Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2023 | May 12, 2023 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2023 | |
Entity File Number | 000-56192 | |
Entity Registrant Name | Electromedical Technologies, Inc | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 82-2619815 | |
Entity Address, Address Line One | 16561 N. 92nd Street | |
Entity Address, Address Line Two | Ste. 101 | |
Entity Address, City or Town | Scottsdale | |
Entity Address State Or Province | AZ | |
Entity Address, Postal Zip Code | 85260 | |
City Area Code | 888 | |
Local Phone Number | 880-7888 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | No | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 309,680,172 | |
Entity Central Index Key | 0001715819 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 1,235,027 | $ 368,425 |
Accounts receivable | 5,826 | 9,444 |
Inventories | 159,704 | 62,061 |
Prepaid expenses and other current assets | 170,202 | 207,872 |
Total current assets | 1,570,759 | 647,802 |
Property and equipment, net | 705,469 | |
Total assets | 1,570,759 | 1,353,271 |
Current liabilities: | ||
Accounts payable | 543,644 | 266,744 |
Credit cards payable | 34,632 | 37,633 |
Accrued expenses and other current liabilities | 365,598 | 1,065,483 |
Customer deposits | 134,000 | 217,588 |
Convertible promissory notes, net of discount of $215,660 and $375,865, respectively | 1,365,193 | 1,304,909 |
Long term debt, current portion | 31,818 | |
Total current liabilities | 2,443,067 | 2,924,175 |
Long-term liabilities: | ||
Bank debt, net of current portion | 489,707 | |
Government debt, net of current portion | 150,000 | 150,000 |
Other liabilities | 10,600 | 10,234 |
Total liabilities | 2,603,667 | 3,574,116 |
Commitments and contingencies | ||
Stockholders' deficit | ||
Common stock, $.00001 par value, 1,999,000,000 and 999,000,000 shares authorized; 296,886,686 and 189,784,529 shares outstanding at March 31, 2023 and December 31, 2022, respectively | 2,967 | 1,896 |
Additional paid-in-capital | 23,480,229 | 22,237,300 |
Accumulated deficit | (25,281,104) | (24,825,041) |
Total stockholders' deficit | (1,032,908) | (2,220,845) |
Total liabilities and stockholders' deficit | 1,570,759 | 1,353,271 |
Series A Preferred Stock | ||
Stockholders' deficit | ||
Preferred Stock | 365,000 | 365,000 |
Series B Preferred Stock | ||
Stockholders' deficit | ||
Preferred Stock | $ 400,000 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Discount on convertible promissory notes | $ 215,660 | $ 375,865 |
Common stock, par value | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 1,999,000,000 | 999,000,000 |
Common stock, shares outstanding | 296,886,686 | 189,784,529 |
Series A Preferred Stock | ||
Preferred stock, par value | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 1,000,000 | 1,000,000 |
Series B Preferred Stock | ||
Preferred stock, par value | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 1 | 1 |
Preferred stock, shares outstanding | 1 | 0 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
STATEMENTS OF OPERATIONS | ||
Net sales | $ 378,646 | $ 221,894 |
Cost of sales | 87,696 | 67,641 |
Gross profit | 290,950 | 154,253 |
Selling, general and administrative expenses | 1,552,488 | 879,810 |
Loss from operations | (1,261,538) | (725,557) |
Other income (expense) | ||
Interest expense | (388,201) | (213,379) |
Loss on extinguishment of debt | (205,600) | |
Gain on sale of fixed assets | 1,193,676 | |
Total other expense | 805,475 | (418,979) |
Net loss | (456,063) | (1,144,536) |
Deemed dividend related to warrant resets | (63,381) | |
Net loss attributable to common stockholders | $ (456,063) | $ (1,207,917) |
Weighted average shares outstanding - basic | 240,567,805 | 97,260,915 |
Weighted average shares outstanding - diluted | 240,567,805 | 97,260,915 |
Weighted average loss per share - basic | $ (0.002) | $ (0.01) |
Weighted average loss per share - diluted | $ (0.002) | $ (0.01) |
STATEMENT OF CHANGES IN STOCKHO
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT - USD ($) | Series A Preferred Stock Preferred Stock | Series B Preferred Stock Preferred Stock | Common Stock | Paid in Capital Cumulative Effect, Period of Adoption, Adjustment | Paid in Capital | Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment | Accumulated Deficit | Cumulative Effect, Period of Adoption, Adjustment | Total |
Beginning balance at Dec. 31, 2021 | $ 355,000 | $ 876 | $ 20,804,333 | $ (21,882,712) | $ (722,503) | ||||
Beginning balance (in shares) at Dec. 31, 2021 | 500,000 | 87,725,842 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Shares issued for consulting services | $ 106 | 356,794 | 356,900 | ||||||
Shares issued for consulting services (in shares) | 10,600,000 | ||||||||
Warrants issued in conjunction with convertible promissory notes | 142,996 | 142,996 | |||||||
Warrants reset in conjunction with convertible promissory notes | 63,381 | (63,381) | |||||||
Cashless warrant exercises | $ 51 | (51) | |||||||
Cashless warrant exercises (in shares) | 5,129,725 | ||||||||
Issuance of common stock for cash | $ 15 | 42,751 | 42,766 | ||||||
Issuance of common stock for cash (in shares) | 1,500,000 | ||||||||
Stock-based compensation | 4,703 | 4,703 | |||||||
Net loss | (1,144,536) | (1,144,536) | |||||||
Ending balance (ASU 2020-06) at Mar. 31, 2022 | $ (1,013,414) | $ 634,059 | $ (379,355) | ||||||
Ending balance at Mar. 31, 2022 | $ 355,000 | $ 1,048 | 20,401,493 | (22,456,570) | (1,699,029) | ||||
Ending balance (in shares) at Mar. 31, 2022 | 500,000 | 104,955,567 | |||||||
Beginning balance at Dec. 31, 2022 | $ 365,000 | $ 1,896 | 22,237,300 | (24,825,041) | (2,220,845) | ||||
Beginning balance (in shares) at Dec. 31, 2022 | 1,000,000 | 189,784,529 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Shares issued for consulting services | $ 350 | 314,650 | 315,000 | ||||||
Shares issued for consulting services (in shares) | 35,000,000 | ||||||||
Share issued as CEO compensation | $ 400,000 | 400,000 | |||||||
Share issued as CEO compensation, (in shares) | 1 | ||||||||
Cashless warrant exercises | $ 180 | (180) | |||||||
Cashless warrant exercises (in shares) | 18,000,000 | ||||||||
Convertible promissory note conversions | $ 50 | 49,950 | 50,000 | ||||||
Convertible promissory note conversions (In shares) | 5,000,000 | ||||||||
Shares issued in conjunction with settlement reset | $ 461 | 697,539 | 698,000 | ||||||
Shares issued in conjunction with settlement reset (in shares) | 46,102,156 | ||||||||
Trigger warrants issued | 160,000 | 160,000 | |||||||
Settlement of stock - based compensation liabilities | $ 30 | 20,970 | 21,000 | ||||||
Settlement of stock - based compensation liabilities (in shares) | 3,000,000 | ||||||||
Net loss | (456,063) | (456,063) | |||||||
Ending balance at Mar. 31, 2023 | $ 365,000 | $ 400,000 | $ 2,967 | $ 23,480,229 | $ (25,281,104) | $ (1,032,908) | |||
Ending balance (in shares) at Mar. 31, 2023 | 1,000,000 | 1 | 296,886,685 |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Cash flows from operating activities: | ||
Net loss | $ (456,063) | $ (1,144,536) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock-based compensation expense | 715,000 | 361,603 |
Depreciation and amortization | 4,557 | 5,469 |
Loss on extinguishment of debt | 205,600 | |
Amortization of debt discount and warrant expense | 320,204 | 164,710 |
Gain on sale of fixed assets | (1,193,676) | |
Other | 876 | |
Change in operating assets and liabilities: | ||
Accounts receivable | 3,618 | 3,295 |
Inventories | (97,643) | 21,586 |
Prepaid expenses and other current assets | 37,670 | 13,072 |
Accounts payable | 276,900 | 59,466 |
Credit cards payable | (3,001) | 3,403 |
Accrued expenses and other current liabilities | 22,044 | (33,400) |
Customer deposits | (83,588) | 21,850 |
Other liabilities | 366 | 37 |
Net cash used in operating activities | (452,736) | (317,845) |
Cash flows from investing activities: | ||
Sale of property and equipment | 1,894,588 | |
Net cash provided by investing activities | 1,894,588 | |
Cash flows from financing activities: | ||
Repayments on bank debt | (522,401) | (6,888) |
Related party notes payable-net | (57,875) | |
Issuance of convertible promissory notes | 494,220 | |
Repayments on convertible promissory notes | (52,849) | (367,500) |
Net cash provided by ( used in) financing activities | (575,250) | 104,723 |
Net (decrease) increase in cash and cash equivalents | 866,602 | (213,122) |
Cash and cash equivalents, beginning of period | 368,425 | 383,170 |
Cash and cash equivalents, end of period | 1,235,027 | 170,048 |
Cash paid during the period for: | ||
Interest | 22,934 | 72,308 |
Non-cash investing and financing activities: | ||
January 1,2022 adoption of ASU 2020-06 | 379,355 | |
Warrants, common stock and beneficial conversion feature issued in conjunction with convertible promissory notes | $ 192,996 | |
Settlement of stock-based compensation liabilities | 719,000 | |
Conversion of convertible promissory notes and accrued interest into shares of common stock | $ 50,000 |
ORGANIZATION AND NATURE OF BUSI
ORGANIZATION AND NATURE OF BUSINESS | 3 Months Ended |
Mar. 31, 2023 | |
ORGANIZATION AND NATURE OF BUSINESS | |
ORGANIZATION AND NATURE OF BUSINESS | NOTE 1. ElectroMedical Technologies, LLC (“the Company”), was formed in November 2010 as an Arizona limited liability company. In August 2017, the Company converted to a Delaware C Corporation under Electromedical Technologies, Inc. The Company is a bioelectronic engineering company with medical device certifications in the United States (FDA) and Mexico (Cofepris). The Company engineers simple-to-use portable bioelectronics devices, which provide fast and long -lasting pain relief across a broad range of ailments. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. Accounting Method The accompanying unaudited financial statements of Electromedical Technologies, Inc. have been prepared in accordance with Accounting Principles Generally Accepted in the United States of America (“GAAP”) for interim financial information and in accordance with Rule 8-03 of Regulation S-X. Certain information and disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. These interim financial statements should be read in conjunction with the audited annual financial statements of the Company as of and for the year ended December 31, 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the full year. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, certain disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates affecting the financial statements have been prepared on the basis of the most current and best available information. However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the financial statements. Going Concern Since inception, the Company has incurred approximately $21.5 million of accumulated net losses. In addition, during the three months ended March 31, 2023, the Company used $452,736 in operations and had a working capital deficit of $872,308. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company expects to obtain funding through additional debt and equity placement offerings until it consistently achieves positive cash flows from operations. If the Company is unable to obtain additional funding, it may not be able to meet all of its obligations as they come due for the next twelve months. The continuing viability of the entity and its ability to continue as a going concern is dependent upon the entity being successful in its continuing efforts in growing its revenue base and/or accessing additional sources of capital, and/or selling assets. As a result, there is significant uncertainty whether the entity will continue as a going concern and, therefore, whether it will realize its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial statements. Accordingly, no adjustments have been made to the financial statements relating to the recoverability and classification of the asset carrying amounts or the amount and classification of liabilities that might be necessary should the entity not continue as a going concern. At this time, management is of the opinion that no asset is likely to be realized for an amount less than the amount at which it is recorded in the financial statements as at March 31, 2023. Revenue Recognition The FASB issued Accounting Standards Update (“ASU”) No. 2014-09, codified as ASC 606: Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The Company adopted ASC 606 effective January 1,2019 using modified retrospective basis and the cumulative effect was immaterial to the financial statements. Revenues are recognized in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, when performance obligations are satisfied through the transfer of promised goods to the Company’s customers. Control transfers upon shipment of product and when the title has been passed to the customers. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. Revenue is recorded net of sales taxes collected from customers on behalf of taxing authorities, allowance for estimated returns, chargebacks, and markdowns based upon management’s estimates and the Company’s historical experience. The Company’s liability for sales return refunds is recognized within other current liabilities, and an asset for the value of inventory which is expected to be returned is recognized within other current assets on the balance sheets. The Company generally allows a 30 day right of return to its customers. As of both March 31, 2023 and December 31, 2022 the sales returns allowance was $6,990. Certain larger customers pay in advance for future shipments. These advance payments totaled $134,000 and $217,588 at March 31, 2023 and December 31, 2022, respectively, and are recorded as customer deposits in the accompanying balance sheets. Revenue related to these advance payments is recognized upon shipment to the distributor or the end-customer. At the completion of the initial three-year warranty, the Company sells extended warranties for periods ranging from one Financial Instruments and Concentrations of Business and Credit Risk The Company maintains cash balances that can, at times, exceed amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk. The Company’s accounts receivable, which are unsecured, expose the Company to credit risks such as collectability and business risks such as customer concentrations. The Company mitigates credit risk by investigating the creditworthiness of all customers prior to establishing relationships with them, performing periodic review of the credit activities of those customers during the course of the business relationship, regularly analyzing the collectability of accounts receivables, and recording allowances for doubtful accounts when these receivables become uncollectible. The Company mitigates business risks by attempting to diversify its customer base. Significant customer sales as a percentage of total sales are as follows: THREE MONTHS ENDED MARCH 31, 2023 2022 Customer A 18.8 % 17.8 % Customer B 10.2 % 17.4 % Amounts due these customers totaled $12,642 and $13,342, at March 31, 2023 and December 31, 2022, respectively, for commissions and reimbursements. No amounts were due from these customers at March 31, 2023 and December 31, 2022. Customer deposits on hand from these customers totaled $28,750 and $73,385 at March 31, 2023 and December 31, 2022, respectively. The loss of these customers would have a significant impact on the operations and cash flows of the Company. The Company’s supplier concentrations expose the Company to business risks, which the Company mitigates by attempting to diversify its supply chain. Significant supplier purchases as a percentage of total inventory purchases are as follows: THREE MONTHS ENDED MARCH 31, 2023 2022 Supplier A 64.0 % 86.2 % Supplier D 25.5 % — There were no amounts outstanding due these suppliers at March 31, 2023 and December 31, 2022. The loss of key vendors may have a significant impact on the operations and cash flows of the Company. The estimated fair value of financial instruments has been determined using available market information and appropriate valuation methodologies. However, considerable judgment is often required to interpret market data used to develop the estimates of fair value. Accordingly, the estimates presented may not be indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts. Inventories Inventories are stated at the lower of cost or market. Cost is determined based on the first-in, first-out cost flow assumption (“FIFO”) while market is determined based upon the estimated net realizable value less an allowance for selling and distribution expenses and a normal gross profit. The Company evaluates the need for inventory reserves associated with obsolete, slow moving, and non-sellable inventory by reviewing estimated net realizable values on a periodic basis. As of March 31, 2023 and December 31, 2022, the Company believes there are no excess and obsolete inventories and accordingly, did not record an inventory reserve. Inventories consist of purchased finished goods. Sales Taxes Sales taxes for the three months ended March 31, 2023 and 2022, were recorded on a net basis. Included in accrued expenses at both March 31, 2023 and December 31, 2022 is approximately $61,000 related to sales taxes. Warranty The Company warranties the sale of most of its products and records an accrual for estimated future claims. The standard warranty is typically for a period of three years. Such accruals are based upon historical experience and management’s estimate of the level of future claims. The Company recorded a liability as of March 31, 2023 and December 31,2022 of $17,604 and $12,678, respectively. The expense is included in cost of sales in the statements of operations and within accrued expenses on the accompanying balance sheets. Net Loss per Share Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. As all potentially dilutive securities are anti-dilutive as of March 31, 2022 and December 31, 2022, diluted net loss per share is the same as basic net loss per share for each period. Conversion of outstanding warrants, stock options and convertible promissory notes at March 31, 2023 may result in an estimated 179.0 million additional shares of common stock outstanding. COVID-19 On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the COVID-19 include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. COVID-19, and actions taken to mitigate it, have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial effect will be to the company, COVID-19 has had an adverse effect on our business, including our supply chains and distribution systems. While we are taking diligent steps to mitigate disruptions to our supply chain, we are unable to predict the extent or nature of these impacts at this time to our future financial condition and results of operations. Recently Issued Accounting Pronouncements Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2023 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 3. Property and equipment consisted of the following as of: March 31, December 31, 2023 2022 Building $ — $ 875,000 Furniture and equipment 24,987 24,987 24,987 899,987 Less: accumulated depreciation and amortization (24,987) (194,518) $ — $ 705,469 On March 15, 2023, the Company entered into an agreement to sell the building of its principal offices at a purchase price of $2 million and net proceeds of $1,363,818, upon repayment in full of the Company’s bank debt. The sale resulted in a realized gain of $1,193,676, which has been recorded as other income on the accompanying statement of operations. Depreciation and amortization expense related to property and equipment was $4,557 and $5,469 for the three -months ended March 31,2023 and 2022, respectively. Depreciation and amortization are included in selling, general and administrative expenses on the accompanying statements of operations. |
NOTES PAYABLE
NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2023 | |
NOTES PAYABLE | |
NOTES PAYABLE | NOTE 4. Convertible Promissory Notes The aggregate of convertible promissory notes is as follows: March 31, December 31, Convertible promissory notes 2023 2022 Principal balance $ 1,580,853 $ 1,680,774 Debt discount balance (215,660) (375,865) Net Notes balance $ 1,365,193 $ 1,304,909 The Net Notes balance at March 31, 2023 is comprised of the following: Principal Debt Discount Net Pre 2020 $ 50,000 $ — $ 50,000 October 2021 73,336 — 73,336 February 2022 44,882 — 44,882 March 2022 307,500 — 307,500 July 2022 33,135 (4,874) 28,261 August 2022 176,000 (30,279) 145,721 September 2022 896,000 (180,507) 715,493 $ 1,580,853 $ (215,660) $ 1,365,193 The Net Notes balance at December 31, 2022 is comprised of the following: Principal Debt Discount Net Pre 2020 $ 50,000 $ — $ 50,000 October 2021 73,336 — 73,336 February 2022 91,953 (7,721) 84,232 March 2022 307,500 (29,510) 277,990 July 2022 85,985 (9,443) 76,542 August 2022 176,000 (51,405) 124,595 September 2022 896,000 (277,786) 618,214 $ 1,680,774 $ (375,865) $ 1,304,909 As of the date of this filing, the Company is currently in default with one its lenders, for non-payment of two matured convertible promissory notes issued on October 13, 2021, and February 11, 2022, with principal and interest due in the amounts of $78,753 and $46,151 respectively. Further, and as a result of the Company's sale of its real property on March 15, 2023, the Company is in default with its unmatured convertible promissory note issued to the lender on September 15, 2022. The convertible promissory notes issued to the lender all contain provisions for default amounts equal to the principal amounts, plus accrued interest, and default interest, through the date of repayment, multiplied by 125% as well as terms that could impact the conversion price of the instruments. Separately, and also as a result of the Company's sale of its real property on March 15, 2023, the Company is in default respecting convertible promissory notes issued to two lenders on March 10, 2022, and August 8, 2022, in the principal amounts of $307,500 and $176,000, respectively, each not including interest due. One convertible note included a cross-default provision which required the Company to remit full repayment of interest and principal due through the date of full repayment multiplied by 125% as well as terms that could impact the conversion price of the instruments. As of the date of this filing, the note holders have agreed to temporarily waive the respective defaults, including principal, interest, default penalties, and default amounts, and to enter into negotiations to reform the respective outstanding convertible notes payable. Accordingly, no amounts were accrued as a result of the defaults. During the year ended December 31, 2022, the subsequent issuance of convertible promissory notes with warrant exercises and stock issuances triggered a conversion price reset on certain convertible promissory notes to $0.01 per share. Retroactive issuance of 3,700,000 shares were issued in conjunction with certain 2022 conversions at $0.015 per share. See Note 10. |
LONG-TERM DEBT
LONG-TERM DEBT | 3 Months Ended |
Mar. 31, 2023 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | NOTE 5. Government Debt In June 2020, the Company received a $150,000 economic injury disaster loan (“EIDL”). The loan accrues interest at a rate of 3.75% annually and is collateralized by all personal property and intangible assets of the Company. The loan has a 30-month moratorium on payments, after which monthly principal and interest payments of $731 will be made through the maturity date of June 2050. Interest expense totaled $1,387 and $1,462 for the three months ended March 31, 2023 and 2022, respectively. Bank Debt In September 2015, the Company entered into a credit agreement for a $700,000 term loan with a financial institution. Payment terms consist of monthly payments in arrears of $3,547 for the first year outstanding. The monthly payment then increases to $4,574 until the term loan matures on September 30, 2025, in which the remaining unpaid principal balance and accrued interest is due. The interest rate for the first year was 1.99% per annum and increased to 4.95% per annum for the remaining life of the term loan. The term loan is collateralized by a deed of trust in the office building. The proceeds were used to purchase a building for which the Company’s operations are located. The net principal balance outstanding on the term loan at March 31, 2023 and December 31, 2022 was $0 and $521,525, respectively. On March 15, 2023, the Company entered into an agreement to sell the building of its principal offices at a purchase price of $2 million and net proceeds of $1,363,818, upon repayment in full of the Company’s bank debt. Principal and interest totaling $524,585 were paid in conjunction with the sale. Interest expense totaled $12,802 and $6,753 for the three months ended March 31, 2023 and 2022, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2023 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 6. In January 2023, the Company issued one share of Series B Preferred stock to the Company’s CEO. Compensation expense of $400,000 has been recorded as selling, general and administrative expense in the accompanying statement of operations. The fair value of the Series B Preferred stock was calculated in accordance with fair value defined by the Financial Accounting Standards Board (“FASB”) in ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”) based on the market approach. The Company paid the Company’s CEO a bonus of $10,000 and $58,380 during the three months ended March 31,2023 and 2022, respectively. In February 2023, the Company entered into a one-year consulting agreement under the Company’s Employee and Consultant Stock Ownership Plan, with an advisor and director in exchange for compensation of 35 million shares of common stock at a basis of $0.01 per share. The value of the compensation totaling $315,000 has been recorded in selling, general and administrative expenses in the Company’s statement of operations. The fair market value of the shares was determined based on the Company’s closing price on the date of issuance. The agreement includes a registration requirement. |
STOCKHOLDERS' DEFICIT
STOCKHOLDERS' DEFICIT | 3 Months Ended |
Mar. 31, 2023 | |
STOCKHOLDERS' DEFICIT | |
STOCKHOLDERS' DEFICIT | NOTE 7. In January 2023, the Company issued one share of Series B Preferred stock to the Company’s CEO. See Note 6. In January 2023, holders of convertible promissory notes converted $50,000 of principal and interest into 5,000,000 of common stock at a price of $0.01 per share. In January 2023, the Company issued 3,000,000 shares of common stock granted and accrued at December 31, 2022 under the Company’s Employee and Consultant Stock Ownership Plan. In January 2023, the Company’s board of directors approved a resolution to amend the Company’s Certificate of Incorporation to increase the Company’s authorized common shares from 999,000,000 to 1,999,000,000. In February 2023, 2,000,000 shares to be issued in conjunction with anti-dilution provisions of a third -party consulting agreement were settled for a cash payment totaling $12,000. In February 2023, the Company issued 46,102,156 shares of common stock as part of the June 2022 convertible notes payable settlement. In March 2023, the Company issued 18,000,000 shares of common stock in conjunction with the cashless exercise of 24,000,000 warrants by convertible note holders. Trigger warrants to purchase a total of 25,000,000 shares of common stock, became exercisable as of March 31, 2023, as the convertible promissory notes were not paid in full at the maturity dates. See Note 8. In February 2023, the Company entered into a one-year consulting agreement under the Company’s Employee and Consultant Stock Ownership Plan, with an advisor and director in exchange for compensation of 35 million shares of common stock at a basis of $0.01 per share. See Note 6. During the three months ended, March 31, 2022, the Company issued 10,600,000 shares of common stock, at prices ranging from $0.029-$0.035 per share, in conjunction with an agreement for financial advisory consulting services. The fair market value of the shares totaling $356,900 was determined based the on the Company’s closing price on the dates of issuance and has been recorded as selling, general and administrative expenses in the accompanying statement of operations. |
STOCK OPTIONS AND WARRANTS
STOCK OPTIONS AND WARRANTS | 3 Months Ended |
Mar. 31, 2023 | |
STOCK OPTIONS AND WARRANTS | |
STOCK OPTIONS AND WARRANTS | NOTE 8. Stock Options In 2017, the Company’s Board of Directors approved the 2017 Employee and Consultant Stock Ownership Plan, (the “Plan”). The Plan provides that the Board of Directors may grant stock units, incentive stock options and non-statutory stock options to officers, key employees and certain consultants and advisors to the Company up to a maximum of 50,000,000 shares. Stock options granted under the Plan have ten-year terms with vesting terms to be determined by the administrator of the Plan. Stock unit grant terms will be set by the administrator and at the discretion of the administrator, be settled in cash, shares, or a combination of both. No options were granted during the three months ended March 31, 2023. The Company recorded pretax stock compensation expense related to stock options of $0 and $4,703 during the three months ended March 31, 2023 and 2022, respectively. Stock-based compensation is included in selling, general, and administrative expense in the accompanying statements of operations. Stock-based compensation expense is based on awards ultimately expected to vest. Warrants During the three months ended March 31, 2023, warrants to purchase 25,000,000 shares of the Company’s common stock in conjunction with previously issued convertible promissory notes were triggered. The warrants entitle the holders to each purchase the shares of the Company’s common stock at an exercise price of $0.01 per share. The warrants expire in February and March 2028. The warrants qualified for equity accounting as the warrants did not fall within the scope of ASC Topic 480, Distinguishing Liabilities from Equity. The warrants were measured at fair value at the trigger dates and classified as equity. The underlying notes matured prior to the trigger dates. The Company valued the warrants using a Black Scholes Merton pricing model and recorded the warrants as interest expense in the accompanying statement of operations. The following table summarizes the assumptions used in the valuation model to determine the fair value of the warrants: Fair Value of Common Share $ 0.006-0.009 Exercise Price $ 0.01 Risk Free Rate 3.92-3.96 % Expected Life (Yrs.) 5.0 Volatility 130.0 % The fair value of the warrants of $160,000 has been recorded as interest expense. The following table summarizes the information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable at March 31, 2023: Date Issued Exercise Price Number Outstanding Expiration Date December 1, 2018 $ 0.01 170,000 December 1, 2023 May 1, 2020 $ 0.52 100,000 May 1, 2025 October 1, 2021 $ 0.025 9,000,000 October 1, 2026 October 17, 2021 $ 0.025 450,000 October 17, 2024 August 10, 2022, 2022 $ 0.01 3,336,843 August 10, 2027 September 29, 2022, 2022 $ 0.01 2,780,690 September 29,2027 February 11, 2023 $ 0.01 500,000 February 11, 2028 March 10, 2023 $ 0.01 12,500,000 March 10, 2028 28,837,533 Retroactive application of the reset rate to a 2022 exercise resulted in an additional 375,000 shares to be issued. See Note 10. The following table summarizes the information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable at December 31, 2022: Date Issued Exercise Price Number Outstanding Expiration Date December 1, 2018 $ 0.01 170,000 December 1, 2023 May 1, 2020 $ 0.52 100,000 May 1, 2025 October 1, 2021 $ 0.025 9,000,000 October 1, 2026 October 17, 2021 $ 0.01 450,000 October 17, 2024 August 10, 2022 $ 0.01 3,336,843 August 10, 2027 September 15, 2022 $ 0.01 12,000,000 September 15, 2025 September 29, 2022 $ 0.01 2,780,690 September 29, 2027 27,837,533 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2023 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 9. Commitments The Company has entered into a product development agreement with payments totaling approximately $300,000. The agreement requires that approximately $150,000 of the payments be made in conjunction with certain development milestones which the Company expects to meet over the next twelve months. The remainder is to be paid in conjunction with future new product sales. Contingencies The Company is subject to various loss contingencies and assessments arising in the normal course of the business, some of which relate to litigation, claims, property taxes and sales and use tax or goods and services tax assessments. The Company considers the likelihood of the loss or the incurrence of a liability, as well as its ability to reasonably estimate the amount of loss in determining loss contingencies and assessments. An estimated loss contingency or assessment is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Management regularly evaluates current information available to them to determine whether such accruals should be adjusted. Based on the information presently available, including discussion with counsel and other consultants, management believes that resolution of these matters will not have a material adverse effect on its business, results of operations, financial condition or cash flows. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2023 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 10. The Company has evaluated subsequent events that have occurred through the date of this filing and determined that there were no subsequent events or transactions that required recognition or disclosure in the financial statements, except as disclosed below. On May 8, 2023, the Company issued 4,075,000 shares related to reset adjustments of prior warrant and convertible note payable conversions. See Notes 4 and Note 8. On May 9, 2023, convertible notes payable totaling $20,000 were converted into 8,718,487 shares of common stock at a conversion price of $0.00238 per share. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Accounting Method | Accounting Method The accompanying unaudited financial statements of Electromedical Technologies, Inc. have been prepared in accordance with Accounting Principles Generally Accepted in the United States of America (“GAAP”) for interim financial information and in accordance with Rule 8-03 of Regulation S-X. Certain information and disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. These interim financial statements should be read in conjunction with the audited annual financial statements of the Company as of and for the year ended December 31, 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the full year. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, certain disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates affecting the financial statements have been prepared on the basis of the most current and best available information. However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the financial statements. |
Going Concern | Going Concern Since inception, the Company has incurred approximately $21.5 million of accumulated net losses. In addition, during the three months ended March 31, 2023, the Company used $452,736 in operations and had a working capital deficit of $872,308. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company expects to obtain funding through additional debt and equity placement offerings until it consistently achieves positive cash flows from operations. If the Company is unable to obtain additional funding, it may not be able to meet all of its obligations as they come due for the next twelve months. The continuing viability of the entity and its ability to continue as a going concern is dependent upon the entity being successful in its continuing efforts in growing its revenue base and/or accessing additional sources of capital, and/or selling assets. As a result, there is significant uncertainty whether the entity will continue as a going concern and, therefore, whether it will realize its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial statements. Accordingly, no adjustments have been made to the financial statements relating to the recoverability and classification of the asset carrying amounts or the amount and classification of liabilities that might be necessary should the entity not continue as a going concern. At this time, management is of the opinion that no asset is likely to be realized for an amount less than the amount at which it is recorded in the financial statements as at March 31, 2023. |
Revenue Recognition | Revenue Recognition The FASB issued Accounting Standards Update (“ASU”) No. 2014-09, codified as ASC 606: Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The Company adopted ASC 606 effective January 1,2019 using modified retrospective basis and the cumulative effect was immaterial to the financial statements. Revenues are recognized in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, when performance obligations are satisfied through the transfer of promised goods to the Company’s customers. Control transfers upon shipment of product and when the title has been passed to the customers. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. Revenue is recorded net of sales taxes collected from customers on behalf of taxing authorities, allowance for estimated returns, chargebacks, and markdowns based upon management’s estimates and the Company’s historical experience. The Company’s liability for sales return refunds is recognized within other current liabilities, and an asset for the value of inventory which is expected to be returned is recognized within other current assets on the balance sheets. The Company generally allows a 30 day right of return to its customers. As of both March 31, 2023 and December 31, 2022 the sales returns allowance was $6,990. Certain larger customers pay in advance for future shipments. These advance payments totaled $134,000 and $217,588 at March 31, 2023 and December 31, 2022, respectively, and are recorded as customer deposits in the accompanying balance sheets. Revenue related to these advance payments is recognized upon shipment to the distributor or the end-customer. At the completion of the initial three-year warranty, the Company sells extended warranties for periods ranging from one |
Financial Instruments and Concentrations of Business and Credit Risk | Financial Instruments and Concentrations of Business and Credit Risk The Company maintains cash balances that can, at times, exceed amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk. The Company’s accounts receivable, which are unsecured, expose the Company to credit risks such as collectability and business risks such as customer concentrations. The Company mitigates credit risk by investigating the creditworthiness of all customers prior to establishing relationships with them, performing periodic review of the credit activities of those customers during the course of the business relationship, regularly analyzing the collectability of accounts receivables, and recording allowances for doubtful accounts when these receivables become uncollectible. The Company mitigates business risks by attempting to diversify its customer base. Significant customer sales as a percentage of total sales are as follows: THREE MONTHS ENDED MARCH 31, 2023 2022 Customer A 18.8 % 17.8 % Customer B 10.2 % 17.4 % Amounts due these customers totaled $12,642 and $13,342, at March 31, 2023 and December 31, 2022, respectively, for commissions and reimbursements. No amounts were due from these customers at March 31, 2023 and December 31, 2022. Customer deposits on hand from these customers totaled $28,750 and $73,385 at March 31, 2023 and December 31, 2022, respectively. The loss of these customers would have a significant impact on the operations and cash flows of the Company. The Company’s supplier concentrations expose the Company to business risks, which the Company mitigates by attempting to diversify its supply chain. Significant supplier purchases as a percentage of total inventory purchases are as follows: THREE MONTHS ENDED MARCH 31, 2023 2022 Supplier A 64.0 % 86.2 % Supplier D 25.5 % — There were no amounts outstanding due these suppliers at March 31, 2023 and December 31, 2022. The loss of key vendors may have a significant impact on the operations and cash flows of the Company. The estimated fair value of financial instruments has been determined using available market information and appropriate valuation methodologies. However, considerable judgment is often required to interpret market data used to develop the estimates of fair value. Accordingly, the estimates presented may not be indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts. |
Inventories | Inventories Inventories are stated at the lower of cost or market. Cost is determined based on the first-in, first-out cost flow assumption (“FIFO”) while market is determined based upon the estimated net realizable value less an allowance for selling and distribution expenses and a normal gross profit. The Company evaluates the need for inventory reserves associated with obsolete, slow moving, and non-sellable inventory by reviewing estimated net realizable values on a periodic basis. As of March 31, 2023 and December 31, 2022, the Company believes there are no excess and obsolete inventories and accordingly, did not record an inventory reserve. Inventories consist of purchased finished goods. |
Sales Taxes | Sales Taxes Sales taxes for the three months ended March 31, 2023 and 2022, were recorded on a net basis. Included in accrued expenses at both March 31, 2023 and December 31, 2022 is approximately $61,000 related to sales taxes. |
Warranty | Warranty The Company warranties the sale of most of its products and records an accrual for estimated future claims. The standard warranty is typically for a period of three years. Such accruals are based upon historical experience and management’s estimate of the level of future claims. The Company recorded a liability as of March 31, 2023 and December 31,2022 of $17,604 and $12,678, respectively. The expense is included in cost of sales in the statements of operations and within accrued expenses on the accompanying balance sheets. |
Net Loss per Share | Net Loss per Share Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. As all potentially dilutive securities are anti-dilutive as of March 31, 2022 and December 31, 2022, diluted net loss per share is the same as basic net loss per share for each period. Conversion of outstanding warrants, stock options and convertible promissory notes at March 31, 2023 may result in an estimated 179.0 million additional shares of common stock outstanding. |
COVID-19 | COVID-19 On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the COVID-19 include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. COVID-19, and actions taken to mitigate it, have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial effect will be to the company, COVID-19 has had an adverse effect on our business, including our supply chains and distribution systems. While we are taking diligent steps to mitigate disruptions to our supply chain, we are unable to predict the extent or nature of these impacts at this time to our future financial condition and results of operations. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of significant customer sales as a percentage of total sales | THREE MONTHS ENDED MARCH 31, 2023 2022 Customer A 18.8 % 17.8 % Customer B 10.2 % 17.4 % |
Schedules of supplier purchases as percentage of total inventory purchases | THREE MONTHS ENDED MARCH 31, 2023 2022 Supplier A 64.0 % 86.2 % Supplier D 25.5 % — |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | March 31, December 31, 2023 2022 Building $ — $ 875,000 Furniture and equipment 24,987 24,987 24,987 899,987 Less: accumulated depreciation and amortization (24,987) (194,518) $ — $ 705,469 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
NOTES PAYABLE | |
Schedule of convertible note | The aggregate of convertible promissory notes is as follows: March 31, December 31, Convertible promissory notes 2023 2022 Principal balance $ 1,580,853 $ 1,680,774 Debt discount balance (215,660) (375,865) Net Notes balance $ 1,365,193 $ 1,304,909 The Net Notes balance at March 31, 2023 is comprised of the following: Principal Debt Discount Net Pre 2020 $ 50,000 $ — $ 50,000 October 2021 73,336 — 73,336 February 2022 44,882 — 44,882 March 2022 307,500 — 307,500 July 2022 33,135 (4,874) 28,261 August 2022 176,000 (30,279) 145,721 September 2022 896,000 (180,507) 715,493 $ 1,580,853 $ (215,660) $ 1,365,193 The Net Notes balance at December 31, 2022 is comprised of the following: Principal Debt Discount Net Pre 2020 $ 50,000 $ — $ 50,000 October 2021 73,336 — 73,336 February 2022 91,953 (7,721) 84,232 March 2022 307,500 (29,510) 277,990 July 2022 85,985 (9,443) 76,542 August 2022 176,000 (51,405) 124,595 September 2022 896,000 (277,786) 618,214 $ 1,680,774 $ (375,865) $ 1,304,909 |
STOCK OPTIONS AND WARRANTS (Tab
STOCK OPTIONS AND WARRANTS (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Schedule of warrants to purchase common stock | The following table summarizes the information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable at March 31, 2023: Date Issued Exercise Price Number Outstanding Expiration Date December 1, 2018 $ 0.01 170,000 December 1, 2023 May 1, 2020 $ 0.52 100,000 May 1, 2025 October 1, 2021 $ 0.025 9,000,000 October 1, 2026 October 17, 2021 $ 0.025 450,000 October 17, 2024 August 10, 2022, 2022 $ 0.01 3,336,843 August 10, 2027 September 29, 2022, 2022 $ 0.01 2,780,690 September 29,2027 February 11, 2023 $ 0.01 500,000 February 11, 2028 March 10, 2023 $ 0.01 12,500,000 March 10, 2028 28,837,533 Retroactive application of the reset rate to a 2022 exercise resulted in an additional 375,000 shares to be issued. See Note 10. The following table summarizes the information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable at December 31, 2022: Date Issued Exercise Price Number Outstanding Expiration Date December 1, 2018 $ 0.01 170,000 December 1, 2023 May 1, 2020 $ 0.52 100,000 May 1, 2025 October 1, 2021 $ 0.025 9,000,000 October 1, 2026 October 17, 2021 $ 0.01 450,000 October 17, 2024 August 10, 2022 $ 0.01 3,336,843 August 10, 2027 September 15, 2022 $ 0.01 12,000,000 September 15, 2025 September 29, 2022 $ 0.01 2,780,690 September 29, 2027 27,837,533 |
Warrant using monte carlo pricing model [Member] | |
Schedule of assumptions used in the determination of the fair value of the warrant | Fair Value of Common Share $ 0.006-0.009 Exercise Price $ 0.01 Risk Free Rate 3.92-3.96 % Expected Life (Yrs.) 5.0 Volatility 130.0 % |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Going Concern (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Accumulated net losses | $ 21,500,000 | |
Cash used in operating activities | (452,736) | $ (317,845) |
Working capital deficit | $ 872,308 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Right of return period | 30 days | |
Sales returns allowance | $ 6,990 | $ 6,990 |
Customer deposits | $ 134,000 | 217,588 |
Initial warranty period | 3 years | |
Deferred revenue | $ 23,375 | $ 23,313 |
Minimum | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Extended warranty period | 1 year | |
Maximum | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Extended warranty period | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Financial Instruments and Concentrations of Business and Credit Risk (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Amount due from customers | $ 12,642 | $ 13,342 | |
Due from customers | 0 | 0 | |
Customer deposits | 134,000 | 217,588 | |
Customer deposits on hand | 28,750 | 73,385 | |
Net purchase | Supplier concentrations | |||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Amount due to suppliers | $ 0 | $ 0 | |
Customer A | Net Sales | Customer concentration | |||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Concentration risk percentage | 18.80% | 17.80% | |
Customer B | Net Sales | Customer concentration | |||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Concentration risk percentage | 10.20% | 17.40% |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Supplier Purchases as a Percentage of Total Inventory Purchases (Details) - Purchases - Supplier concentrations | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Supplier A | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Concentration risk percentage | 64% | 86.20% |
Supplier D | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Concentration risk percentage | 25.50% |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional information (Details) - USD ($) shares in Millions | 3 Months Ended | |
Mar. 31, 2023 | Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Sales tax payable | $ 61,000 | $ 61,000 |
Standard warranty period | 3 years | |
Warranty liability | $ 17,604 | $ 12,678 |
Additional shares of common stock outstanding | 179 |
PROPERTY AND EQUIPMENT - Summar
PROPERTY AND EQUIPMENT - Summary of Property and Equipment (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
PROPERTY AND EQUIPMENT | ||
Total | $ 24,987 | $ 899,987 |
Less: accumulated depreciation and amortization | (24,987) | (194,518) |
Property and equipment | 705,469 | |
Building | ||
PROPERTY AND EQUIPMENT | ||
Total | 875,000 | |
Furniture and equipment | ||
PROPERTY AND EQUIPMENT | ||
Total | $ 24,987 | $ 24,987 |
PROPERTY AND EQUIPMENT - Additi
PROPERTY AND EQUIPMENT - Additional Information (Details) - USD ($) | 3 Months Ended | ||
Mar. 15, 2023 | Mar. 31, 2023 | Mar. 31, 2022 | |
PROPERTY AND EQUIPMENT | |||
Sale of property and equipment | $ 1,894,588 | ||
Gain on sale of fixed assets | $ 1,193,676 | 1,193,676 | |
Depreciation and amortization expense | $ 4,557 | $ 5,469 | |
Bank debt | Building | |||
PROPERTY AND EQUIPMENT | |||
Proceeds from sale of building | 2,000,000 | ||
Sale of property and equipment | $ 1,363,818 |
NOTES PAYABLE - Convertible Not
NOTES PAYABLE - Convertible Note (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
NOTES PAYABLE | ||
Principal balance | $ 1,580,853 | $ 1,680,774 |
Debt discount balance | (215,660) | (375,865) |
Net Notes balance | $ 1,365,193 | $ 1,304,909 |
NOTES PAYABLE - The Net Notes (
NOTES PAYABLE - The Net Notes (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
NOTES PAYABLE | ||
Principal | $ 1,580,853 | $ 1,680,774 |
Debt discount balance | (215,660) | (375,865) |
Net | 1,365,193 | 1,304,909 |
Pre 2020 | ||
NOTES PAYABLE | ||
Principal | 50,000 | 50,000 |
Net | 50,000 | 50,000 |
October 2021 | ||
NOTES PAYABLE | ||
Principal | 73,336 | 73,336 |
Net | 73,336 | 73,336 |
February 2022 | ||
NOTES PAYABLE | ||
Principal | 44,882 | 91,953 |
Debt discount balance | (7,721) | |
Net | 44,882 | 84,232 |
March 2022 | ||
NOTES PAYABLE | ||
Principal | 307,500 | 307,500 |
Debt discount balance | (29,510) | |
Net | 307,500 | 277,990 |
July 2022 | ||
NOTES PAYABLE | ||
Principal | 33,135 | 85,985 |
Debt discount balance | (4,874) | (9,443) |
Net | 28,261 | 76,542 |
September 2022 | ||
NOTES PAYABLE | ||
Principal | 896,000 | 896,000 |
Debt discount balance | (180,507) | (277,786) |
Net | 715,493 | 618,214 |
August 2022 | ||
NOTES PAYABLE | ||
Principal | 176,000 | 176,000 |
Debt discount balance | (30,279) | (51,405) |
Net | $ 145,721 | $ 124,595 |
NOTES PAYABLE - Additional Info
NOTES PAYABLE - Additional Information (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |||
Feb. 11, 2022 | Jan. 31, 2023 | Dec. 31, 2022 | Mar. 31, 2023 | Aug. 08, 2022 | |
Principal amount due | $ 78,753 | ||||
Interest due | 46,151 | ||||
Price per share of debt converted | $ 0.01 | ||||
Retroactive issuance of debt converted | 5,000,000 | ||||
Convertible notes payable | |||||
Principal amount due | $ 78,753 | ||||
Interest on payment default (as a percent) | 125% | 125% | |||
Principal amount | $ 307,500 | $ 176,000 | |||
Price per share of debt converted | $ 0.015 | ||||
Retroactive issuance of debt converted | 3,700,000 | ||||
Convertible notes payable | Trigger warrants | |||||
Price per share of debt converted | $ 0.01 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |||||
Mar. 15, 2023 | Feb. 11, 2022 | Jun. 30, 2020 | Sep. 30, 2015 | Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
LONG-TERM DEBT | |||||||
Sale of property and equipment | $ 1,894,588 | ||||||
Payment of principal and interest | $ 46,151 | ||||||
Bank debt | |||||||
LONG-TERM DEBT | |||||||
Interest expense totaled | 12,802 | $ 6,753 | |||||
Payment of principal and interest | $ 524,585 | ||||||
Bank debt | Building | |||||||
LONG-TERM DEBT | |||||||
Proceeds from sale of building | 2,000,000 | ||||||
Sale of property and equipment | $ 1,363,818 | ||||||
Government Debt | |||||||
LONG-TERM DEBT | |||||||
Proceeds from issuance of long-term debt | $ 150,000 | ||||||
Interest rate (as a percent) | 3.75% | ||||||
Debt instrument deferment period | 30 months | ||||||
Monthly payment of debt | $ 731 | ||||||
Interest expense totaled | 1,387 | $ 1,462 | |||||
Bank Debt | |||||||
LONG-TERM DEBT | |||||||
Outstanding balance of debt | $ 700,000 | ||||||
Long-term debt | $ 0 | $ 521,525 | |||||
Bank Debt | First Year | |||||||
LONG-TERM DEBT | |||||||
Interest rate (as a percent) | 1.99% | ||||||
Monthly payment of debt | $ 3,547 | ||||||
Bank Debt | Subsequent period | |||||||
LONG-TERM DEBT | |||||||
Interest rate (as a percent) | 4.95% | ||||||
Monthly payment of debt | $ 4,574 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 1 Months Ended | 3 Months Ended | ||||
Feb. 28, 2023 | Mar. 31, 2023 | Mar. 31, 2022 | Jan. 31, 2023 | Dec. 31, 2022 | Feb. 28, 2021 | |
RELATED PARTY TRANSACTIONS | ||||||
Compensation expense | $ 400,000 | |||||
Shares issued for consulting services (in shares) | 2,000,000 | |||||
Common stock, par value | $ 0.00001 | $ 0.00001 | ||||
Value issued for consulting services | $ 315,000 | $ 356,900 | ||||
Consulting agreement | Advisor and director | Employee and consultant stock ownership plan | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Consulting term agreement | 1 year | |||||
Shares issued for consulting services (in shares) | 35,000,000 | |||||
Common stock, par value | $ 0.01 | $ 0.01 | ||||
Selling, general and administrative expenses | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Value issued for consulting services | $ 315,000 | |||||
CEO | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Additional bonus paid | $ 10,000 | $ 58,380 | ||||
CEO | Series B Preferred Stock | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Number of shares issued | 1 |
STOCKHOLDERS' DEFICIT (Details)
STOCKHOLDERS' DEFICIT (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2023 | Feb. 28, 2023 | Jan. 31, 2023 | Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Feb. 28, 2021 | |
Stockholder's deficit | |||||||
Amount of principal and interest converted | $ 50,000 | ||||||
Number of shares upon conversion of debt instrument | 5,000,000 | ||||||
Conversion price per share (in dollars per share) | $ 0.01 | ||||||
Granted and accrued | 0 | ||||||
Common stock, shares authorized | 1,999,000,000 | 1,999,000,000 | 999,000,000 | ||||
Shares issued for consulting services (in shares) | 2,000,000 | ||||||
Common stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||||
Issuance of common stock for cash- net | $ 12,000 | ||||||
Series B Preferred Stock | CEO | |||||||
Stockholder's deficit | |||||||
Number of shares issued | 1 | ||||||
Selling, general and administrative expenses | |||||||
Stockholder's deficit | |||||||
Issuance of common stock for cash- net | $ 356,900 | ||||||
Minimum | |||||||
Stockholder's deficit | |||||||
Common stock, shares authorized | 999,000,000 | ||||||
Maximum | |||||||
Stockholder's deficit | |||||||
Common stock, shares authorized | 1,999,000,000 | ||||||
Consulting agreement with third party | |||||||
Stockholder's deficit | |||||||
Shares issued for consulting services (in shares) | 10,600,000 | ||||||
Consulting agreement with third party | Minimum | |||||||
Stockholder's deficit | |||||||
Per share value of common shares issued in conjunction with agreements for financial and marketing consulting services (in dollars per share) | $ 0.029 | ||||||
Consulting agreement with third party | Maximum | |||||||
Stockholder's deficit | |||||||
Per share value of common shares issued in conjunction with agreements for financial and marketing consulting services (in dollars per share) | $ 0.035 | ||||||
Common Stock | |||||||
Stockholder's deficit | |||||||
Shares issued for consulting services (in shares) | 35,000,000 | 10,600,000 | |||||
Convertible notes payable | |||||||
Stockholder's deficit | |||||||
Number of shares upon conversion of debt instrument | 3,700,000 | ||||||
Conversion price per share (in dollars per share) | $ 0.015 | ||||||
Shares issued as a part of convertible notes payable settlement | 18,000,000 | ||||||
Cashless exercise of warrants | 24,000,000 | ||||||
Convertible notes payable | Common Stock | |||||||
Stockholder's deficit | |||||||
Shares issued as a part of convertible notes payable settlement | 46,102,156 | ||||||
Convertible promissory note | |||||||
Stockholder's deficit | |||||||
Shares issued as a part of convertible notes payable settlement | 25,000,000 | ||||||
Employee and consultant stock ownership plan | |||||||
Stockholder's deficit | |||||||
Granted and accrued | 3,000,000 | ||||||
Employee and consultant stock ownership plan | Advisor and director | Consulting agreement | |||||||
Stockholder's deficit | |||||||
Shares issued for consulting services (in shares) | 35,000,000 | ||||||
Consulting term agreement | 1 year | ||||||
Common stock, par value | $ 0.01 | $ 0.01 |
STOCK OPTIONS AND WARRANTS - Fa
STOCK OPTIONS AND WARRANTS - Fair value of the warrant awarded (Details) | Mar. 31, 2023 $ / shares Y shares | Dec. 31, 2022 $ / shares shares |
STOCK OPTIONS AND WARRANTS | ||
Warrants exercise price | $ 0.01 | |
Number Outstanding | shares | 28,837,533 | 27,837,533 |
Exercise Price 0.025 | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants exercise price | $ 0.025 | |
Number Outstanding | shares | 9,000,000 | |
Exercise Price 0.52 | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants exercise price | $ 0.52 | $ 0.52 |
Number Outstanding | shares | 100,000 | 100,000 |
Exercise price 0.025 | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants exercise price | $ 0.025 | $ 0.025 |
Number Outstanding | shares | 450,000 | 9,000,000 |
Exercise price 0.01 | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants exercise price | $ 0.01 | $ 0.01 |
Number Outstanding | shares | 170,000 | 170,000 |
Exercise price 0.01 One | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants exercise price | $ 0.01 | $ 0.01 |
Number Outstanding | shares | 3,336,843 | 3,336,843 |
Exercise price 0.01 Two | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants exercise price | $ 0.01 | $ 0.01 |
Number Outstanding | shares | 2,780,690 | 2,780,690 |
Exercise price 0.01 Three | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants exercise price | $ 0.01 | $ 0.01 |
Number Outstanding | shares | 500,000 | 450,000 |
Exercise price 0.01 Four | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants exercise price | $ 0.01 | $ 0.01 |
Number Outstanding | shares | 12,500,000 | 12,000,000 |
Black-Scholes model and recorded warrants as reduction of note included debt discount balance | Fair Value of Common Share | Minimum | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants and rights outstanding, measurement input | 0.006 | |
Black-Scholes model and recorded warrants as reduction of note included debt discount balance | Fair Value of Common Share | Maximum | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants and rights outstanding, measurement input | 0.009 | |
Black-Scholes model and recorded warrants as reduction of note included debt discount balance | Exercise Price | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants and rights outstanding, measurement input | 0.01 | |
Black-Scholes model and recorded warrants as reduction of note included debt discount balance | Risk Free Rate | Minimum | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants and rights outstanding, measurement input | 0.0392 | |
Black-Scholes model and recorded warrants as reduction of note included debt discount balance | Risk Free Rate | Maximum | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants and rights outstanding, measurement input | 0.0396 | |
Black-Scholes model and recorded warrants as reduction of note included debt discount balance | Expected term (in years) | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants and rights outstanding, measurement input | Y | 5 | |
Black-Scholes model and recorded warrants as reduction of note included debt discount balance | Volatility | ||
STOCK OPTIONS AND WARRANTS | ||
Warrants and rights outstanding, measurement input | 1.300 |
STOCK OPTIONS AND WARRANTS - Ad
STOCK OPTIONS AND WARRANTS - Additional Information (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2017 | |
STOCK OPTIONS AND WARRANTS | |||
Number of shares authorized to be issued under the Plan | 50,000,000 | ||
Term of the awards granted | 10 years | ||
Number of stock options granted | 0 | ||
Stock compensation expense | $ 0 | $ 4,703 | |
Number of shares issued by warrants | 25,000,000 | ||
Fixed price of warrants | $ 0.01 | ||
Fair value of warrant | $ 160,000 | ||
Trigger warrants | |||
STOCK OPTIONS AND WARRANTS | |||
Number of shares authorized to be issued under the Plan | 375,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | 3 Months Ended |
Mar. 31, 2023 USD ($) | |
COMMITMENTS AND CONTINGENCIES | |
Commitment for product development | $ 300,000 |
Amount for product development paid | $ 150,000 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
May 09, 2023 | May 08, 2023 | Jan. 31, 2023 | Dec. 31, 2022 | |
Subsequent events | ||||
Number of shares upon conversion of debt instrument | 5,000,000 | |||
Amount of convertible note payable | $ 50,000 | |||
Conversion price per share (in dollars per share) | $ 0.01 | |||
Convertible notes payable | ||||
Subsequent events | ||||
Number of shares upon conversion of debt instrument | 3,700,000 | |||
Conversion price per share (in dollars per share) | $ 0.015 | |||
Convertible notes payable | Subsequent event | ||||
Subsequent events | ||||
Number of shares upon conversion of debt instrument | 8,718,487 | |||
Amount of convertible note payable | $ 20,000 | |||
Conversion price per share (in dollars per share) | $ 0.00238 | |||
Convertible notes payable | Warrant | Subsequent event | ||||
Subsequent events | ||||
Number of shares upon conversion of debt instrument | 4,075,000 |