Item
1. Financial Statements.
Advanced
Medical Isotope Corporation
Condensed
Balance Sheets
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
22,110
|
|
|
$
|
27,889
|
|
Prepaid expenses
|
|
|
6,767
|
|
|
|
11,990
|
|
Total current assets
|
|
|
28,877
|
|
|
|
39,879
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net of accumulated depreciation
|
|
|
-
|
|
|
|
1,473
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
669
|
|
|
|
644
|
|
Total other assets
|
|
|
669
|
|
|
|
644
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
29,546
|
|
|
$
|
41,996
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
794,627
|
|
|
$
|
1,137,086
|
|
Related party accounts payable
|
|
|
71,297
|
|
|
|
109,718
|
|
Accrued interest payable
|
|
|
319,372
|
|
|
|
114,755
|
|
Payroll liabilities payable
|
|
|
44,441
|
|
|
|
499,502
|
|
Convertible notes payable, net
|
|
|
1,959,276
|
|
|
|
544,508
|
|
Derivative liability
|
|
|
-
|
|
|
|
324,532
|
|
Related party promissory note
|
|
|
383,771
|
|
|
|
332,195
|
|
Total current liabilities
|
|
|
3,572,784
|
|
|
|
3,062,296
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,572,784
|
|
|
|
3,062,296
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value, 20,000,000 shares authorized; 3,583,860 and 3,773,592 shares issued and outstanding, respectively
|
|
|
3,584
|
|
|
|
3,774
|
|
Paid in capital, preferred stock
|
|
|
12,907,354
|
|
|
|
14,140,797
|
|
Common stock, $.001 par value; 2,000,000,000 shares authorized; 53,468,563 and 31,743,797 shares issued and outstanding, respectively
|
|
|
53,469
|
|
|
|
31,744
|
|
Paid in capital, common stock
|
|
|
45,155,762
|
|
|
|
40,672,825
|
|
Accumulated deficit
|
|
|
(61,663,407
|
)
|
|
|
(57,869,440
|
)
|
Total stockholders’ equity (deficit)
|
|
|
(3,543,238
|
)
|
|
|
(3,020,300
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity (deficit)
|
|
$
|
29,546
|
|
|
$
|
41,996
|
|
The
accompanying notes are an integral part of these condensed financial statements.
Advanced
Medical Isotope Corporation
Condensed
Statements of Operations
(unaudited)
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
4,054
|
|
|
$
|
4,054
|
|
|
$
|
8,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing expenses
|
|
|
52,620
|
|
|
|
65,995
|
|
|
|
93,870
|
|
|
|
213,539
|
|
Depreciation and amortization
|
|
|
-
|
|
|
|
738
|
|
|
|
1,473
|
|
|
|
2,212
|
|
Professional fees
|
|
|
211,954
|
|
|
|
265,497
|
|
|
|
642,101
|
|
|
|
1,968,084
|
|
Reserved stock units granted
|
|
|
169,650
|
|
|
|
-
|
|
|
|
169,650
|
|
|
|
-
|
|
Stock options granted
|
|
|
24,283
|
|
|
|
27,427
|
|
|
|
79,582
|
|
|
|
612,343
|
|
Payroll expenses
|
|
|
436,319
|
|
|
|
160,500
|
|
|
|
722,594
|
|
|
|
492,077
|
|
Loan fees
|
|
|
-
|
|
|
|
8,664
|
|
|
|
-
|
|
|
|
603,861
|
|
General and administrative expenses
|
|
|
66,973
|
|
|
|
137,593
|
|
|
|
240,469
|
|
|
|
683,788
|
|
Total operating expenses
|
|
|
961,799
|
|
|
|
666,414
|
|
|
|
1,949,739
|
|
|
|
4,575,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(961,799
|
)
|
|
|
(666,414
|
)
|
|
|
(1,945,685
|
)
|
|
|
(4,567,796
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(527,188
|
)
|
|
|
(85,830
|
)
|
|
|
(1,836,279
|
)
|
|
|
(535,563
|
)
|
Net gain on sale of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
2,800
|
|
|
|
-
|
|
Net gain (loss) on settlement of debt
|
|
|
-
|
|
|
|
(111,328
|
)
|
|
|
-
|
|
|
|
(1,877,959
|
)
|
Loss on sale of stock
|
|
|
-
|
|
|
|
(54,561
|
)
|
|
|
-
|
|
|
|
(54,561
|
)
|
Net gain (loss) on debt extinguishment
|
|
|
(369,428
|
)
|
|
|
-
|
|
|
|
(423,291
|
)
|
|
|
-
|
|
Gain (loss) on derivative liability
|
|
|
9
|
|
|
|
762,151
|
|
|
|
408,488
|
|
|
|
(3,108,889
|
)
|
Non-operating income (expense), net
|
|
|
(896,607
|
)
|
|
|
510,432
|
|
|
|
(1,848,282
|
)
|
|
|
(5,576,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Income Taxes
|
|
|
(1,858,406
|
)
|
|
|
(155,982
|
)
|
|
|
(3,793,967
|
)
|
|
|
(10,144,768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Provision
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(1,858,406
|
)
|
|
$
|
(155,982
|
)
|
|
$
|
(3,793,967
|
)
|
|
$
|
(10,144,168
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Income (Loss) per Common Share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
52,471,896
|
|
|
|
19,999,985
|
|
|
|
45,777,689
|
|
|
|
19,987,347
|
|
The
accompanying notes are an integral part of these condensed financial statements.
Advanced
Medical Isotope Corporation
Condensed
Statements of Cash Flow
(Unaudited)
|
|
Nine months ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(3,793,967
|
)
|
|
$
|
(10,144,768
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation of fixed assets
|
|
|
1,473
|
|
|
|
2,213
|
|
Amortization of licenses and intangible assets
|
|
|
-
|
|
|
|
-
|
|
Amortization of convertible debt discount
|
|
|
1,473,205
|
|
|
|
379,290
|
|
Gain on sale of assets
|
|
|
(2,800
|
)
|
|
|
-
|
|
Preferred stock issued for loan fees
|
|
|
-
|
|
|
|
603,861
|
|
Common stock issued for services
|
|
|
250,393
|
|
|
|
-
|
|
Common stock issued for wages
|
|
|
365,989
|
|
|
|
-
|
|
Preferred stock for services
|
|
|
-
|
|
|
|
357,403
|
|
Preferred stock for wages
|
|
|
-
|
|
|
|
64,982
|
|
Restricted stock units granted
|
|
|
169,650
|
|
|
|
-
|
|
Stock options for services
|
|
|
79,582
|
|
|
|
782,226
|
|
Warrants issued for services
|
|
|
-
|
|
|
|
1,069,353
|
|
(Gain) loss on derivative liability
|
|
|
(408,488
|
)
|
|
|
3,108,889
|
|
(Gain) loss on settlement of debt
|
|
|
423,291
|
|
|
|
1,877,959
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
5,198
|
|
|
|
(4,240
|
)
|
Accounts payable
|
|
|
22,226
|
|
|
|
36,964
|
|
Related party accounts payable
|
|
|
(4,675
|
)
|
|
|
(11,725
|
)
|
Payroll liabilities
|
|
|
(67,310
|
)
|
|
|
144,503
|
|
Accrued interest
|
|
|
361,951
|
|
|
|
87,265
|
|
Net cash used by operating activities
|
|
|
(1,124,282
|
)
|
|
|
1,645,825
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Sale of fixed assets
|
|
|
2,800
|
|
|
|
-
|
|
Net cash from vesting activities
|
|
|
2,800
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payments made for loan fees
|
|
|
(101,631
|
)
|
|
|
-
|
|
Proceeds from shareholder advances
|
|
|
137,000
|
|
|
|
-
|
|
Proceeds from exercise of warrants
|
|
|
-
|
|
|
|
250
|
|
Payments on convertible debt
|
|
|
-
|
|
|
|
(10,000
|
)
|
Proceeds from convertible debt
|
|
|
1,080,334
|
|
|
|
1,476,558
|
|
Net cash provided by financing activities
|
|
|
1,115,703
|
|
|
|
1,466,808
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(5,779
|
)
|
|
|
(179,017
|
)
|
Cash, beginning of period
|
|
|
27,889
|
|
|
|
179,032
|
|
|
|
|
|
|
|
|
|
|
CASH, END OF PERIOD
|
|
$
|
22,110
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these condensed financial statements.
Advanced
Medical Isotope Corporation
Notes
to Condensed Financial Statements
(Unaudited)
NOTE
1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The
accompanying condensed financial statements of Advanced Medical Isotope Corporation (the “
Company
”) have been
prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and
disclosures required by accounting principles generally accepted in the United States have been condensed or omitted pursuant
to such rules and regulations. These condensed financial statements reflect all adjustments that, in the opinion of management,
are necessary to present fairly the results of operations of the Company for the period presented. The results of operations for
the nine months ended September 30, 2017, are not necessarily indicative of the results that may be expected for any future period
or the fiscal year ending December 31, 2017 and should be read in conjunction with the Company’s Annual Report on Form 10-K
for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 9, 2017.
In
April of 2017, the Company filed a Certificate of Merger with the Delaware Division of Corporations in order to merge the Company’s
wholly-owned subsidiary, IsoPet Solutions Corporation, with and into the Company. The Company therefore no longer prepares Consolidated
Financial Statements.
Use
of Estimates
The
preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Fair
Value of Financial Instruments
Fair
value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet,
where it is practicable to estimate that value. As of September 30, 2017 and December 31, 2016, the balances reported for cash,
prepaid expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The Financial Accounting Standards Board (“
FASB
”) issued
Accounting Standards Update (“
ASU
”) Topic 820, “
Fair Value Measurements
,” established a
three-tier fair value hierarchy to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority
to unobservable inputs (level 3 measurements). These tiers include:
Level
1, defined as observable inputs such as quoted prices for identical instruments in active markets;
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not
active; and
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are
unobservable.
The
Company measures certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value
on a recurring basis were calculated using the Black-Scholes pricing model and are as follows at September 30, 2017 and December
31, 2016:
September
30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liability
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
Liabilities Measured at Fair Value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liability
|
|
$
|
324,532
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
324,532
|
|
Total
Liabilities Measured at Fair Value
|
|
$
|
324,532
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
324,532
|
|
Reclassifications
Certain
account balances from prior periods have been reclassified in the current period financial statements so as to conform to current
period classifications.
Recent
Accounting Pronouncements
There
are no recently issued accounting pronouncements that the Company believes are applicable or would have a material impact on the
financial statements of the Company.
NOTE
2: GOING CONCERN
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has
suffered recurring losses and has used significant cash in support of its operating activities and the Company’s cash position
is not sufficient to support the Company’s operations. Historically, the Company has relied upon outside investor funds
to maintain the Company’s operations and develop the Company’s business. The Company anticipates it will continue
to require funding from investors for working capital, as well as business expansion during this fiscal year and it can provide
no assurance that additional investor funds will be available on acceptable terms. These factors, among others, indicate that
there is substantial doubt regarding the Company’s ability to continue as a going concern within one year of the date these
financial statements are issued. In addition, the Company’s ability to continue as a going concern must be considered in
light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive
environment in which it operates.
The
Company anticipates a requirement of $1.5 million over the next twelve months to maintain current operating activities. The Company
may also require up to approximately $4.6 million to retire outstanding debt and past due payables. As of September 30, 2017 the
Company had convertible promissory notes in the aggregate principal amount of $3,188,081 outstanding (the “
Outstanding
Notes
”), of which approximately $45,000 are currently due and payable.
Over
the next 12 to 24 months, the Company believes it will cost approximately $5 million to $10 million to fund: (1) the Food and
Drug Administration (“
FDA
”) approval process and initial deployment of the brachytherapy products and (2) initiate
regulatory approval processes outside of the United States. The continued deployment of the brachytherapy products and a worldwide
regulatory approval effort will require additional resources and personnel. The principal variables in the timing and amount of
spending for the brachytherapy products in the next 12 to 24 months will be the FDA’s classification of the Company’s
brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies, which may
include clinical studies. Thereafter, the principal variables in the amount of the Company’s spending and its financing
requirements are timing of any approvals and the nature of the Company’s arrangements with third parties for manufacturing,
sales, distribution and licensing of those products and the products’ success in the U.S. and elsewhere. The Company intends
to fund its activities through strategic transactions such as licensing and partnership agreements and/or additional capital raises.
As
of September 30, 2017, the Company has $22,110 cash on hand. There are currently commitments to vendors for products and services
purchased, accrued compensation expenses and the Company’s current lease commitments that, in the absence of additional
capital, would result in a liquidation of the Company. The current level of cash is not sufficient to cover the fixed and variable
obligations of the Company.
Assuming
the Company is successful in its development efforts, the Company believes that it will be able to raise additional funds through
strategic agreements or the sale of the Company’s securities to either current stockholders or new investors. However, there
is no guarantee that the Company will be able to raise additional funds or to do so on favorable terms.
The
financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern
is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain
profitability. The Company plans to seek additional funding to maintain its operations through debt and equity financing and to
improve operating performance through a focus on strategic products and increased efficiencies in business processes and improvements
to the cost structure. There is no assurance that the Company will be successful in its efforts to raise additional working capital
or achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
NOTE
3: FIXED ASSETS
Fixed
assets consist of the following at September 30, 2017 and December 31, 2016:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
Production equipment
|
|
$
|
15,182
|
|
|
$
|
1,938,532
|
|
Office equipment
|
|
|
-
|
|
|
|
32,769
|
|
|
|
|
15,182
|
|
|
|
1,971,301
|
|
Less accumulated depreciation
|
|
|
(15,182
|
)
|
|
|
(1,969,828
|
)
|
|
|
$
|
-
|
|
|
$
|
1,473
|
|
Depreciation
expense for the above fixed assets for the three months ended September 30, 2017 and 2016, respectively was $0 and $738 and for
the nine months ended September 30, 2017 and 2016, respectively, was $1,473 and $2,212.
NOTE
4: INTANGIBLE ASSETS
Intangible
assets consist of the following at September 30, 2017 and December 31, 2016:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
License Fee
|
|
$
|
-
|
|
|
$
|
112,500
|
|
Less accumulated amortization
|
|
|
-
|
|
|
|
(112,500
|
)
|
|
|
|
|
|
|
|
|
|
Patents and intellectual property
|
|
|
-
|
|
|
|
-
|
|
Intangible assets net of accumulated amortization
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company did not incur any amortization expense during the three and nine months ended September 30, 2017 and 2016.
NOTE
5: RELATED PARTY TRANSACTIONS
Related
Party Convertible Notes Payable
In
March 2017, the Company combined Outstanding Notes owed to a director and major stockholder, along with $51,576 of accrued interest
payable, into one promissory note (the “
Related Party Note
”). The Related Party Note accrues interest at a
rate of 10% and will become due and payable on December 31, 2017. As of September 30, 2017 and December 31, 2016 the balance of
the Related Party Note was $383,771 and $332,195, respectively.
Rent
Expenses
The
Company was renting office space from a significant shareholder and director of the Company on a month-to-month basis with a monthly
payment of $1,500. This rental agreement was terminated as of April 1, 2017.
Rental
expense was $0 and $4,500 for each of the three months ended September 30, 2017 and 2016 and is recorded in general and administrative
expense. Rental expense was $4,500 and $13,500 for the nine months ending September 30, 2017 and 2016, respectively, and is recorded
in general and administrative expense.
NOTE
6: CONVERTIBLE NOTES PAYABLE
As
of September 30, 2017 and December 31, 2016, the Company had the following convertible notes outstanding:
|
|
September
30, 2017
|
|
|
December
31, 2016
|
|
|
|
Principal
(net)
|
|
|
Accrued
Interest
|
|
|
Principal
(net)
|
|
|
Accrued
Interest
|
|
July
and August 2012 $1,060,000 Notes convertible into common stock at $4.60 per share, 12% interest, due December 2013 and January
2014, respectively
|
|
$
|
45,000
|
|
|
$
|
27,861
|
|
|
$
|
95,000
|
|
|
|
50,365
|
|
May
through October 2015 $605,000 Notes convertible into preferred stock at $1 per share, 8-10% interest, due September 30, 2015
|
|
|
-
|
|
|
|
17,341
|
|
|
|
-
|
|
|
|
17,341
|
|
October
through December 2015 $613,000 Notes convertible into preferred stock at $1 per share, 8% interest, due June 30, 2016, net
of debt discount of $0 and $560,913, respectively
|
|
|
-
|
|
|
|
5,953
|
|
|
|
-
|
|
|
|
5,953
|
|
January
through March 2016 $345,000 Notes convertible into preferred stock at $1 per share, 8% interest, due June 30, 2016
|
|
|
-
|
|
|
|
696
|
|
|
|
-
|
|
|
|
696
|
|
November
2016 $979,162 Notes convertible into common stock at a variable conversion price, 10% interest, due May 2017, net of debt
discounts of $0 and $540,720, respectively
|
|
|
-
|
|
|
|
-
|
|
|
|
438,442
|
|
|
|
12,397
|
|
January
and March 2017 $335,838 Notes convertible into common stock at a variable conversion price, 10% interest, due May 2017, net
of debt discounts of $0 and $0, respectively
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
May
2017 $2,378,155 Notes convertible into common stock after December 15, 2017 at a $0.20 conversion price (subject to adjustment),
7.5% interest, due May 2018, net of debt discounts of $933,417 and $0, respectively
|
|
|
1,444,738
|
|
|
|
178,304
|
|
|
|
-
|
|
|
|
-
|
|
May
2017 $648,039 Notes convertible into common stock after December 15, 2017 at a $0.12 conversion price (subject to adjustment),
7.5% interest, due May 2018, net of debt discounts of $252,412 and $0, respectively
|
|
|
395,627
|
|
|
|
52,831
|
|
|
|
-
|
|
|
|
-
|
|
May
2017 $110,312 Notes convertible after December 31, 2017 into common stock at a $0.13 conversion price (subject to adjustment),
7.5% interest, due May 2018, net of debt discounts of $42,976 and $0, respectively
|
|
|
67,336
|
|
|
|
15,773
|
|
|
|
-
|
|
|
|
-
|
|
Penalties
on notes in default
|
|
|
6,575
|
|
|
|
-
|
|
|
|
11,066
|
|
|
|
-
|
|
Total
Convertible Notes Payable, Net
|
|
$
|
1,959,276
|
|
|
$
|
298,759
|
|
|
$
|
544,508
|
|
|
$
|
86,752
|
|
During
the nine months ending September 30, 2017, the Company received proceeds from the issuance of 10% Convertible Notes (“
Convertible
Notes
”) and 7.5% Original Issue Discount Senior Secured Convertible Debentures (“
Debentures
”) of
$1,080,334 and obtained advances from shareholders of $137,000 that were reclassified into Convertible Notes. The Company also
assigned or exchanged $1,358,750 worth of Convertible Notes and Notes that were outstanding as of December 31, 2016 into Debentures,
while also reclassifying $69,279 worth of accrued interest to convertible note principal. Each of the Company’s Convertible
Notes had a conversion rate that was variable or had adjustment provisions. As a result of recording derivative liabilities at
note inception, the Company increased the debt discount recorded on Convertible Notes by $99,661 during the nine months ending
September 30, 2017.The Company also recorded original issue discounts and loan fees on Convertible Notes and Debentures of $757,696
and $386,758, respectively, which also increased the debt discounts recorded on the Convertible Notes and Debentures.
The
Company recorded $322,381 of conversions on certain outstanding notes, $272,381 of which was voluntarily allowed by the Company
despite the conversion feature of the notes not yet being in effect, and a total gain on settlement of $135,432 representing the
write-off of outstanding note principal and debt discount. The Company also recorded amortization of $1,473,208 on outstanding
note debt discounts. Lastly, the Company paid $101,631 in cash for loan fees and issued 743,699 shares of the Company’s
Series A Convertible Preferred Stock (“
Series A Preferred
”) as loan fees in connection with the issuance of
the Convertible Notes and Debentures. The Company therefore increased its debt discount by $1,116,110, which represented the portion
of the proceeds from the Convertible Notes and Debentures that were allocated to preferred stock.
NOTE
7: COMMON STOCK OPTIONS, WARRANTS, AND RESTRICTED STOCK UNITS
The
Company recognizes in the financial statements compensation related to all stock-based awards, including stock options, warrants,
and restricted stock units (“RSUs”) based on their estimated grant-date fair value. The Company has estimated expected
forfeitures and is recognizing compensation expense only for those awards expected to vest. All compensation is recognized by
the time the award vests.
Common
Stock Options
The
following schedule summarizes the changes in the Company’s stock options:
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Options
Outstanding
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
Exercise
|
|
|
|
Of
|
|
|
Price
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Price
|
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Life
|
|
|
Value
|
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
|
2,402,500
|
|
|
$
|
0.50-15
|
|
|
|
4.05
years
|
|
|
$
|
-
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Options
exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Options
expired
|
|
|
(1,180,000
|
)
|
|
$
|
0.50-1.00
|
|
|
|
-
|
|
|
|
|
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 30, 2017
|
|
|
1,222,500
|
|
|
$
|
0.50-15
|
|
|
|
3.16
years
|
|
|
$
|
-
|
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at September 30, 2017
|
|
|
1,030,829
|
|
|
$
|
0.50-15
|
|
|
|
3.06
years
|
|
|
$
|
-
|
|
|
$
|
1.18
|
|
During
the nine months ended September 30, 2017 the Company recognized $79,582 worth of expense related to the vesting of its previously
issued stock options. As of September 30, 2017, the Company had $69,681 worth of expense yet to be recognized for options not
yet vested.
Common
Stock Warrants
The
following schedule summarizes the changes in the Company’s stock warrants:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Warrants
Outstanding
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
Exercise
|
|
|
|
Of
|
|
|
Price
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Price
|
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Life
|
|
|
Value
|
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
|
3,579,505
|
|
|
$
|
0.10-10
|
|
|
|
0.52
years
|
|
|
$
|
749
|
|
|
$
|
4.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Warrants
exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Warrants
expired/cancelled
|
|
|
(3,274,055
|
)
|
|
$
|
0.10-4.60
|
|
|
|
-
|
|
|
|
|
|
|
$
|
4.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 30, 2017
|
|
|
305,450
|
|
|
$
|
0.40-10
|
|
|
|
1.44
years
|
|
|
$
|
-
|
|
|
$
|
2.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at September 30, 2017
|
|
|
305,450
|
|
|
$
|
0.40-10
|
|
|
|
1.44
years
|
|
|
$
|
-
|
|
|
$
|
2.64
|
|
Restricted
Stock Units
The
following schedule summarizes the changes in the Company’s restricted stock units:
|
|
|
|
|
Weighted
|
|
|
|
|
Number
|
|
|
Average
|
|
|
|
|
Of
|
|
|
Grant
Date
|
|
|
|
|
Shares
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU’s
granted
|
|
|
12,560,000
|
|
|
$
|
0.07
|
|
|
RSU’s
vested
|
|
|
-
|
|
|
$
|
-
|
|
|
RSU’s
forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 30, 2017
|
|
|
12,560,000
|
|
|
$
|
0.07
|
|
|
During
the nine months ended September 30, 2017 the Company recognized $169,650 worth of expense related to the vesting of its RSU’s.
As of September 30, 2017, the Company had $759,790 worth of expense yet to be recognized for RSU’s not yet vested.
NOTE
8: STOCKHOLDERS’ EQUITY
Common
Stock
The
Company has 2,000,000,000 shares of common stock authorized, with a par value of $0.001, and as of September 30, 2017, the Company
has 53,468,563 shares issued and outstanding.
During
the nine months ending September 30, 2017, the Company issued 3,040,239 shares of its common stock valued at $334,048 for the
settlement of debt, 2,220,944 shares of its common stock valued at $250,392 for services, and 13,367,100 shares of its common
stock valued at $3,361,540 for conversions of 1,276,710 shares of Series A Preferred. Additionally, during the nine months ending
September 30, 2017 the Company issued 3,096,483 shares of common stock valued at $309,450 and 343,279 shares of Series A Preferred
valued at $1,011,797 for the reduction of $272,976 of accounts payable, the reduction of $387,751 of accrued payroll, while recording
$294,530 as a gain on extinguishment of debt and $365,990 worth of services.
Preferred
Stock
As
of September 31, 2017 the Company has 20,000,000 shares of Series A Preferred authorized with a par value of $0.001. The Company’s
Board of Directors is authorized to provide for the issuance of shares of preferred stock in one or more series, to establish
the number of shares in each series, and to determine the designations, preferences and rights through a resolution of the Board
of Directors.
Effective
June of 2015, the Board of Directors designated the Series A Preferred as a new series of preferred stock. As of September 30,
2017, the Company has 5,000,000 shares of Series A Preferred authorized, with a par value of $0.001, and has 3,583,860 shares
issued and outstanding. Each Series A Preferred share is convertible into shares of the Company’s common stock. Each holder
of Series A Preferred is entitled to the equivalent of five votes for every conversion share, where the conversion shares are
the number of common stock the Series A Preferred would be convertible into. The holders of the Series A Preferred have a liquidation
preference equal to $5.00 per share.
During
the nine months ending September 30, 2017 the Company issued 743,699 shares of Series A Preferred valued at $1,116,110 as loan
fees in connection with the issuance of the Debentures, and 343,279 shares of Series A Preferred valued at $1,011,797 for accrued
payroll and accounts payable.
NOTE
9: SUPPLEMENTAL CASH FLOW INFORMATION
During
the nine months ending September 30, 2017, the Company had the following non-cash investing and financing activities:
●
|
|
Increased
convertible notes payable by $69,279, increased related party notes payable by $51,576, and decreased accrued interest by
$120,855 for the reclassification of accrued interest to principal.
|
|
|
|
●
|
|
Increased
derivative liabilities for $99,661 to record a debt discount on convertible notes payable.
|
|
|
|
●
|
|
Increased
convertible notes payable and decreased loan from shareholder by $137,000 to roll proceeds from shareholder advances to a
formal convertible note payable.
|
|
|
|
●
|
|
Issued
743,699 shares of Series A Preferred for loan fees that increased the convertible note debt discount by $1,116,110.
|
|
|
|
●
|
|
Issued
13,367,100 shares of common stock in exchange for 1,276,710 shares of Series A Preferred decreasing preferred stock by $3,361,540,
increasing common stock by $13,367, and increasing paid in capital by $3,348,173.
|
|
|
|
●
|
|
Issued
3,096,483 shares of common stock valued at $309,450 and 343,279 shares of Series A Preferred valued at $1,011,797 for the
reduction of $272,976 of accounts payable, the reduction of $387,751 of accrued payroll, while recording $294,530 as a gain
on extinguishment of debt and $365,990 worth of services.
|
|
|
|
●
|
|
Issued
3,040,239 shares of common stock valued at $334,048 for the reduction of $322,381 of convertible notes payable and $36,479
of accrued interest, reducing debt discount by $159,299, and recording $134,487 as a gain on extinguishment of debt.
|
NOTE
10: COMMITMENTS AND CONTINGENCIES
Effective
June 21, 2017, the Company entered into a separation agreement with an individual previously associated with the Company, at times
as a consultant and as an employee at other times. Pursuant to the agreement, the Company agreed to pay regular bi-weekly checks
beginning July 7, 2017 and ending September 15, 2017, for a total of six checks in the aggregate amount of $28,846. This obligation
was fully paid as of September 30, 2017.
NOTE
11: SUBSEQUENT EVENTS
In
October 2017 the Company exchanged 300,000 common stock shares for 30,000 Series A Preferred shares.
In
November 2017 the Company received $150,000 in exchange for a 10% convertible promissory note due April 15, 2018. The Company
issued 100,000 Series A Preferred shares as an origination fee on this note.
The
Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no additional subsequent events
to disclose.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Except
for statements of historical fact, certain information described in this Form 10-Q report contains “forward-looking statements”
that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,”
“should,” “will,” “would” or similar words. The statements that contain these or similar words
should be read carefully because these statements discuss the Company’s future expectations, including its expectations
of its future results of operations or financial position, or state other “forward-looking” information. Advanced
Medical Isotope Corporation believes that it is important to communicate its future expectations to its investors. However, there
may be events in the future that the Company is not able to accurately predict or to control. Further, the Company urges you to
be cautious of the forward-looking statements which are contained in this Form 10-Q report because they involve risks, uncertainties
and other factors affecting its operations, market growth, service, products and licenses. The risk factors in the section captioned
“Risk Factors” in Item 1A of the Company’s previously filed Form 10-K for the year ended December 31, 2016,
filed with the Securities and Exchange Commission on March 9, 2017, as well as other cautionary language in this report on Form
10-Q, describe such risks, uncertainties and events that may cause the Company’s actual results and achievements, whether
expressed or implied, to differ materially from the expectations the Company describes in its forward-looking statements. The
occurrence of any of the events described as risk factors could have a material adverse effect on the Company’s business,
results of operations and financial position.
General
Statement of Business
Advanced
Medical Isotope Corporation (the
“Company,” “AMI”
or
“we”
) was incorporated
under the laws of Delaware on December 23, 1994 as Savage Mountain Sports Corporation (
“SMSC”
). On September
6, 2006, the Company changed its name to Advanced Medical Isotope Corporation. AMI has authorized capital of 2,000,000,000 shares
of common stock, $0.001 par value per share and 20,000,000 shares of preferred stock, $0.001 par value per share. Our common stock
is quoted on the OTC PINK Marketplace under the symbol,
“ADMD”.
Recent
Developments
On
or about May 10, 2017, the Company entered into Securities Purchase Agreements (the “
Purchase Agreement
”) with
certain accredited investors to purchase 7.5% Original issue Discount Senior Secured Convertible Debentures (“
Debentures
”)
in the aggregate principal amount of $1,179,581, including an original issue discount of $235,916 and loan fees of $30,000. The
principal, original issue discount, and loan fees accrue interest at a rate of 7.5% per annum, and will become due and payable
one year from the issuance date. Holders of the Debentures may elect to convert the principal and original issue discount, as
well as any accrued by unpaid interest (the “
Outstanding Balance
”), into that number of shares of the Company’s
common stock equal to the Outstanding Balance, divided by $0.20 (the “
Conversion Price
”).
On
the same date, the Company also entered into Securities Exchange Agreements (the “
Exchange Agreement
”) with
certain holders of outstanding convertible promissory notes to exchange such notes and their accrued interest for Debentures,
resulting in the issuance of Debentures in the aggregate principal amount of $2,229,306 including an original issue discount of
$445,961 and loan fees of $356,758. The Debentures issued pursuant to the Exchange Agreement have terms substantially similar
to those issued pursuant to the Purchase Agreement, expect that certain of the Debentures issued pursuant to Exchange Agreements
have a Conversion Price of $0.13 and $0.12 per share.
The
Company paid loan fees in connection with the issuance of the Debentures, both pursuant to the Purchase Agreements and Exchange
Agreements, of 20% of the principal and original issue discount of the Debentures in shares of its Series A Preferred Stock (“
Series
A Preferre
d”). In addition, the Company granted to each of the holders of the Debentures a continuing security interest
in substantially all of the Company’s assets, pursuant to the terms and conditions of a Security Agreement.
Overview
The
Company is a late stage radiation oncology medical device company engaged in the development of its yttrium-90 based brachytherapy
device, RadioGel™, for the treatment of non-resectable tumors. A prominent team of radiochemists, scientists and engineers,
collaborating with strategic partners, including national laboratories, universities and private corporations, lead the Company’s
development efforts. The Company’s overall vision is to globally empower physicians, medical researchers and patients by
providing them with new isotope technologies that offer safe and effective treatments for cancer.
The
Company’s current focus is on the development of its RadioGel™ device. RadioGel™ is an injectable particle-gel
for brachytherapy radiation treatment of cancerous tumors in people and animals. RadioGel™ is comprised of a hydrogel, or
a substance that is liquid at room temperature and then gels when reaching body temperature after injection into a tumor. In the
gel are small, one micron, yttrium-90 phosphate particles (“
Y-90
”). Once injected, these inert particles are
locked in place inside the tumor by the gel, delivering a very high local radiation dose. The radiation is beta, consisting of
high-speed electrons. These electrons only travel a short distance so the device can deliver high radiation to the tumor with
minimal dose to the surrounding tissue. Optimally, patients can go home immediately following treatment without the risk of radiation
exposure to family members. Since Y-90 has a half-life of 2.7 days, the radioactively drops to 5% of its original value after
ten days.
The
Company’s lead brachytherapy product, RadioGel™, incorporates patented technology developed for Battelle Memorial
Institute (“
Battelle
”) at Pacific Northwest National Laboratory, a leading research institute for government
and commercial customers. Battelle has granted the Company an exclusive license to patents covering the manufacturing, processing
and applications of RadioGel™ (the “
Battelle License
”). Other intellectual property protection includes
proprietary production processes and trademark protection in 17 countries. The Company plans to continue efforts to develop new
refinements on the production process, and the product and application hardware, as a basis for future patents.
The
Company is currently focusing on obtaining approval from the Food and Drug Administration (“
FDA
”) to market
and sell RadioGel™ as a Class II medical device. The Company first requested FDA approval of RadioGel™ in June 2013,
at which time the FDA classified RadioGel™ as a medical device. The Company then followed with a 510(k) submission which
the FDA responded, in turn, with a request for a physician letter of substantial equivalence and a reformatted 510(k) summary,
which the Company provided January 2014. In February 2014 the FDA ruled the device as not substantially equivalent due to a lack
of predicate device and it was classified to Class III. The Company is currently developing test plans to address issues raised
by the FDA in connection with the Company’s previous submissions regarding RadioGel™, including developing specific
test plans and specific indication of use. The Company intends to request FDA approval to apply for
de novo
classification
of RadioGel™, which would reclassify the device from a Class III device to a Class II device, further simplifying the path
to FDA approval.
In
previous FDA submittals, the Company proposed applying RadioGel™ for a very broad range of cancer therapies, referred to
as Indication for Use. The FDA has requested that the Company reduce its Indications for Use. To comply with that request, the
Company has expanded its Medical Advisory Board (“
MAB
”) and engaged doctors from respected hospitals who have
evaluated the candidate cancer therapies based on three criteria: (1) potential for FDA approval and successful therapy;
(2) notable advantage over current therapies; and (3) probability of wide spread acceptance by the medical community.
The
MAB selected eighteen applications for RadioGel™, each of which meet the criteria described above. This large number confirms
the wide applicability of the device and defines the path for future business growth. The Company intends to apply to the FDA
for a single Indication for Use, treatment of basal cell and squamous cell skin cancers, followed by subsequent applications for
additional Indications for Use. We anticipate that this initial application will facilitate each subsequent application, and the
testing for many of the subsequent applications could be conducted in parallel, depending on available resources.
The
Company’s IsoPet Solutions division was established in May 2016 to focus on the veterinary oncology market, namely engagement
of university veterinarian hospital to develop the detailed therapy procedures to treat animal tumors and ultimately use of the
technology in private clinics. The Company has engaged four different university veterinarian hospitals to begin using RadioGel™
for treatment of four different cancer types in dogs and cats. Washington State University Veterinary Hospital has tested one
cat to demonstrate the procedures and the absence of any significant toxicity effect. The other three centers are expected to
begin therapy during the fourth quarter of 2017 after their internal administrative review process is completed.
These
animal therapies will focus on creating labels that describe the procedures in detail as a guide to future veterinarians. The
labels will be voluntarily submitted to the FDA for review. They will then be used as data for future FDA applications in the
medical sector and as key intellectual property for licensing to private veterinary clinics. Dr. Alice Villalobos, the Chair of
our Veterinarian Advisory Board, has expressed an interest in being the first to utilize RadioGel™ in her private clinic,
but is also introducing the Company to other clinics with an interest in utilizing RadioGel™ and to demonstrate the business
model.
The
Company anticipates that future profit will be derived from direct sales of RadioGel™ and related services, and from licensing
to private medical and veterinary clinics in the U.S. and internationally.
Based
on the Company’s financial history since inception, its auditor has expressed substantial doubt as to the Company’s
ability to continue as a going concern. The Company has limited revenue, nominal cash, and has accumulated deficits since inception.
If the Company cannot obtain sufficient additional capital, the Company will be required to delay the implementation of its business
strategy and not be able to continue operations.
Results
of Operations
Comparison
of the Three Months Ended September 30, 2017 and 2016
The
following table sets forth information from our statements of operations for the three months ended September 30, 2017 and 2016.
|
|
Three
Months Ended
September 30, 2017
|
|
|
Three
Months Ended
September 30, 2016
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
Operating
expenses
|
|
|
961,799
|
|
|
|
666,414
|
|
Operating
loss
|
|
|
(961,799
|
)
|
|
|
(666,414
|
)
|
Non-operating
income (expense):
|
|
|
|
|
|
|
|
|
Gain
(loss) on derivative liability
|
|
|
9
|
|
|
|
762,151
|
|
Gain
(loss) on debt extinguishment
|
|
|
(369,428
|
)
|
|
|
-
|
|
Net
gain (loss) on settlement of debt
|
|
|
-
|
|
|
|
(111,328
|
)
|
Loss
on sale of stock
|
|
|
-
|
|
|
|
(54,561
|
)
|
Interest
expense
|
|
|
(527,188
|
)
|
|
|
(85,830
|
)
|
Net
income (loss)
|
|
$
|
(1,858,406
|
)
|
|
$
|
(155,982
|
)
|
Revenue
Revenue
was $0 for the three months ended September 30, 2017 and September 30, 2016.
Management
does not anticipate that the Company will generate revenue sufficient to sustain operations until such time as the Company secures
revenue-generating arrangements with respect to RadioGel™ and/or any of our other brachytherapy technologies.
Operating
Expenses
Operating
expenses for the three months ended September 30, 2017 and 2016 consists of the following:
|
|
Three
months
ended
September 30, 2017
|
|
|
Three
months
ended
September 30, 2016
|
|
Depreciation
and amortization expense
|
|
$
|
-
|
|
|
$
|
738
|
|
Professional
fees
|
|
|
211,954
|
|
|
|
265,497
|
|
Restricted
stock units granted
|
|
|
169,650
|
|
|
|
-
|
|
Stock
options granted
|
|
|
24,283
|
|
|
|
27,427
|
|
Payroll
expenses
|
|
|
436,319
|
|
|
|
160,500
|
|
General
and administrative expenses
|
|
|
66,973
|
|
|
|
146,257
|
|
Sales
and marketing expense
|
|
|
52,620
|
|
|
|
65,995
|
|
|
|
$
|
912,799
|
|
|
$
|
666,414
|
|
Operating
expenses for the three months ended September 30, 2017 and 2016 was $961,799 and $666,414, respectively. The increase in operating
expenses from 2016 to 2017 can be attributed to the increase in payroll expenses from 2016 to 2017 ($160,500 for the three months
ended September 30, 2016 versus $436,319 for the three months ended September 30, 2017), attributable to the settlement of prior
payroll obligations with the issuance of stock; and the increase in restricted stock units granted from 2016 to 2017 ($169,650
for the three months ended September 30, 2017 versus $0 for the three months ended September 30, 2016). The increase in operating
expenses was partially offset by a decrease in sales and marketing expense from 2016 to 2017 ($65,995 for the three months ended
September 30, 2016 versus $52,620 for the three months ended September 30, 2017); a decrease in stock options granted from 2016
to 2017 ($27,427 for the three months ended September 30, 2016 versus $24,283 for the three months ended September 30, 2017);
a decrease in professional fees from 2016 to 2017 ($265,497 for the three months ended September 30, 2016 versus $212,878 for
the three months ended September 30, 2017); and the decrease in general and administrative expense ($146,257 for the three months
ended September 30, 2016 versus $66,973 for the three months ended September 30, 2017). The main contributors to the decrease
in general and administrative expense was a decrease in loan fees ($0 for the three months ended September 30, 2017 versus $8,663
for the three months ended September 30, 2016); rent ($0 for the three months ended September 30, 2017 versus $4,500 for the three
months ended September 30, 2016); and a decrease in research expense ($43,758 for the three months ended September 30, 2017 versus
$102,691 for the three months ended September 30, 2016).
Non-Operating
Income (Expense)
Non-operating
income (expense) for the three months ended September 30, 2017 and 2016 consists of the following:
|
|
Three months
ended
September 30, 2017
|
|
|
Three months
ended
September 30, 2016
|
|
Interest expense
|
|
$
|
(527,188
|
)
|
|
$
|
(85,830
|
)
|
Net gain on sale of assets
|
|
|
-
|
|
|
|
-
|
|
Net gain (loss) on settlement of debt
|
|
|
-
|
|
|
|
(111,328
|
)
|
Net gain (loss) on debt extinguishment
|
|
|
(369,428
|
)
|
|
|
-
|
|
Loss on sale of stock
|
|
|
-
|
|
|
|
(54,561
|
)
|
Gain (loss) on derivative liability
|
|
|
9
|
|
|
|
762,151
|
|
|
|
$
|
(896,607
|
)
|
|
$
|
(510,432
|
)
|
Non-operating
income (expense) increased during the three months ended September 30, 2017, when compared to the three months ended September
30, 2016. This increase is primarily due to an increase in interest expense from $85,830 for the three months ended September
30, 2016 to $527,188 for the three months ended September 30, 2017; and an increase in loss on debt extinguishment for the three
months ended September 30, 2017 of $369,428 versus $0 for the three months ended September 30, 2016. These increases were offset
by a decrease in the gain on derivative liability of $762,151 for the three months ended September 30, 2016 versus a gain of $9
for the three months ended September 30, 2017; and a decrease in loss on settlement of debt for the three months ended September
30, 2017 of $0 versus a loss of $111,328 for the three months ended September 30, 2016.
Net
Loss
Our
net income (loss) for the three months ended September 30, 2017 and 2016 was $1,858,406 and $155,982 respectively.
Comparison
of the Nine Months Ended September 30, 2017 and 2016
The
following table sets forth information from our statements of operations for the nine months ended September 30, 2017 and 2016.
|
|
Nine Months
Ended
September 30, 2017
|
|
|
Nine Months
Ended
September 30, 2016
|
|
Revenues
|
|
$
|
4,054
|
|
|
$
|
8,108
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
1,949,739
|
|
|
|
4,575,904
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,945,685
|
)
|
|
|
(4,567,796
|
)
|
Non-operating income (expense)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,836,279
|
)
|
|
|
(535,563
|
)
|
Net gain on sale of assets
|
|
|
2,800
|
|
|
|
-
|
|
Net gain (loss) on settlement of debt
|
|
|
-
|
|
|
|
(1,877,959
|
)
|
Net gain (loss) on debt extinguishment
|
|
|
(423,291
|
)
|
|
|
-
|
|
Loss on sale of stock
|
|
|
-
|
|
|
|
(54,561
|
)
|
Gain (loss) on derivative liability
|
|
|
408,488
|
|
|
|
(3,108,889
|
)
|
Net Gain (Loss)
|
|
$
|
(3,793,967
|
)
|
|
$
|
(10,144,768
|
)
|
Revenue
Revenue
was $4,054 for the nine months ended September 30, 2017, compared to $8,108 for the nine months ended September 30, 2016, a period
over period decrease of $4,054. The decrease was a result of a loss of consulting revenue, which was our only source of revenue
during the nine months ended September 30, 2016 and 2017. Consulting revenue consists of providing clients with assistance in
strategic targetry services, and research into production of radiopharmaceuticals and the operations of radioisotope production
facilities. No proprietary information belonging to our Company is shared during the process of this consulting. Consulting services
had been our only source of revenue. The Company does not have any current contracts or arrangements for consulting services,
and, until such time as the Company secures contracts or arrangements to provide consulting services, the Company does not expect
to generate any additional revenue during the fourth quarter of 2017 and beyond.
Management
does not anticipate that the Company will generate revenue sufficient to sustain operations until such time as the Company secures
revenue-generating arrangements with respect to RadioGel™ and/or any of our other brachytherapy technologies.
Operating
Expense
Operating
expenses for the nine months ended September 30, 2017 and 2016 consists of the following:
|
|
Nine
months
ended
September 30, 2017
|
|
|
Nine
months
ended
September 30, 2016
|
|
Depreciation and amortization expense
|
|
$
|
-
|
|
|
$
|
2,212
|
|
Professional fees
|
|
|
642,101
|
|
|
|
1,968,084
|
|
Restricted stock units granted
|
|
|
169,650
|
|
|
|
-
|
|
Stock options granted
|
|
|
79,582
|
|
|
|
612,343
|
|
Payroll expenses
|
|
|
722,594
|
|
|
|
492,077
|
|
General and administrative expenses
|
|
|
240,469
|
|
|
|
1,287,649
|
|
Sales and marketing expense
|
|
|
93,870
|
|
|
|
213,539
|
|
|
|
$
|
1,949,739
|
|
|
$
|
4,575,904
|
|
Operating
expenses for the nine months ended September 30, 2017 and 2016 was $1,949,739 and $4,575,904, respectively. The decrease in operating
expenses from 2016 to 2017 can be attributed to the decrease in professional fees expense ($1,968,084 for the nine months ended
September 30, 2016 versus $642,101 for the nine months ended September 30, 2017); a decrease in sales and marketing expense from
2016 to 2017 ($213,539 for the nine months ended September 30, 2016 versus $93,870 for the nine months ended September 30, 2017);
a decrease in stock options granted from 2016 to 2017 ($612,343 for the nine months ended September 30, 2016 versus $79,582 for
the nine months ended September 30, 2017); and the decrease in general and administrative expense ($1,287,649 for the nine months
ended September 30, 2016 versus $240,469 for the nine months ended September 30, 2017). The main contributors to the decrease
in general and administrative expense was a decrease in loan fees ($603,861 for the nine months ended September 30, 2016 versus
$0 for the nine months ended September 30, 2017); rent ($53,500 for the nine months ended September 30, 2016 versus $4,500 for
the nine months ended September 30, 2017); repairs and maintenance ($226,655 for the nine months ended September 30, 2016 versus
$5,050 for the nine months ended September 30, 2017); and research expense ($309,539 for the nine months ended June 30, 2016 versus
$157,168 for the nine months ended September 30, 2017). The decrease in operating expenses was partially offset by an increase
in restricted stock units granted (($169,650 for the nine months ended September 30, 2017 versus $0 for the nine months ended
September 30, 2016).
Non-Operating
Income (Expense)
Non-Operating
income (expense) for the nine months ended September 30, 2017 and 2016 consists of the following:
|
|
Nine months
ended
September 30, 2017
|
|
|
Nine months
ended
September 30, 2016
|
|
Interest expense
|
|
$
|
(1,836,279
|
)
|
|
$
|
(535,563
|
)
|
Net gain on sale of assets
|
|
|
2,800
|
|
|
|
-
|
|
Net gain (loss) on settlement of debt
|
|
|
-
|
|
|
|
(1,877,959
|
)
|
Net gain (loss) on debt extinguishment
|
|
|
(423,291
|
)
|
|
|
-
|
|
Loss on sale of stock
|
|
|
-
|
|
|
|
(54,561
|
)
|
Gain (loss) on derivative liability
|
|
|
408,488
|
|
|
|
(3,108,889
|
)
|
|
|
$
|
(1,848,282
|
)
|
|
$
|
(5,576,972
|
)
|
The
Company had non-operating expense of $5,576,972 during the nine months ended September 30, 2016, as compared to non-operating
expense of $1,848,282 during the nine months ended September 30, 2017. As shown above, this decrease in non-operating expense
is primarily due to a loss on derivative liability of $3,108,889 for the nine months ended September 30, 2016, as compared to
a gain of $408,488 during the same period in 2017. The $3,108,889 loss on derivative liability was due to an increase in the Company’s
stock price from September 30, 2016 ($0.02) to September 30, 2017 ($0.07) and an increase in preferred shares value which is also
used to value derivatives. The Company’s stock price is used in the Black Scholes calculations to compute the derivative
liability at the end of the quarter. Additionally, the Company experienced a decrease in non-operating expense due to a loss on
settlement of debt of $1,877,959 for the nine months ended September 30, 2016, as compared to a loss on settlement of debt of
$0 for the nine months ended September 30, 2017.
Net
Gain (Loss)
Our
net income (loss) for the nine months ended September 30, 2017 and 2016 was $(3,793,967) and $(10,144,168) respectively.
Liquidity
and Capital Resources
At
September 30, 2017, the Company had negative working capital of $3,543,907, as compared to $4,126,519 at September 30, 2016. During
the nine months ended September 30, 2017 the Company experienced negative cash flow from operations of $1,124,282, received $2,800
for investing activities and added $1,115,703 of cash flows from financing activities. As of September 30, 2017, the Company had
$0 commitments for capital expenditures.
Cash
used in operating activities decreased from $1,645,825 for the nine month period ending September 30, 2016 to $1,124,282 for the
nine month period ending September 30, 2017. Cash used in operating activities was primarily a result of the Company’s net
loss and the non-cash gain (loss) on derivative liability, partially offset by non-cash item amortization of convertible debt
discount, and depreciation, included in that net loss and preferred and common stock issued for services and other expenses. The
Company had no cash used in investing activities for the nine month period ended September 30, 2017 and received $2,800 in investing
activities for the nine month period ending September 30, 2017. Cash provided from financing activities decreased from $1,466,808
for the nine month period ending September 30, 2016 to $1,124,282 for the nine month period ending September 30, 2017. The decrease
in cash provided from financing activities was primarily a result of decrease in proceeds from convertible debt.
The
Company has generated material operating losses since inception. The Company had a net loss of $3,793,967 for the nine months
ended September 30, 2017, and $10,144,168 for the nine months ended September 30, 2016. The Company expects to continue to experience
net operating losses. Historically, the Company has relied upon investor funds to maintain its operations and develop the Company’s
business. The Company anticipates raising additional capital within the next twelve months from investors for working capital
as well as business expansion, although the Company can provide no assurance that additional investor funds will be available
on terms acceptable to the Company. If the Company is unable to obtain additional financing to meet its working capital requirements,
it may have to curtail its business.
The
Company anticipates raising additional capital within the next twelve months from investors for working capital as well as business
expansion, although the Company can provide no assurance that additional investor funds will be available on terms acceptable
to the Company. If the Company is unable to obtain additional financing to meet its working capital requirements, it may have
to cease operations.
The
Company requires at least $1.5 million per year to maintain current operating activities. Over the next 12-24 months, the Company
believes it will cost approximately $5 million to $10 million to fund: (1) the FDA approval process and initial deployment of
the brachytherapy products and (2) initiate regulatory approval processes outside of the United States. The continued deployment
of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel. The
principal variables in the timing and amount of spending for the brachytherapy products in the next 12-24 months will be the FDA’s
classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements
for additional studies which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company’s
spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements
with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the
U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership
agreements or additional capital raises.
Although
the Company is seeking the foregoing funding and has engaged in numerous discussions with potential finders, investment bankers
and investors with respect to the initial portion thereof, the Company has not received firm commitments for the required funding.
Based upon its discussions, the Company anticipates that if the Company is able to obtain the funding required to retire outstanding
debt, pay past due payables and maintain its current operating activities that the terms thereof will be materially dilutive to
existing shareholders.
The
recent economic events, including the inherent instability and volatility in global capital markets, as well as the lack of liquidity
in the capital markets, could impact the Company’s ability to obtain financing and its ability to execute its business plan.
The Company believes healthcare institutions will continue to purchase the medical solutions that it distributes.
Accounting
Policies and Estimates
The
preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited
condensed financial statements and accompanying notes. Management bases its estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates
under different assumptions or conditions. During the period ended September 30, 2017, we believe there have been no significant
changes to the items disclosed as significant accounting policies in management’s notes to the condensed financial statements
in our Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 9, 2017.
Off-Balance
Sheet Arrangements
The
Company does not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on the
Company’s financial condition, revenues, results of operations, liquidity or capital expenditures.