumer health and emerging post-acute care.care space. The Company is currently developing a study plan with a major research center in the Midwest, with the goal of submitting for FDA approval during 2018.approval.
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Management believes that 2017 developments allowallowed the Company to more fully leverage the products and biomarker solutions from the original CytoCore component of MEDITE. The first entry will beis the introduction of the SureCyte C1 fluorogenic instant stain, offering tremendous opportunities for lab efficiencies and enhanced patient care. C1 is the first of many new offerings under the SureCyte brand that will ultimately include algorithms for computer-assisted analysis and advanced assays for micro-environment analysis. The Company is currently conducting informal studies with several labs in the USAU.S. and preparingEurope and is also conducting a formal study with a hospital in China andin partnership with UNIC. CI has recently received the CE Mark in the EU.
 
As part of early SureCyte marketing activities, the Company is working with numerous USU.S. and European Key Opinion Leaders (KOLs) and clinical sites to test the C1 stain, provide feedback on the overall product line plans, and to create white papers and publish articles in highly recognizedhighly-recognized peer-reviewed journals and conferences. Similar approaches are in progress in the EU and also planned for China.
 
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 and their experience for the specialized skills required for manufacturing of the newly developed and updated microtome product line and the newly developed cryostat (instruments used for sectioning tissue biopsies).  The Company will begin manufacturing theits new cryostat line during the fourthsecond quarter of 20172018 and has already taken some customer orders. This enhanced microtome and cryostat production facilityproduct line 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 onethe industry segment for cancer screening, diagnostics instruments and consumables for histology and cytology laboratories.
 
Definition:Histology - Cancer diagnostics based on the structures of cells in tissues
 Cytology - Cancer screening and diagnostics based on the structures of individual cells
 
Cancers 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 diagnosticsdiagnostic 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. The Company believes 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 about a 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 aidedcomputer-aided diagnostic systems, while also lookingand in general a search for cost effectivemore 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 laboratories worldwide. The MEDITE brand stands for innovative and high qualityhigh-quality products – most equipment is 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-cytologyliquid-based cytology which is an important tool in cancer screening and detection in the field of cervical, bladder, breast, lung and other cancer types.
 
All of the Company’s operations during the reporting period were conducted and managed within this segment, with management teamsteam reporting directly to the Chief Executive Office. For information on revenues, profit or loss and total assets, among other financial data, attributable to operations, see the consolidated financial statements included herein. Further during these 2016 and 2017 periods the Company added key personnel with excellent historical performance in new product commercialization, sales development and internal operations improvement.
 
 
 
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Outlook
 
Due to promising innovative new products for cancer risk assessment and an increasing number of distributionsdistribution contracts executed in the lastrecent years, management believes the profitability and cash-flow of the business will grow and improve. However, significantSignificant on-going manufacturing issues have been identified and addressed, and additional 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.) Finishing and gaining approval for the products currently under development, and 2.) IncreaseIncreasing sales in the USU.S. to optimize the excellent sales/distribution channels invigorateavailable there and 3.) Invigorate the distribution networks for the EU/ROW and continue to expand Chinese market sales by broadening the Company’s collaborationscollaboration with the local distributor UNIC. The Company also will work on continuously optimizing manufacturing capacity and planning to increase gross margin. Implementation of ourthese plans will beare contingent upon securing additional debt and/or equity financing.financing, which was partly completed through May 2018 (see Subsequent Events). If the 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 are primarily are generated in Euro currency. While in 2016For the three months ended March 31, 2018 the average USD/EuroEUR-USD exchange rate was 1.12111.22921 compared to 1.0655 for the ninethree months ended September 30, 2016, comparedMarch 31, 2017 (ODNDA) a significant increase. The stronger Euro is favorable to 1.11375 in September 30, 2017 a nominal decrease, however the conversion rate at December 31, 2016 was 1.05204 and 1.18128 at September 30, 2017, respectively. MEDITE’s sales in USD were lower on a year over year basis as approximatelyrevenue reporting since 90% of sales currently occursthe Company’s revenue is in Euros. The Company is working to lessen the impact of the Euro’s decline versus the dollar by working towards increasing the percentage of overall product salesEuro, but also increases COGS for products sold in the USU.S. and other countries such as China whose currencyconducting business in USD (including China). Overall, the stronger Euro is not peggedfavorable to the Euro. revenue reporting.
 
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, 20162017 filed with the SEC on April 14, 2017.May 17, 2018.
 
Three months ended September 30, 2017March 31, 2018 as compared to the three months ended September 30, 2016March 31, 2017 (in thousandthousands USD)
 
RevenueNet Sales
 
RevenueNet sales for the three months ended September 30, 2017,March 31, 2018, was $1,686$1,505 as compared to $2,339$1,891 for the three months ended September 30, 2016. Due to some seasonalityMarch 31, 2017.  Net sales decreased by $386 or 20.4 % as a result of a decreased by $195 in equipment sales and a $191 decrease in Cytology consumable sales during the first quarter of 2018. This was the result of funding issues early in the industry, usually the first halfquarter of the year is weaker because many larger customers buy their lab equipment during the last 4 to 5 months of the year.   The Company increased sales in the cytology 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 into 2017, cytology products were not readily available for sale.  MEDITE manufactured lab equipment decreased during 2017, compared to the same period in 2016. The sales for the second quarter and to a lesser extent in the third quarter were impacted2018. Sales by the identification by the new management team of manufacturing, quality, installation and service issues that were addressed during the second and third quarters. The new management team undertook a purposeful slowdown of production in order to fully address these issues. The Company and its new management team took a hard look at the product offering and the endemic problems associated with certain products to make the necessary changes in development, manufacturing and technical service. During the second quarter, the Company slowed down its delivery of certain products to ensure that issues identified were solved. Service staff attended to equipment in various regions and reengineered certain equipment as needed. Sales increased slowly but steadily from April through September and the Company anticipates that the quality issuesmonth have been identified and closely monitored to ensure that all quality standards are in place and have been enforced. Sales revenues included customer credits for returns, allowances and adjustments associated with the manufacturing quality and services issues discussed above. The credits totaled $135 for the threetrending upward each month period ended September 30, 2017. New sales for the 2017 period were $1,821. Our sales team has communicated with our regional distribution channels the changes that have been implemented and they are working with the Company to create incremental sales. The sales were also impacted by the lack of working capital and subsequent supplier delays. The Company closed on a securities purchase agreement on September 26, 2017 which has provided the Company with needed working capital in the manufacturing facility to secure parts and consumable products to fulfill backorders. The Company’s backlog of sales at September 30, 2017 was approximately $1.0 million.

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this year.
 
Costs of Revenue
 
Cost of revenues were $1,317$1,170, or 78% of the revenues for the three months ended September 30, 2017,March 31, 2018, as compared to $1,336,$1,211, or 57%64% of the revenues for the three months ended September 30, 2016.March 31, 2017. The cost of revenue consisted of higher manufacturing and fixed costs during 20172018 due to lack of working capital which caused delays in sourcing parts quality and some installation issues discussed above. The Company has historically experienced cost of revenue as a percentage of revenue of between 58% and 65%. Manufacturing and service costs were not absorbed for the period in 2017, as the Company purposefully slowed down production during the second quarter and gradually increased production during the third quarter.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 new cancer markers,marker consumables and developing work, including engineering and industrial design, for the existing product line,histology and development of the Company’s digital pathology strategy.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, outsourced development, prototype expenses and material purchased for R&D.
 
For the thirdfirst quarter 2017,2018, research and development expenses increaseddecreased to $423$305 compared to $305$425 for the samefirst quarter in 2016.2017. The Company focused much of its attention duringreduced the quarter on quality and technical services issues worldwide. The former Cytocore research and development team continued to pursue its new products which were introduced during the third quarter 2017 at a number of trade shows in Europe and the Company anticipates that first sales will beginR&D staff by two employees in the fourthfirst quarter of 2017.2018.
 
Selling, General and Administrative
 
For the thirdfirst quarter 2017,2018, SG&A expenses were $1,248$919 as compared to $860$782 for the samefirst quarter 2016. Professional fees were higher for the2017. The first quarter ended September 30, 2017 specifically related to $173 for issuance of non-qualified options to purchase common stock to the Board of Directors for 2017 services which are non-cash transactions offset by lower2018 included increased professional fees for audit services. Included in selling, general and administrative expenses forincreased financing fees resulting from the three months ended September 30, 2017 was the non-cash impact related to the issuance of common stock to management and the amortizationresult of the cost overincreased convertible debt financing for GPB Debt Holdings II, LLC (“GPB”) convertible notes payable and 2018 convertible notes (see Note 4 of the vesting period of up to three years totaling $43 for the three months ended September 30, 2017. The Company increased its allowance for bad debt by $46 for the three months ended September 30, 2017 associated with the receivables identified under revenues. Salaries and wages increased during the three months ended September 30, 2017, as the Company completed its hiring of its management team in April and May of 2017.accompanying condensedconsolidated financial statements).
 
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Operating Loss
 
The operating loss of $1,412$960 for the thirdfirst quarter of 2017,2018 compares to $215MEDITE’s operating loss of $576 for the samefirst quarter of 2016,2017 and is directly related to lower sales for the period offset by lower gross margins, higher selling, generalresearch and administrative expenses and higher development costs discussed above.
 
Interest Expense
 
Interest expenses increased by $30132% to $200$447 in the three months ended September 30, 2017,March 31, 2018, compared to $170$193 for the three months ended September 30, 2016, due toMarch 31, 2017. The increase in interest expense in was the amortizationresult of the increased convertible debt issuance costsfinancing for GPB convertible notes payable and the amortization2018 convertible notes (see Note 4 of the debt discount attributed to the secured promissory notes issued on May 25, 2016, which matured on August 26, 2016.  These notes bear interest at 15%, or $24 for the 2017 period compared to $19 for the 2016 period and the amortization of the debt issuance costs and debt discount totaled $7 for the three months ended September 30, 2016.  The 2017 period did not have any amortization of the debt issuance costs related to the secured promissory note. On September 26 and 27, 2017 the Company closed on $5,356 and $572 convertible notes with related interest of $12 and debt issuance costs of $7 for the three months ended September 30, 2017.accompanying condensed consolidated financial statements).
 
Net Loss
 
The net loss for the quarter ended September 30, 2017,March 31, 2018, totaled $1,605,$1,402, as compared to net loss of $306$955 for the quarter ended September 30, 2016.March 31, 2017. The loss for 20172018 directly related to lower sales and net margins for the period and higher selling, general and administrative expenses and research and development costs discussed above.
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Nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 (in thousand USD)
Revenue
Revenue for the nine months ended September 30, 2017, was $4,854 as compared to $7,286 for the nine months ended September 30, 2016. Due to some seasonality in the industry, usually the first quarter of the year is weaker because many larger customers buy their larger equipment during the last 4 to 5 months of the year. The Company increased sales in the cytology 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 into 2017, cytology products were not available for sale.  MEDITE manufactured lab equipment decreased during 2017, compared to the same period in 2016. The sales for the first nine months were impacted by the identification by the new management team of manufacturing, quality, installation and service issues that were addressed during the period. The new management team undertook a purposeful slowdown of production in order to fully address these issues. Sales revenues included customer credits for returns, allowances and adjustments associated with the manufacturing quality and services issues discussed above. The credits totaled $421 for the nine month period ended September 30, 2017. New sales for the 2017 period were $5,275. The Company and its new management team took a hard look at the product offering and the endemic problems associated with certain products to make the necessary changes in the manufactured products. During the period, the Company slowed down its delivery of certain products to ensure that issues identified were solved. Service staff attended to equipment in various regions and reengineered certain equipment as needed. Sales increased slowly but steadily from April through September and the Company anticipates that the quality issues have been identified and closely monitored to ensure that all quality standards are in place and have been enforced. The sales were also impacted by the lack of working capital and subsequent supplier delays. The Company closed on a securities purchase agreement on September 26, 2017 which has provided the Company with needed working capital in the manufacturing facility to secure parts and consumable products to fulfill backorders. The Company’s backlog of sales at September 30, 2017 was $1.0 million.
Costs of Revenue
Cost of revenues were $3,756, or 77% of the revenues for the nine months ended September 30, 2017, as compared to $4,095, or 56% of the revenues for the nine months ended September 30, 2016. The cost of revenue consisted of higher manufacturing and fixed costs during 2017 due delays in sourcing parts, quality and installation issues discussed above. The Company has historically experienced cost of revenue as a percentage of revenue of between 58% and 65%. Manufacturing and service costs were not absorbed for the period in 2017, as the Company purposefully slowed down production for April 2017 and gradually increased production in May through September. The service personnel were focused on reinstallation of equipment, identifying solutions to prior installation, retraining their distributors’ installers and evaluating what products went back to the development department for reengineering.
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 new cancer markers engineering and industrial design for the existing product line, and development of the Company’s digital pathology strategy. The major components consist of payroll-related costs for in-house scientific research, mechanical and electrical engineering, instrument related software development staff, outsourced development, prototype expenses and material purchased for R&D.
For the nine month ended September 30, 2017, research and development expenses increased to $1,177 compared to $1,086 for the same period in 2016. The Company expensed approximately $200 of development expense for the nine months ended September 30, 2017. The Company focused all its attention for the period as it related to the manufacturing and service issue in Germany. The former Cytocore research and development team continued to pursue its new products rolled out in the third and fourth quarter of 2017.
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Selling, General and Administrative
For the nine months ended September 30, 2017, SG&A expenses were $3,258 as compared to $2,635 for the same period in 2016.  Professional fees were approximately the same for the nine months ended September 30, 2017 however included was the $173 amortization of the non-qualified stock options issued to the Board of Directors offset by lower audit fees for the annual audit. Included in selling, general and administrative expenses for the nine months ended September 30, 2017 was the non-cash impact related to the issuance of common stock to management and the amortization of the cost over the vesting period of up to three years totaling $105 for the nine months ended September 30, 2017. The Company increased its allowance for bad debt by $105 for the nine months ended September 30, 2017 associated with the related receivables identified above under revenues. Salaries and wages increased during the nine months ended September 30, 2017, as the Company completed its hiring of its management team in April and May of 2017. Severance payments through September 30, 2017 were $119 for the nine months ended September 30, 2017 related to the agreements signed with Michael and Michaela Ott on May 5, 2017.
Operating Loss
The operating loss of $3,550 for the nine months ended September 30, 2017, compares to $684 for the same period in 2016, and is directly related to lower sales and margin for the period and higher selling, general and administrative expense discussed above.
Interest Expense
Interest expenses decreased by $110 to $460 in the nine months ended September 30, 2017, compared to $570 for the nine months ended September 30, 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, which matured on March 31, 2016.  These notes bear interest at 15%, or $73 for the 2017 period compared to $65 for the 2016 period and the amortization of the debt issuance costs and debt discount totaled $250 for the nine months ended September 30, 2016.  The 2017 period had amortization of the debt issuance costs of $0 for the secured promissory notes. During the nine months ended September 30, 2017 the Company recorded $64 for interest expense related to repricing of the warrants related to the secured promissory notes. For the nine months ended September 30, 2017 and 2016, the Company recorded $133 and $116, respectively, for the fair value of warrants issued related to the penalty, default and refinancing feature in the secured promissory notes.   On September 26 and 27, 2017 the Company closed on $5,356 and $572 convertible notes with related interest of $12 and debt issuance costs of $7 for the nine months ended September 30, 2017.
Net Loss
The net loss for the nine months period ended September 30, 2017, totaled $4,185, as compared to net loss of $1,130 for the nine months ended September 30, 2016. The loss for 2017 directly related to lower sales and margin for the period and higher selling, general and administrative expenses discussed above. Decreased interest costs, resulted from the amortization of the debt issuance cost and debt discount with the secured promissory notes of $250 in 2016 offset by repricing and warrant issuances discussed above.
  
Liquidity and Capital Resources
 
Due to the pending introduction of promising new products and distributions contracts executed in the last two years and as well as management changes with increased focus on the various sales channels and manufacturing and quality systems, management anticipates the profitability and cash flow of the business will improve. However, significant on-going manufacturing issues have been identified and addressed and additional 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.) Finishingfinishing and gaining approval for the products currently under development and 2.) Increasingincrease direct sales in the USA through multiple focused sales distribution channels continue to increase EU/ROW distribution and continue 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. Specific forecasting is monitored continually by the Company to improve purchasing and through put management.
 
For the ninethree months ended September 30, 2017,March 31, 2018, we used net cash in operations of approximately $1,855$1,641 compared to $1,140$645 for the same period in 2016.2017. During 2017,2018, cash used in operations consisted of loss from operations, offset by non-cash transactions for warrants issued related to secured promissory notes, stock-based compensation, loss on extinguishmentamortization of notes due to employees,debt discounts and net changes in accounts receivables, inventories and accounts payables and accrued expenses. During 2016, cash used in operations consisted of loss from operations, offset by non-cash transactions for warrants issued related to secured promissory notes and net changes in accounts receivable, inventories and accounts payable and accrued expense.debt issuance costs.
 
For the ninethree months ended September 30, 2017,March 31, 2018, net cash used in investing activities were $43$2 compared to $3 net cash provided$16 for the same period in 2016.2017.  The changeimprovement in this activity relates to decreases other asset balanceslower purchases of equipment in 2016.2018 compared to 2017.
 
For the ninethree months ended September 30, 2017,March 31, 2018, financing activities provided $3,663$1,428 compared $333to $914 provided by financing activities for the same period in 2016.2017. On February 6, 2018, the Company established a private placement of convertible notes and common stock to raise approximately $1,500,000, with an over-allotment option for an additional $750,000. The convertible notes have a conversion price of $0.075 per share. The investors received shares of the Company sold 5.1 millionbased on an assumed purchase price of $0.075 per share and the investor is not required to pay any additional consideration for the common stock. As of March 31, 2018 the Company had received $1,325,000 and converted $100,000 of accrued liabilities and issued 19,000,000 shares of common stock for $2.6 million duringstock. The convertible notes mature five years from the nine month period ended September 30, 2017, netclosing date, have an interest rate of $18112%, are secured obligations of issuance costs. The Company borrowed $5.3 million, net of debt discounts for the nine months ended September 30, 2017 through the convertible debt transactions closed at the end of September 2017 offset by repayments of $2.8 million of lines of credits and the DZ loan. In addition, during the 2017 period the Company repaid $182 of notes duesenior to employeesother outstanding indebtedness and $333 of secured promissory notes and converted $133 of secured promissory notes into subordinated convertible debt. The Company is required to maintain restricted cash balances relatedare expressly subordinate to the convertible debt of $393.
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Company’s indebtedness with GPB.
 
The Company mustaccompanying condensed consolidated financial statements have been prepared in conformity with 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, 2017,March 31, 2018, the Company’s cash balance was $1.7 million$153,000 and its operating losses for the nine months ended September 30, 2017 and the year ended December 31, 2016,2017 and for the three months March 31, 2018 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, the Company has approximately $78,000 in working capital has improved by approximately $4.3 million from December 31, 2016.
The Company has settled three of the five employee notes for $330 of notes 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. The balances owed to these employees remains outstanding as of September 30, 2017. In November 2017, the employees have agreedMarch 31, 2018 compared to renegotiate the March 30, 2017 agreement in good faith with the Company as to a future payment plan mutually agreeable by all parties.
The Company has accrued wages and vacationnegative working capital of approximately $1.1 million payable to the former CFO at September 30, 2017 and$318,000 on December 31, 2016. In August 2017, the Company executed a term sheet whereby a formal settlement agreement and forbearance agreement must be entered with the court. Pursuant to the agreement, the Company is to issue a combination of stock, warrants and payments over a period of up to three years. See Note 8 for further discussion regarding the legal proceedings with the Company’s former CFO.
Also included in accrued salaries, vacation and related expenses are amounts owed to both the Michaela and Michael Ott totaling approximately $142 at September 30, 2017. The payments are to be made in 18 installments scheduled to start on October 31, 2017.  The Company is reviewingraised additional agreements to settle the debt owedcash of $1.5 million from the US entity whereissuance of convertible notes payable starting in the wages were earned versus the German entity. The Company is working to get these payments paid asfirst quarter of 2018 (see Note 4 of the date of this filing due to the changes requested by Michaela and Michael Ott.  
The Company owes Ms. Ott, 99 Euros ($117 as September 30, 2017)accompanying condensed consolidated financial statements). The Company has established a payment plan whereby the balances owed will be repaid beginning on October 31, 2017, over a 24 months period. The Company has made the first payment due on October 31, 2017.
 
Management continues to expand its product offerings and has also expanded its sales and distribution channels during 2017.2018.
If management is unsuccessful in completing its equity financing, management will begin negotiating with some of the 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.
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Off-Balance Sheet Arrangements
 
As of September 30, 2017,March 31, 2018, 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.           Controlsntrols and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
Our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 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 Executive and Chief Financial Officers haveOfficer has 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 Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
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Part II. OtheOther Inrf Informationormation
 
Item 1.          1.           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 September 30, 2017 and December 31, 2016. The presiding Federal Judge has referred the lawsuit to mediation. No settlement was reach during the April 2017 meditation. The Company has proactively initiated settlement offer. In August 2017, the parties executedreached a Settlement Term Sheet whereby a final forbearance and settlement agreement must be filed with the magistrate judge. On November 8, 2017 the Plaintiff filed a motion to compel settlement with a meeting before a magistrate judge on November 14, 2017.
 
On February 20, 2018, the magistrate judge denied Plaintiff’s motion. On March 8, 2018, Plaintiff again filed a Motion to Enforce Settlement Agreement which has been opposed by the Company. On April 22, the judge ruled in favor of the Company and denied plaintiff’s motion to compel.
On May 15, 2018, a complaint was filed in the United States District Court of Northern California against the individual directors of the Company by Robert McCullough, Jr, and Dr. Zhongxi Zheng. The Company was named as a Nominal Defendant. The complaint alleges various claims including Breach of Fiduciary Obligations, Abuse of Control, Unjust Enrichment, Fraud, Intentional Misrepresentation and Negligent Representation. The suit seeks certain declaratory relief, injunctive relief and an accounting. Management believes these claims are frivolous and without any merit whatsoever, and are being filed for the sole purpose of harassing the named Defendants and to leverage a more beneficial settlement in the suit discussed in the paragraph above. Further, management believes that the suit was filed in a court having no personal jurisdiction over any of the named Defendants, The Company and individual directors will vigorously defend against this suit and seek to have it immediately dismissed. If successful, Defendants will seek attorneys’ fees and appropriate sanctions.
Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds.
On February 6, 2018, the Company established a private placement of convertible notes and common stock to raise approximately $1,500,000, with an over-allotment option for an additional $750,000. The convertible notes have a conversion price of $0.075 per share. The investors received shares of the Company based on an assumed purchase price of $0.075 per share and the investor is not required to pay any additional consideration for the common stock. As of March 31, 2018 the Company had received $1,325,000 and converted $100,000 of accrued liabilities and issued 19,000,000 shares of common stock. The convertible notes mature five years from the closing date, have an interest rate of 12%, are secured obligations of the Company senior to other outstanding indebtedness and are expressly subordinate to the Company’s indebtedness with GPB.
 
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Item 23.           .          UnreDefaults upgoistered Sales of Equity Securities and Use of Proceeds.n Senior Securities.
 
On March 7, 2017 the Company filed a $4,250,000 Form D to issue up to 8.5 million shares of common stock and approximately 2.2 million warrants to issue common stock at $0.50 a share. During the nine months ended September 30, 2017, the Company issued 5,060,000 shares of common stock for $2,530,000, less $181,000 of issuance costs. In connection with the issuance of common stock, the Company issued 2,530,000 warrants to purchase shares of common stock at $0.50, for a term ofFebruary 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 same terms and conditions. The Company incurred $191,625 of cash commissions and issued 176,625 warrants associated with the sale of these securities. These issuances were exempt from registration pursuant to Rule 506(b) of the Securities Act of 1933.
On September 26, 2017,2018 the Company entered into a securities purchaseForbearance Agreement with GBP that provides relief until July 1, 2018 of the Company’s requirement to maintain an interest reserve and to complete a registration rights agreement (the “Purchase Agreement”) with GPB Debt Holdings II, LLC  (“GPB”), pursuantand provides relief until April 1, 2018 of the Company’s requirement to which the Company issuedmake interest payments.  According to the GPB (i) a secured convertible promissory note in the aggregate principal amount of $5,356,400 (the “Note”) at a purchase price equal to 97.5% of the Face Value of the of the original $5 million Note and an additional discount of 300,000 Euro ($356,400 at September 26, 2017) attributed to the purchase and settlement of the 750,000 Euro ($890,325 at September 26, 2017) note with VR Equity Partners formerly DZ Equity Partners (“DZ”) Forbearance Agreement, interest payments must be current by the GPB and considered an additional purchase discount, with the Company receiving net proceeds of $4.9 million and (ii) a warrant to purchase an aggregate of 4,120,308 shares of the common stock, par value $0.001 per share, of the Company (the “Warrant”). The Note matures on the 36th month anniversary date following the Closing Date, as defined in the Note (the “Maturity Date”). The Note is secured by a senior secured first priority security interest on all of the assets of the Company and its subsidiaries evidenced b y a security agreement (the “Security Agreement”). Each subsidiary also entered into a guaranty agreement pursuant to which the subsidiaries have guaranteed all obligations of the Company to the GPB. The Note bears interest at a rate of 13.25% per annum (which interest is increased to 18.25% upon an Event of Default). The Note is initially convertible at a price of $0.65 (the “Conversion Price”) into 8,240,615 shares of common stock. The Conversion Price and exercise price of the Warrant is subject to a ratchet downside protection with a $0.30 per share floor price in the event the Company issues additional equity securities, and subject to adjustments for stock splits, dividends, combinations, recapitalizations and the like. The Note is being amortized quarterly at a rate of 10% of the face value of the Note beginning on month 24, with the remaining 60% due at the Maturity Date. There is a flat 3% success fee which allows for the prepayment of the Note and applies to the payment of principal during the Term through the Maturity Date. The Note contains customary Events of Default. The Notes contain certain covenants, such as restrictions on the incurrence of indebtedness, the existence of liens, the payment of restricted payments, redemptions, and the payment of cash dividends and the transfer of assets. The Warrant is not to be exercisable until 6 months after the closing date. GPB also has a Right of Participation for any Company offering, financing, debt purchase or assignment for 36 months after the closing date. The Company is required to maintain a 6 month interest reserve of $354,862. In connection with the loan, the Company issued 182,927 of shares of common stock totaling $75,000 of compensation to its broker and 375,000 warrants to purchase common stock at $0.60. These issuances were exempt from registration pursuant to Rule 506(b) of the Securities Act of 1933.
In connection with the Purchase Agreement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company will file a registration statement with the Securities and Exchange Commission relating to the offer and sale by the s GPBs of the shares of common stock underlying the Warrant (the “Warrant Shares”). Pursuant to the Registration Rights Agreement, the Company is obligated to file the registration statement within 60 days and to use best efforts to cause the registration statement to be declared effective within 90 days. Failure to meet those and related obligations, or failure to maintain the effective registration of the Warrant Shares will subject the Company to payment for liquidated damages.
The Company shall use the proceeds of this offering to pay (i) the outstanding balance of various credit facilities due to Hannoveresche Volksbank in the amount of $2.3 million, (ii) the outstanding balance of a settlement with VR Equity in the amount of $0.5 million and (iii) the outstanding balance on secured promissory notes in the amount of $301,000, with the remaining balance for working capital of $1.4 million and $125,000 of broker fees and $171,000 of GPBs legal fees.
Pursuant to the above transaction, the Company converted 2 notes with a balance of approximately $133,000 of secured promissory notes into $137,000 of debt in a subordinated transaction with similar terms and conditions as the transaction with the GPB stated above and 3 additional investors totaling $425,000 invested in $436,000 of debt in subordinated transaction with similar terms and conditions as the transaction with the GPB.
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Item 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, 2017which extended the maturity of the Notes to June 30, 2017
In 2016, the 2015 Notes and 2016 Notes matured and were not repaid.  Therefore the 2016 Notes were in default on August 26, 2016 and on April 1, 2016 the 2015 Notes were in default.
On July 10, 2017, all holders of the 2015 and 2016 Notes, with the exception of a single individual who holds two (2) Notes and has elected not to waive default, agreed to further extend the repayment of the Notes until JulyDecember 31, 2017 and was thereafter further r extended through September 30, 2017. No additional consideration is being given by the Company for this extension by the consenting 2015 Notes. The noteholders received a payoff letter, and at September 30, 2017, all noteholders except two have been repaid. The Company has paid $50,000 of the balance outstanding of $83,333 at September 30, 2017 on October 2017 and in November 2017 the remaining $33,333 balance was repaid.2018.
On May 31, 2017, Medite GmbH (“Medite”), a wholly-owned subsidiary of MEDITE Cancer Diagnostics, Inc. (the “Company”) entered in an agreement with VR Equity Partner GmbH (formerly DZ Equity Partners) to extend the payment date of a credit facility in the outstanding principal amount of EUR 750,000 until September 1, 2017. In consideration for the extension, Medite shall pay an interest increase on the outstanding principal balance of three percent (3%). . On September 26, 2017, GPB purchased the participation rights agreement with DZ and settled the debt owed by the Company and included the balance and in the related debt outstanding discussed above.
Item 5.          Other Information
On November 12, 2107, the Board of Directors of the Company held a meeting whereby they appointed Joel Kanter to the position of Director to serve until such time as his resignation or termination. Mr. Kanter’s appointment fills the vacancy created by the resignation of David E. Patterson.
Mr. Joel Kanter, 61 years of age, has served as President of Windy City, Inc., a privately held investment firm, since July 1986.
From 1989 to November 1999, Mr. Kanter served as the President, and subsequently as the President and Chief Executive Officer of Walnut Financial Services, Inc., a publicly traded company (NMS: WNUT). Walnut Financial’s primary business focus was the provision of different forms of financing to small business, by providing equity financing to start-up and early stage development companies, providing bridge financing to small and medium-sized companies, and providing later stage institutional financing to more mature enterprises. The Company was sold to Tower Hill Capital Group in 1999 in a transaction valued at approximately $400 million.
From 1978 - 1980, Mr. Kanter served as a Legislative Assistant to former Congressman Abner J. Mikva (D-Ill.). In that position, Mr. Kanter provided support to Congressman Mikva with respect to activities related to his position on the House Judiciary Committee. In particular, Mr. Kanter was intimately involved in efforts then underway to reform the Federal Criminal Code. Mikva subsequently became the Chief Judge of the U.S. Court of Appeals for the District of Columbia Circuit, and then served as Counsel to President Clinton.
From 1980 - 1983, Mr. Kanter served as Special Assistant to the National Association of Attorneys General. In that position, he represented the interests of the State Attorneys General in Washington, D.C. in the criminal justice and environmental arenas. In particular, Mr. Kanter was involved in the legislative efforts to reenact the Clean Air Act, the Clean Water Act, and to enact the original Superfund Legislation.
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From 1983 - 1985, Mr. Kanter served as the Staff Director of the House Rules Committee's Subcommittee on Legislative Process Chaired by the late Congressman Gillis W. Long (D-La.). He also lent considerable support to the activities of the House Democratic Caucus, which was also chaired by Congressman Long. In particular, Mr. Kanter was intimately involved in the effort to provide a new debate format that was first used during the Democratic Primary in New Hampshire in 1984 and was moderated by Phil Donahue and Ted Koppel. He was also involved in authoring a House Democratic Caucus publication called Blueprint for America which served as the basis for several subsequent Democratic Platforms and the policy efforts of the Democratic Leadership Council. Congressman Long passed away in early 1985.
From April 1985 through June 1986, Mr. Kanter served as Managing Director of The Investors' Washington Service, an investment advisory company specializing in providing advice to large institutional clients regarding the impact of federal legislative and regulatory decisions on debt and equity markets. Clients included Amoco Oil, AT&T, Bankers Trust, Chase Manhattan Bank, General Motors, and J.C. Penney.
Mr. Kanter serves on the Board of Directors of one other public company, Magna-Labs, Inc., formerly involved in the development of a cardiac MRI device. Mr. Kanter also serves on the Boards of several private concerns including Fibralign Corporation, Mercator MedSystems, Inc., Orpheus Biosciences, Inc., and Serpin Phama.
Mr. Kanter is also a current Trustee Emeritus and past President of the Board of Trustees of The Langley School in McLean, Virginia, a former Trustee at the Georgetown Day School in Washington, D.C., and of the Union Institute & University, the Country’s first Online University. He is also the current Board Chair of the Black Student Fund, the Education Committee Chairman of the Kennedy Center’s National Committee on the Performing Arts, and serves as an appointee of the State Legislature to the Gubernatorial Virginia Israel Advisory Board.
Mr. Kanter holds a B.A in Political Science and a B.S. in Psychology from Tulane University.
 
Item 66. .          ExhExhiibbitsits
 
Exhibit  
Number Description
   
10.1Form of First Amendment to Amended and Restated Securities Purchase Agreement
   
 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.
   
 Section 302 certification by the chief 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.
   
 Section 906 certification by the principal executive pursuant to 18 USC.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
   
 Section 906 certification by the chief financial officer pursuant to 18 USC.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
 
 

 
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SIGNSIGNATURES
 
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, 2017June 22, 2018/s/ Stephen Von Rump
 Stephen Von Rump
 Chief Executive Officer
  
Date: November 14, 2017June 22, 2018/s/ Susan WeismanStephen Von Rump
 Susan WeismanStephen Von Rump
 Chief Financial Officer
 
 
 
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