Notes
to Consolidated Financial Statements
December
31, 2016
1.
|
Organization
and Going Concern
|
Immudyne,
Inc. (the “Company”) is a Delaware corporation established to develop, manufacture and sell natural immune support
products containing the Company’s proprietary yeast beta glucans, a group of beta glucans naturally occurring in the cell
walls of yeast that have been shown through testing and analysis to support the immune system. The Company’s products include
once a day oral intake tablets and topical creams and gels for skin application. The Company concentrates its sales and marketing
efforts on healthcare professionals, distributors for its all-natural raw material ingredient products and direct-to-consumer
sales.
In 2015, the Company formed
a joint venture domiciled in Puerto Rico, Innate Skincare, LLC d/b/a Innate Scientific, LLC (“Innate”). Under the
terms of the joint venture agreement, the Company held a 33.3% equity interest, and a 51% controlling voting interest, in
Innate. On January 20, 2016, Innate amended its limited liability company operating agreement and changed its legal name to
Immudyne PR LLC (“Immudyne PR”). On April 1, 2016, Immudyne PR further amended its operating agreement and
restated the Company’s ownership and voting interest in Immudyne PR increasing its ownership to 78.16667% resulting in
a charge to noncontrolling interest and additional paid-in-capital of $91,612. Immudyne PR was formed to launch a complete
skin care regime formulated using strategic ingredients provided by the Company. Immudyne PR is also currently pursuing other
opportunities.
The
Company has funded operations in the past through the sales of its products, issuance of common stock and through loans and advances
from officers and directors. The Company’s continued operations are dependent upon obtaining an increase in its sales volume
and the continued financial support from officers and directors or the issuance of additional shares of common stock.
The
accompanying financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes
the realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2016, the Company
has an accumulated deficit approximating $9.7 million and has incurred negative cash flows from operations. These conditions raise
substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Based
on the Company's cash balance at December 31, 2016, and projected cash needs for 2017, management estimates that it may need to
increase sales revenue and/or raise additional capital to cover operating and capital requirements for the 2017 year. Management
may raise the additional needed funds through increased sales volume, issuing additional shares of common stock or other equity
securities, or obtaining debt financing. Although management has been successful to date in raising necessary funding, there can
be no assurance that sales revenue will substantially increase or that any required future financing can be successfully completed
on a timely basis, or on terms acceptable to the Company.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
2.
|
Summary
of Significant Accounting Policies
|
Principles
of Consolidation
The Company evaluates the need to consolidate
affiliates based on standards set forth in ASC 810 Consolidation (“ASC 810”).
The consolidated financial statements include
the accounts of the Company and its majority owned subsidiary, Immudyne PR and variable interest entities (VIE’s) in which
the Company has been determined to be the primary beneficiary. The non- controlling interest in Immudyne PR represents the 21.833%
equity interest held by other members of the joint venture. All significant consolidated transactions and balances have been eliminated
in consolidation.
Variable Interest Entities
The Company follows ASC 810-10-15 guidance
with respect to accounting for variable interest entities (each, a “VIE”). These entities do not have sufficient equity
at risk to finance their activities without additional subordinated financial support from other parties or whose equity investors
lack any of the characteristics of a controlling financial interest. A variable interest is an investment or other interest that
will absorb portions of a VIE’s expected losses or receive portions of its expected residual returns and are contractual,
ownership, or pecuniary in nature and that change with changes in the fair value of the entity’s net assets. A reporting
entity is the primary beneficiary of a VIE and must consolidate it when that party has a variable interest, or combination of variable
interests, that provides it with a controlling financial interest. A party is deemed to have a controlling financial interest if
it meets both of the power and losses/benefits criteria. The power criterion is the ability to direct the activities of the VIE
that most significantly impact its economic performance. The losses/benefits criterion is the obligation to absorb losses from,
or right to receive benefits from, the VIE that could potentially be significant to the VIE. The VIE model requires an ongoing
reconsideration of whether a reporting entity is the primary beneficiary of a VIE due to changes in facts and circumstances.
As of December 31, 2016 and 2015, the Company
consolidated nine and zero VIEs, respectively.
Immudyne PR as the primary beneficiary of Ace Account Management LLC, Innerwell Skincare
LLC, MCD Merchants LLC, One Equity Research LLC, Inate Gems LLC, Retriever Health Products LLC, Spurs 5, LLC, Salus LLC and Huntley
LLC which are qualified as VIEs. The assets and liabilities and revenues and expenses of these VIEs included in the financial
statements of Immudyne PR and further included in the consolidated financial statements. As of December 31, 2016, the VIEs had
assets of $10,306, liabilities of $5,748, revenues of $6,271, and operating expenses of $6,141. The assets and liabilities include
balances due from and due to the subsidiaries of Immudyne PR. These inter-company receivables and payables are eliminated upon
consolidation of the VIE with Immudyne PR and Immudyne. No assets were pledged or given as collateral against any borrowings.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
2.
|
Summary
of Significant Accounting Policies
|
The Company utilizes third party entities to
provide and increase credit card processing capacity and optimize corresponding rates and fees. A majority of these entities provide
this service as independent contractors in exchange for a one (1%) percent fee of the net revenues processed and collected by such
contractors from sales initiated by the Company. The VIEs consolidated in the Company’s financial statements are primarily
contracted to credit card processing through one or more merchant banks contracted by each VIE. Upon receipt of funds by each VIE,
the collection of receipts less any returns, chargeback and other fees charged by such merchant bank is transferred to Immudyne
PR.
Use of Estimates
The
Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of
the more significant estimates required to be made by management include the determination of reserves for accounts receivable,
returns and allowances, the accounting for derivatives, the valuation of inventory and stockholders’ equity based transactions.
Actual results could differ from those estimates.
Derivative Liabilities
The Company evaluates
stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify
as derivatives to be separately accounted for under the relevant sections of Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s
Own Equity. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative
instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is
recorded as a liability, the change in fair value is recorded in the consolidated statements of operations as other income or other
expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date
and then that fair value is reclassified to equity.
Financial instruments
that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability
account at the fair value of the instrument on the reclassification date.
As of December 31, 2016, certain of the Company’s
stock options, stock warrants and convertible debt instruments were accounted for as derivative liabilities due to insufficient
authorized shares of common stock to settle outstanding contracts. At December 31, 2016, the Company estimated the fair value
of these stock options, stock warrants and embedded conversion features using the Black-Scholes option pricing model (“Black-Scholes”)
in the amount of $192,254 was recorded upon issue
Sequencing Policy
Under ASC 815-40-35, the
Company has adopted a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities
is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares, shares
will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving
the first allocation of authorized but unissued shares, and all future instruments being classified as a derivative liability,
with the exception of instruments related to share-based compensation issued to employees or directors.
Inventory
At
December 31, 2016 and December 31, 2015, inventory consisted primarily of cosmetic and nutraceutical additives, and finished cosmetic
products. Inventory is maintained in the Company’s leased Kentucky warehouse and third party warehouses in Pennsylvania
and Louisiana.
Inventory
is valued at the lower of cost or market with cost determined on a first-in, first-out (“FIFO”) basis. Management
compares the cost of inventory with the net realizable value and an allowance is made for writing down inventory to market value,
if lower. At December 31, 2016 and December 31, 2015, the Company recorded an inventory reserve in the amount of $20,000. Inventory
consists of the following:
|
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
38,460
|
|
|
$
|
25,761
|
|
|
Finished products
|
|
|
121,810
|
|
|
|
35,290
|
|
|
|
|
$
|
160,270
|
|
|
$
|
61,051
|
|
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
2.
|
Summary
of Significant Accounting Policies (continued)
|
Revenue
Recognition
The Company’s policy is to record revenue as earned
when a firm commitment, indicating sales quantity and price exists, delivery has taken place and collectability is reasonably assured.
The Company generally records sales of nutraceutical and cosmetic additives once the product is shipped to the customer, and for
sales of finished cosmetic products once the customer places the order and the product is simultaneously shipped, but in limited
cases if title does not pass until the product reaches the customer’s delivery site, then recognition of revenue is deferred
until that time. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Provisions
for discounts, returns, allowances, customer rebates and other adjustments are netted with gross sales. The Company accounts for
such provisions during the same period in which the related revenues are earned. Customer discounts, returns and rebates approximated
$1,926,000 in the year ended December 31, 2016. Customer discounts, returns and rebates were not significant in the year ended
December 31, 2015.
Delivery is considered to have occurred when title and
risk of loss have transferred to the customer. If title does not pass until the product reaches the customer’s delivery site
or the customer accepts the product, then recognition of revenue is deferred until that time. There are no formal sales incentives
offered to any of the Company’s customers. Volume discounts may be offered from time to time to customers purchasing large
quantities on a per transaction basis.
Revenue for the year ended December 31, 2016 consisted
of nutraceutical and cosmetic additives ($997,964) and finished cosmetic products ($4,240,640). Revenue for the year ended December
31, 2015 consists of nutraceutical and cosmetic additives ($1,079,289) and finished cosmetic products ($139,573).
Accounts
receivable
Accounts receivable are carried at original
invoice amount less an estimate made for holdbacks and doubtful receivables based on a review of all outstanding amounts. Management
determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s
financial condition, credit history and current economic conditions and sets up an allowance for doubtful accounts when collection
is uncertain. Customers’ accounts are written off when all attempts to collect have been exhausted. Recoveries of accounts
receivable previously written off are recorded as income when received. At December 31, 2016 and 2015 the accounts receivable reserve
was approximately $37,800 and $18,000, respectively. As of December 31, 2016, the reserve for sales returns and allowances was
approximately $50,500. No sales returns and allowances reserve existed at December 31, 2015.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
2.
|
Summary
of Significant Accounting Policies (continued)
|
Segments
The
guidance for disclosures about segments of an enterprise requires that a public business enterprise report financial and descriptive
information about its operating segments. Generally, financial information is required to be reported on the basis used internally
for evaluating segment performance and resource allocation. The Company manages its operations in two reportable segments for
purposes of assessing performance and making operating decisions. Revenue is generated predominately in the United States, and
all significant assets are held in the United States, or United States territories.
The
accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.
The Company allocates resources and evaluates the performance of segments based on income or loss from operations, excluding interest,
corporate expenses and other income (expenses).
A
summary of the company’s reportable segments is as follows:
|
Total assets:
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
Nutraceutical and Cosmetic Additives
|
|
$
|
556,234
|
|
|
$
|
412,324
|
|
|
Finished Cosmetic Products
|
|
|
422,288
|
|
|
|
101,828
|
|
|
Eliminations
|
|
|
(188,698
|
)
|
|
|
(65,681
|
)
|
|
Total
|
|
$
|
789,824
|
|
|
$
|
448,471
|
|
|
|
|
Year ended
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
Net sales by segment:
|
|
|
|
|
|
|
|
Nutraceutical and Cosmetic Additives
|
|
$
|
1,024,264
|
|
|
$
|
1,092,289
|
|
|
Finished Cosmetic Products
|
|
|
4,240,640
|
|
|
|
139,573
|
|
|
Eliminations
|
|
|
(26,300
|
)
|
|
|
(13,000
|
)
|
|
Total
|
|
$
|
5,238,604
|
|
|
$
|
1,218,862
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income by segment:
|
|
|
|
|
|
|
|
|
|
Nutraceutical and Cosmetic Additives
|
|
$
|
164,286
|
|
|
$
|
110,467
|
|
|
Finished Cosmetic Products
|
|
|
(388,121
|
)
|
|
|
(158,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other unallocated amounts:
|
|
|
|
|
|
|
|
|
|
Corporate expenses
|
|
|
(950,847
|
)
|
|
|
(214,282
|
)
|
|
Other income (expense) – net
|
|
|
(48,611
|
)
|
|
|
89,785
|
|
|
Consolidated income (loss) from operations
|
|
$
|
(1,223,293
|
)
|
|
$
|
(172,432
|
)
|
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
2.
|
Summary
of Significant Accounting Policies (continued)
|
Income
Taxes
The
Company files Corporate Federal and State tax returns, while Immudyne PR, which was formed as a limited liability corporation,
files a separate tax return with any tax liabilities or benefits passing through to its members.
The
Company records current and deferred taxes in accordance with Accounting Standards Codification (ASC) 740, “Accounting for
Income Taxes.” This ASC requires recognition of deferred tax assets and liabilities for temporary differences between tax
basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted
rates in effect for the year in which the differences are expected to reverse. The Company establishes a valuation allowance when
necessary to reduce deferred tax assets to the amount expected to be realized. The Company periodically assesses the value of
its deferred tax asset, a majority of which has been generated by a history of net operating losses and determines the necessity
for a valuation allowance. ASC 740 also provides a recognition threshold and measurement attribute for the financial statement
recognition of a tax position taken or expected to be taken in a tax return. Using this guidance, a company may recognize the
tax benefit from an uncertain tax position in its financial statements only if it is more likely-than-not (i.e., a likelihood
of more than 50%) that the tax position will be sustained on examination by the taxing authorities, based on the technical merits
of the position.
The
Company’s tax returns for all years since December 31, 2013, remain open to taxing authorities.
Stock-Based
Compensation
The
Company follows the provisions of ASC 718, “Share-Based Payment”. Under this guidance compensation cost generally
is recognized at fair value on the date of the grant and amortized over the respective vesting periods. The fair value of options
at the date of grant is estimated using the Black-Scholes option pricing model. The expected option life is derived from assumed
exercise rates based upon historical exercise patterns and represents the period of time that options granted are expected to
be outstanding. The expected volatility is based upon historical volatility of the Company’s shares using weekly price observations
over an observation period that approximates the expected life of the options. The risk-free rate approximates the U.S. Treasury
yield curve rate in effect at the time of grant for periods similar to the expected option life. Due to limited history of forfeitures,
the estimated forfeiture rate included in the option valuation was zero.
Many
of the assumptions require significant judgment and any changes could have a material impact in the determination of stock-based
compensation expense.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
2.
|
Summary
of Significant Accounting Policies (continued)
|
Earnings
(Loss) Per Share
Basic
earnings (loss) per common share is based on the weighted average number of shares outstanding during each period presented. Warrants
and options to purchase common stock are included as common stock equivalents only when dilutive. Potential common stock equivalents
are excluded from dilutive earnings per share when the effects would be antidilutive.
Common stock equivalents comprising shares
underlying 16,302,447 options and warrants for the year ended December 31, 2016 have not been included in the loss per share calculation
as the effects are anti-dilutive. Common stock equivalents comprising shares underlying 12,775,273 options and warrants for the
year ended December 31, 2015 have not been included in the loss per share calculations as the effects are anti-dilutive.
Recent
Accounting Pronouncements
In
August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing
diversity in practice regarding how certain cash receipts and cash payments are presented in the statement of cash flows. The
standard provides guidance on the classification of the following items: (1) debt prepayment or debt extinguishment costs, (2)
settlement of zero-coupon debt instruments, (3) contingent consideration payments made after a business combination, (4) proceeds
from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions
received from equity method investments, (7) beneficial interests in securitization transactions, and (8) separately identifiable
cash flows. The Company is required to adopt ASU 2016-15 for fiscal years, and for interim periods within those fiscal years,
beginning after December 15, 2017 on a retrospective basis. Early adoption is permitted, including adoption in an interim period.
The Company is currently evaluating the impact of adoption of ASU 2016-15.
In March 2016, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09,
“Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting,” which relates
to the accounting for employee share-based payments. This standard addresses several aspects of the accounting for
share-based payment award transactions, including: (a) income tax consequences; (b) classification flows of awards as either
equity or liabilities; and (c) classification on the statement of cash flows. This standard will be effective for fiscal
years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is in the process
of evaluating the impact of the adoption of ASU 2016-09 on its consolidated financial statements. The adoption of ASU No.
2016-09 is not expected to have a material impact on the Company's consolidated financial statements or related
disclosures.
In
February 2016, a pronouncement was issued that creates new accounting and reporting guidelines for leasing arrangements. The new
guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights
and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent
with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily
will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial
statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective
for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early
application permitted. The new standard is to be applied using a modified retrospective approach. The Company is in the process
of evaluating the impact of the new pronouncement on its consolidated financial statements.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
2.
|
Summary
of Significant Accounting Policies (continued)
|
Recent
Accounting Pronouncements (continued)
In
May 2014, the Financial Accounting Standards Board ("FASB") issued accounting guidance, "Revenue from Contracts
with Customers." The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods
or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled
in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance
for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications)
and clarify guidance for multiple-element arrangements. The standard will be effective for fiscal years and interim periods within
those years beginning after December 15, 2017. Accordingly, the Company will adopt this standard in the first quarter of fiscal
year 2018. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements.
In July 2015, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, “Simplifying the Measurement
of Inventory.” ASU 2015-11 applies to inventory that is measured using first-in, first-out (FIFO) or average cost. An entity
should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value. Net realizable value is
the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and
transportation. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016. The adoption of ASU No. 2015-11 is
not expected to have a material impact on the Company's consolidated financial statements or related disclosures.
In August 2014, the FASB issued ASU 2014-15,
"Presentation of Financial Statements-Going Concern". This ASU is intended to define management's responsibility to evaluate
whether there is substantial doubt about an organization's ability to continue as a going concern and to provide related footnote
disclosures. It is effective for annual periods ending after December 15, 2016, with early adoption permitted. The Company does
not expect it to have a material effect on the Company's consolidated financial condition, results of operations, and cash flows.
In May 2017, the FASB issued ASU 2017-09, Compensation
- Stock Compensation (Topic 718) : Scope of Modification Accounting. The new standard provides guidance about which changes to
the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This pronouncement
is effective for annual reporting periods beginning after December 15, 2017 but early adoption is permitted. The Company is currently
evaluating the impact of adopting this guidance.
All
other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are
not expected to have a material impact on the consolidated financial statements upon adoption.
Fair
Value of Financial Instruments
The
carrying value of the Company’s financial instruments, including cash, trade accounts receivable, accounts payable and
accrued expenses and the face amount of notes payable approximate fair value for all periods.
Noncontrolling
Interests
The
Company accounts for its less than 100% interest in Immudyne PR in accordance with ASC Topic 810, Consolidation, and accordingly
the Company presents noncontrolling interests as a component of equity on its consolidated balance sheet and reports the noncontrolling
interest’s share of the Immudyne PR net loss attributable to noncontrolling interests in the consolidated statement of operations.
Consolidation of Variable Interest Entities
In accordance with ASC 810-10-25-37 and as
amended by ASU 2009-17, the Company determines whether any legal entity in which the Company becomes involved is a VIE and subject
to consolidation. The Company conducts an assessment on an ongoing basis for each VIE including (1) the power to direct activities
of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or right
to receive benefits from the VIE that could potentially be significant to the VIE. As a result, the Company determined that nine
(9) entities were VIEs and subject to consolidation.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
2.
|
Summary
of Significant Accounting Policies (continued)
|
Concentration
of Credit Risk
The
Company grants credit in the normal course of business to its customers. The Company periodically performs credit analysis and
monitors the financial condition of its customers to reduce credit risk.
The
Company monitors its positions with, and the credit quality of, the financial institutions with which it invests. The Company,
at times, maintains balances in various operating accounts in excess of federally insured limits.
One
customer in the nutraceutical and cosmetic additives division accounted for 15% and 73% of consolidated sales for the years ended
December 31, 2016 and 2015, respectively. This customer accounted for 11% and 43% of accounts receivable at December 31, 2016
and December 31, 2015, respectively.
A
second customer in the nutraceutical and cosmetic additives division accounted for 2% and 12% of consolidated sales for years
ended December 31, 2016 and 2015, respectively. This customer accounted for 8% and 24% of accounts receivable at December 31,
2016 and December 31, 2015, respectively.
In the finished cosmetic products division,
two credit card processors accounted for 34.9% and 31.6% of accounts receivable at December 31, 2016. There were no significant
concentrations of accounts receivable in the finished cosmetic products division at December 31, 2015
3.
|
Furnishings
and Equipment
|
Furnishings
and equipment consisted of the following:
|
|
|
December 31
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Furnishings and equipment, at cost
|
|
$
|
679,291
|
|
|
$
|
679,291
|
|
|
Accumulated depreciation
|
|
|
679,291
|
|
|
|
679,291
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Depreciation
expense amounted to $0 and $43,748 for years ended December 31, 2016 and 2015, respectively.
4.
|
Investment
in Adiuvo Investment S.A.
|
In December 2013, the Company entered into a memorandum
of understanding (MOU) with Adiuvo Investment S.A. (AI), an investment company located in Poland, whereby AI paid the Company
$100,000 for the option, which expired in September 2014, to purchase up to 10% of the outstanding stock in the Company at $0.25
per share. In January 2014, the Company invested $100,000 in AI in exchange for a minority interest of less than 1% in AI, and
an option to acquire additional shares of AI up to an aggregate consideration of $1,500,000. Further, AI granted the Company the
right to participate in any subsequent public offerings of AI and the option to buy up to 10% of AI. During 2015 AI shares commenced
trading on the Warsaw exchange in Poland, and the Company sold its entire investment, receiving $127,261, net of transaction costs.
Due to the investment’s limited liquidity and uncertain valuation prior to its sale, the Company accounted for its interest
in AI at no value. The proceeds of the Company’s sale of AI stock, $127,261, are recorded as gain on sale of Adiuvo Investment
S.A. stock in the accompanying statement of operations for the year ended December 31, 2015.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
Notes
payable are due to officers, directors, and shareholders and a commercial lender and are summarized as follows:
|
|
|
Officers, Directors, and Shareholders
|
|
|
Commercial Lenders
|
|
|
Total
|
|
|
Balance at December 31, 2014
|
|
$
|
27,200
|
|
|
$
|
-
|
|
|
$
|
27,200
|
|
|
Borrowing
|
|
|
105,000
|
|
|
|
200,000
|
|
|
|
305,000
|
|
|
Repayment
|
|
|
(47,000
|
)
|
|
|
(100,000
|
)
|
|
|
(147,000
|
)
|
|
Conversion to common stock
|
|
|
(85,200
|
)
|
|
|
-
|
|
|
|
(85,200
|
)
|
|
Balance at December 31, 2015
|
|
$
|
-
|
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing
|
|
$
|
300,000
|
|
|
$
|
-
|
|
|
$
|
300,000
|
|
|
Repayment
|
|
|
(68,600
|
)
|
|
|
(100,000
|
)
|
|
|
(168,600
|
)
|
|
Debt discount
|
|
|
(25,035
|
)
|
|
|
-
|
|
|
|
(25,035
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
206,365
|
|
|
$
|
(100,000
|
)
|
|
$
|
106,365
|
|
The
Company periodically borrows from officers, directors, other related individuals, and from commercial lenders. During 2015 two
shareholders, with notes totaling $85,200, converted the notes to Company stock at $0.17 per share.
In January 2015, the Company borrowed $100,000 from a commercial
lender. The loan required payment of principal and interest in 252 daily payments of $492 each commencing January 12, 2015. In
December 2015, the Company repaid the remaining outstanding principal balance. Interest for the year ended December 31, 2015 amounted
to $25,425.
In November 2015, the Company borrowed $100,000 from a
commercial lender. The loan incurred interest at 11% and with a maturity date of November 1, 2016. In October 2016, the Company
repaid the entire principal balance. Interest expense related to this loan for the years ended December 31, 2016 and 2015 amounted
to $9,479 and $1,543, respectively.
In the third quarter of 2016 the Company
commenced an offering pursuant to which it offered 11% subordinated promissory notes in fifty thousand ($50,000) dollar increments
combined with 62,500 shares of the Company’s Common Stock for a maximum offering amount of $200,000 (the “Offering”).
In August and September 2016, the Company sold promissory notes totaling $150,000 to three unrelated individuals. Two of the promissory
notes totaling $100,000 are payable in February 2017 and one promissory note for $50,000 is payable in March 2017. In October
2016, the Company sold promissory notes totaling $50,000 to two unrelated individuals. These promissory notes are payable in October
2017. In connection with these promissory notes sold, pursuant to the Offering, the Company issued 250,000 shares of common stock
valued at $58,750 which was recorded as a debt discount and will be amortized over the term of these notes. Amortization of the
debt discounts for the year ended December 31, 2016 was $33,715. During 2016, the Company repaid $68,600 of the principle balance;
and as a result, the outstanding balances of these notes as of December 31, 2016, were $131,400. The balance of debt discount
related to the subordinated promissory notes is $25,035 at December 31, 2016. Interest expense related to these notes for the
year ended December 31, 2016 amounted to $5,416.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
5.
|
Notes
Payable (continued)
|
In December 2016, the Company borrowed $100,000 from an
officer and issued a convertible promissory note with a maturity date of February 28, 2017. The loan incurs no interest. This note
is convertible if not repaid by the maturity date at a conversion price of $0.23 per Unit. Each Unit shall consist of one share
of the Company’s common stock and one three-year common-stock warrant to purchase one-half of one share of the Company’s
common stock with an exercise price of $0.40 per share.
Interest expense related to loans from officers, directors
and other related individuals amounted to $5,416 and $10,508 for the years ended December 31, 2016 and 2015, respectively.
Total interest expense on notes payable, inclusive of
amortization of debt discount of $39,131 and $0, amounted to $48,611 and $37,476 for the years ended December 31, 2016 and 2015,
respectively.
The Company incurred a loss for the year ended December
31, 2016 and accordingly, no provision for federal income tax has been made in the accompanying financial statements. At December
31, 2016, the Company had available net operating loss carryforwards of approximately $3,953,000, expiring during various years
through 2036.
A
summary of the deferred tax asset using an approximate 34% tax rate is as follows:
|
|
|
December
31
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Net operating
loss
|
|
$
|
1,344,000
|
|
|
$
|
930,000
|
|
|
Accounts receivable reserves
|
|
|
30,000
|
|
|
|
-
|
|
|
Inventory reserves
|
|
|
7,000
|
|
|
|
-
|
|
|
Stock compensation
|
|
|
200,000
|
|
|
|
-
|
|
|
Net deferred tax asset
|
|
|
1,581,000
|
|
|
|
-
|
|
|
Valuation allowance
|
|
|
(1,581,000
|
)
|
|
|
(930,000
|
)
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
The net operating loss carryforwards could be subject to limitation
in any given year in the event of a change in ownership as defined by IRC Section 382.
The
deferred tax benefit included in the 2015 statement of operations represents the change in the deferred tax liability at each
balance sheet date.
The
difference between the statutory and the effective tax rate is primarily due to a change in valuation allowance on deferred taxes,
as the Company has fully reserved the deferred tax asset resulting from available net operating loss carryforwards.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
In
May 2015, the Company purchased and retired 120,000 shares of outstanding Company common stock from an investor for $10,800.
In
July 2015, the Company granted 300,000 options valued at $7,500 to a shareholder in conjunction with the issuance of a $75,000
note payable. The options are fully vested and expire in three years. In December 2015, the Company satisfied the $75,000 note
payable through the issuance of 441,177 shares of Company common stock.
In
December 2015, the Company satisfied $10,200 of notes payable to a director through the issuance of 60,000 shares of Company common
stock. The Company issued 40,800 options valued at $1,000 to the director in conjunction with this transaction. The options are
fully vested and expire in three years.
In
December 2015, the Company satisfied $84,868 of royalties payable to the Company’s President through the issuance of 499,225
shares of Company common stock (see note 8). In conjunction with this transaction, the Company issued 339,473 options valued at
$13,000 to the President of the Company at an exercise price of $0.10 per share. The options are fully vested and expire in 3
years.
On
April 1, 2016, the Company entered into two agreements with two consultants to provide services over a nine- month period in exchange
for 2,300,000 shares of common stock. The Company calculated a fair value of $690,000 based on the market price of the shares
on the date of the agreements. During the third quarter of 2016, the Company and the consultants renegotiated the agreements by
extending the service requirement to December 31, 2017. For the year ended December 31, 2016, the Company has recognized expense
of $383,333 in connection with these agreements.
On
September 1, 2016, the Company issued 200,000 shares of common stock for $46,000. In connection with this issuance the Company
issued 100,000 warrants with an exercise price of $0.50 per share. These warrants are fully vested and expire in two years.
In
August 2016, the Company issued 125,000 shares of common stock pursuant to sale of two promissory notes in the Offering.
In
September 2016, the Company issued 62,500 shares of common stock pursuant to the sale of one promissory note in the Offering.
In
October 2016, the Company issued 62,500 shares of common stock pursuant to the sale of two promissory notes in the Offering.
In
November 2016, the Company issued 434,782 shares of common stock pursuant to a conversion of an equity contribution into Immudyne
PR by the noncontrolling interest. In connection with this issuance the Company issued 217,391 warrants with an exercise price
of $0.40 per share. These warrants are fully vested and expire in two years.
In
December 2016, the Company received proceeds of $30,000 from exercises of options at $0.10 per share. The Company issued 300,000
shares of common stock pursuant to these exercises.
On
December 23, 2016, the Company issued 75,000 shares of common stock for $17,250. In connection with this issuance the Company
issued 37,500 warrants with an exercise price of $0.50 per share. These warrants are fully vested and expire in two years.
During
2016, the Company purchased 325,000 shares of outstanding Company common stock through an exchange for a price per share of $0.23
to $0.29. As of the December 31, 2016, these shares being held by the Company valued at cost is $87,053 and are included in treasury
stock in the consolidated balance sheet.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
7.
|
Stockholders’
Equity (continued)
|
Additional Paid-In Capital
Noncontrolling Interest
On April 1, 2016, the Company increased its ownership
in Immudyne PR from to 78.16667% decreasing the minority interest from 66.7% to 21.83% resulting in a charge to noncontrolling
interest and additional paid-in-capital of $91,612.
In 2016, the net change in loans, contributions
and distributions by other members of Immudyne PR resulted an increase in noncontrolling interests of $119,894.
For the years ended December 31, 2016 and 2015,
the net income (loss) of Immudyne PR attributed the Company amounted to $(115,749) and $(97,240), respectively.
Service-Based Stock Options
In
October 2015 the Company issued 110,000 service-based options valued at $2,800 to two consultants at exercise prices of $0.20
per share. The options are fully vested and expire in 10 years.
In
November 2015 the Company cancelled 100,000 shares of company common stock and 200,000 fully vested service-based options issued
to two consultants.
In
November 2015 the Company issued 500,000 shares of common stock valued at $65,000 to a consultant.
Also
in 2015, the Company extended the expiration date of 500,000 options held by a director one year from 2015 to 2016 and 1,500,000
warrants held by the Company’s President two years from 2015 to 2017. The fair value of these modifications amounted to
$55,000.
In
May 2016, the Company issued 175,000 service-based options valued at $40,829 to two consultants at exercise prices of $0.20 per
share. The options are fully vested and expire in 10 years.
In
July 2016, the Company issued 50,000 service-based options valued at $12,397 to a consultant with an exercise price of $0.20 per
share. The options are fully vested and expire in 10 years.
In November 2016, the Company issued 50,000 service-based
options valued at $9,980 to a consultant with an exercise price of $0.50 per share. The options are fully vested and expire in
2 years.
Accordingly, stock based compensation for the years ended
December 31, 2016 and 2015 included $63,206 and $22,300, respectively, related to such service-based stock options.
A
Summary of the outstanding service-based options are as follows:
|
|
|
Number of
Options
|
|
|
Balance at December 31, 2014
|
|
|
10,435,000
|
|
|
Cancelled
|
|
|
(200,000
|
)
|
|
Issued
|
|
|
790,273
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
11,025,273
|
|
|
Exercised
|
|
|
300,000
|
|
|
Expired
|
|
|
50,000
|
|
|
Cancelled
|
|
|
(250,000
|
)
|
|
Issued
|
|
|
275,000
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
10,700,273
|
|
All outstanding options are exercisable and
have a cashless exercise provision, and certain options provide for accelerated vesting provisions and modifications, as defined,
if the Company is sold or acquired. The intrinsic value of options outstanding and exercisable at December 31, 2016 and 2015 amounted
to $704,794 and $33,605, respectively. The intrinsic value of options exercised during the year ending December 31, 2016 was $54,000.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
7.
|
Stockholders’
Equity (continued)
|
Service-Based
Stock Options (continued)
The
significant assumptions used to determine the fair values of options issued, using a Black-Scholes option-pricing model are as
follows:
|
Significant assumptions:
|
|
|
|
|
Risk-free interest rate at grant date
|
|
|
0.71% - 1.88
|
%
|
|
Expected stock price volatility
|
|
|
217.4% - 248.4
|
%
|
|
Expected dividend payout
|
|
|
—
|
|
|
Expected option life-years
|
|
|
2 to 3
|
years
|
|
Weighted average grant date fair value
|
|
$
|
0.22
|
|
|
Forfeiture rate
|
|
|
0
|
%
|
The
following is a summary of outstanding service-based options at December 31, 2016:
|
Exercise Price
|
|
Number of
Options
|
|
|
Weighted Average Remaining Contractual Life
|
|
|
|
|
|
|
|
|
|
|
$0.10
|
|
|
1,380,273
|
|
|
|
1 year
|
|
|
$0.20 - $0.25
|
|
|
8,120,000
|
|
|
|
5 years
|
|
|
$0.40 - $0.50
|
|
|
1,200,000
|
|
|
|
5 years
|
|
|
Total
|
|
|
10,700,273
|
|
|
|
|
|
Performance-Based
Stock Options
The
Company had granted performance-based options to purchase 4,400,000 shares of common stock at exercise prices of $0.40 to $0.80.
The options expire at various dates between 2021 and 2026 and are exercisable upon the Company achieving annual sales revenue
of $5,000,000 and $10,000,000. The fair value of these performance-based options aggregated $169,035 to be expensed over the implicit
service period commencing once management believes the performance criteria will be met.
In October 2016, the Company cancelled 287,500 of these service-based options valued at $17,999 to two
consultants. The fair value of these performance-based options as of year ended December 31, 2016 aggregated $151,036.
The performance criteria for options
exercisable upon the Company achieving annual sales revenue of $5,000,000, with a fair value amounting to $120,867, was met during
the year ended December 31, 2016. Accordingly, stock based compensation expense for the year ended December 31, 2016 includes
$120,867 related to such options. At December 31, 2016, the unearned compensation for all the performance based options is $30,169.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
7.
|
Stockholders’
Equity (continued)
|
Warrants
The
following is a summary of outstanding and exercisable warrants:
|
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Year of
Expiration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
3,772,720
|
|
|
|
0.29
|
|
|
|
2015 - 2016
|
|
|
Expired
|
|
|
(2,022,720
|
)
|
|
|
0.40
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
1,750,000
|
|
|
|
0.16
|
|
|
|
2016 - 2017
|
|
|
Issued
|
|
|
454,891
|
|
|
|
0.42
|
|
|
|
2018 - 2019
|
|
|
Expired
|
|
|
(250,000
|
)
|
|
|
0.40
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
1,954,981
|
|
|
|
0.19
|
|
|
|
2017 - 2019
|
|
In
September 2016, the Company issued 100,000 warrants with an exercise price of $0.50 per share, in relation to a sale of common
stock. These warrants are fully vested and expire in two years.
In
September 2016, the Company issued 100,000 warrants with exercise prices between $0.20 and $0.50 per share, for consulting services.
These warrants are fully vested and expire in three years. The fair value of these warrants are $20,585 and is included in compensation
and related expenses in the accompanying statement of operations.
In
December 2016, the Company issued 37,500 warrants with an exercise price of $0.50 per share, in relation to a sale of common stock.
These warrants are fully vested and expire in two years.
In
December 2016, the Company issued 217,391 warrants with an exercise price of $0.40 per share, in relation to an issuance of common
stock. These warrants are fully vested and expire in two years.
Warrants outstanding and exercisable amounted to 1,954,891
and 1,750,000 at December 31, 2016 and 2015, respectively. The weighted average exercise price of warrants outstanding at December
31, 2016 is $0.19. The warrants expire at various time between December 2017 and September 2019.
The
fair value of options and warrants granted (or extended) during the years ended December 31, 2016 and 2015, was estimated on the
date of grant (or extension) using the Black-Scholes option-pricing model with the following weighted-average assumptions:
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Expected
volatility
|
|
|
203
|
%
|
|
|
50
|
%
|
|
Risk free
interest rate
|
|
|
.88
|
%
|
|
|
2
|
%
|
|
Expected
dividend yield
|
|
|
-
|
|
|
|
-
|
|
|
Expected
option term (in years)
|
|
|
2
- 3
|
|
|
|
1
- 5
|
|
|
Weighted average grant date
fair value
|
|
$
|
0.20
|
|
|
$
|
0.03
|
|
Under ASC 815-40-05, Accounting for Derivative Financial Instruments
Indexed to and Potentially Settled in a Company’s Own Stock, in the event the Company does not have a sufficient number
of authorized and unissued shares of common stock to satisfy obligations for stock options, warrants and other instruments potentially
convertible into common stock, the fair value of these instruments should be reported as a liability. Pursuant to the outstanding
option, warrant and convertible debt agreements, there is currently no effective registration statement covering the shares of
common stock underlying these agreements, which are currently subject to a cashless exercise whereby the holders, at their option,
may surrender their options and warrants to the company in exchange for shares of common stock. The number of shares of common
stock into which an option or a warrant would be exchangeable in such a cashless exercise depends on both the exercise price of
the options or warrant and the market price of the common stock, each at or near the time of exercise. Because both of these factors
are variable, it is possible that we could have insufficient authorized shares to satisfy a cashless exercise. In this scenario,
if we were unable to obtain shareholder approval to increase the number of authorized shares, we could be obligated to settle
such a cashless exercise with cash rather than by issuing shares of common stock. Further, ASC 815-40-05 requires that we record
the potential settlement obligation at each reporting date using the current estimated fair value of these contracts s, with any
changes in fair value being recorded through our statement of operations. We will continue to report the potential settlement
obligation as a liability until such time as these contracts are exercised or expire or we are otherwise able to modify the warrant
agreement to remove the provisions which require this treatment.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
7.
|
Stockholders’
Equity (continued)
|
Stock Based Compensation
The total stock based compensation expense
related Service-Based Stock Options, Performance-Based Stock Options and Warrants issued for service amounted to $587,991 and
$142,300 for the years ended December 31, 2016 and 2015, respectively. Such amounts are included in compensation and related expenses
($587,991 in 2016 and $133,800 in 2015) and interest expense ($8,500 in 2015).
The
Company was subject to a royalty agreement based upon sales of certain skin care products. The agreement required the Company
to pay a royalty based upon 8% of such sales, up to $227,175. During the year ended December 31, 2015 the Company’s sales
reached the maximum amount under which the Company was required to pay a royalty under this agreement. Royalty expense amounted
to $-0- and $20,157 for the years ended December 31, 2016 and 2015, respectively. During December 2015, the Company’s President
who had a 60% interest in the royalties, converted royalties payable under the agreement in the amount of $84,868 to 499,225 shares
of Company stock at $0.17 cents per share.
Included
in accounts payable and accrued expenses at December 31, 2016 and 2015 was $56,579 in regards to this agreement.
9.
|
Commitments
and Contingencies
|
Leases
The Company leases a plant in Kentucky
under an operating lease which expired on May 31, 2016. Management is currently discussing renewal lease options for the
Kentucky plant and is operating on a month-to-month lease arrangement until a final agreement has been accepted. Monthly base
rental payments are approximately $9,000. Our principal executive offices are in office space provided to us by our
President, Mr. McLaughlin at the rate of $2,000 per month, which includes rents, utilities and other office related
expenditures. This arrangement commenced as of January 1, 2016. In addition, Immudyne PR utilizes office space in Puerto Rico
which is subleased from Mr. Schreiber (President of Immudyne PR)and incurs expense of approximately $4,000 a month for this
office space. Rent expense for the years ended December 31, 2016 and 2015, was $139,030 and $65,968, respectively.
Employment
and Consulting Agreements
The
Company has entered into various agreements with officers, directors, employees and consultants that expire in one to five years.
The agreements provide for annual compensation of up to $145,000 and the issuance of stock options, at exercise prices of $0.40
and $0.80, to purchase 4,400,000 shares of common stock issuable upon the Company’s revenue exceeding $5,000,000 and $10,000,000,
as defined. In addition, the agreements provide for bonus compensation to these individuals aggregating up to 15% (with no individual
having more than 5%) of the Company’s pretax income.
Restricted
Stock and Options
The
Company has entered into two agreements on April 1, 2016 with two consultants of Immudyne PR for business development, marketing
and sales related services (the “Consultant Agreements”). The consultants are treated as employees for accounting
purposes. Upon signing, each consultant was issued 1,000,000 restricted shares of Immudyne, Inc. common stock. In addition, each
consultant shall receive an additional 150,000 restricted shares of Immudyne, Inc. common stock for each $500,000 distributed
by Immudyne PR to the Company. For each consultant, the amount of shares to be issued by the Company to the consultants shall be
capped at 1,500,000 restricted shares when Immudyne PR has transferred $5,000,000 to the Company, for a combined capped total
of 3,000,000 restricted shares. For the year ended December 31, 2016, 2,300,000 restricted shares of common stock have been issued
related to these agreements. The Company valued the shares at their grant date for a value of $0.30 per share for a total of $690,000
to be expensed over the estimated service period ending December 31, 2017.
In
addition, the Consulting Agreements provided that each consultant shall receive a bonus of an additional 750,000 restricted shares
of Immudyne, Inc. common stock, plus an option to buy 1,000,000 shares of Immudyne, Inc. common stock at $0.20/share (including
a cashless exercise feature) when Immudyne PR has transferred to the Company at each of the following three (3) thresholds: $1,250,000,
$2,000,000 and $3,000,000 for a total of 2,250,000 of restricted shares of Immudyne, Inc. common stock and options to purchase
up to 3,000,000 shares of Immudyne, Inc. common stock at $0.20/share. As of December 31, 2016, no bonus shares have been issued
and no options have been granted under this agreement.
Immudyne,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2016
9.
|
Commitments
and Contingencies (continued)
|
Legal
Matters
In
the normal course of business operations, the Company may become involved in various legal matters. At December 31, 2016, the Company’s
management does not believe that there are any potential legal matters that could have an adverse effect on the Company’s
financial position.
10.
|
Related
Party Transactions
|
For the year ended December 31, 2016 one of the Company’s
directors, acting as an advisor for the Company, provided legal and business advisory services and was compensated $16,145. During
2015 there was no compensation to this director. In addition, for the year ended December 31, 2016 the Company’s President
received $24,000 for reimbursement of home office expenditures, including rent, utilities and other related expenses for two offices.
During 2015 the Company’s president was not reimbursed for home office expenditures.
Immudyne, Inc. employs the wife of the
President of the Company Immudyne, Inc. and incurs $3,000 per month as an accountant, plus an annual incentive bonus award equal
to 0.5% of the Company’s pre-tax earnings.
Immudyne PR utilizes BV Global Fulfillment, owned by the father of Mr. Schreiber, and
incurred $19,800 for the year ended December 31, 2016 for these services.
Taggart International Trust (“Taggart”),
a shareholder; provides credit card processing services through one or more merchant banks. Taggart did not receive any compensation
for these services.
JLS Ventures LLC, owned by a shareholder, provides
credit card processing services through one or more merchant banks. Taggart did not receive any compensation for these services.
JSDC, Inc., owned by a shareholder, provides
credit card processing services through one or more merchant banks. Taggart did not receive any compensation for these services.
Immudyne PR utilizes office space in Puerto Rico which
is subleased from Mr. Schreiber (President of Immudyne PR) incurs expense of approximately $4,000 a month for this office space.
The
Company has evaluated subsequent events through the date these financial statements were issued.
In
January 2017, the Company issued 1,183,490 shares of common stock pursuant to a conversion of an equity contribution into Immudyne
PR by the noncontrolling interest. In connection with this issuance the Company issued 591,745 warrants with an exercise price
of $0.40 per share. These warrants are fully vested and expire in two years.
In January 2017, the Company borrowed $200,000 and issued
a promissory note with a 5% original issue discount for a total principal amount of $210,000. The loan incurs 11% interest per
annum and matures in various tranches from February 2017 through April 2017. In addition, the Company issued 217,391 shares of
common stock related to this note. In February 2017, the Company repaid $70,000 of the principle balance of this note. In March,
pursuant to an offering described below, the Company converted the remaining $140,000 of the principle balance of the this note
in exchange for 559,179 shares of common stock and 304,348 warrants.
On March 27, 2017, the Company commenced an offering to
sell up to 4,000,000 shares of common stock at a price of $0.23 per share and warrants to purchase up to 2,000,000 shares of common
stock excisable any time prior to the secondary anniversary of the issuance. The warrants are paired with the stock on the basis
of one warrant for every two shares of stock purchased.
At the time of this filing, the Company received subscriptions
in the amount of 2,673,656 shares and issued 1,336,828 warrants and proceeds in the amount of $614,940. The Company also converted
two additional notes with the total principal balance of $50,000 in exchange for 196,000 shares of common stock and 98,000 warrants.
.
On April 24, 2017, the Company, issued 217,390 shares of
common stock pursuant to a stock subscription agreement and the Company issued 108,696 warrants with an exercise price of $0.40
per share for the stated consideration and satisfaction of obligation to pay $50,000 on the 180-day anniversary of the execution
of the Sole and Exclusive License, Royalty, and Advisory Agreement dated September 1, 2016 with Pilaris Laboratories, LLC
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