UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2019
COMMISSION FILE NUMBER:
000-27781
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UNITED HEALTH PRODUCTS, INC.
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(Exact name of
Registrant as specified in its charter)
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Nevada
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84-1517723
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(State of jurisdiction
of
incorporation or
organization)
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(I.R.S. Employee
Identification
Number)
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10624 S. Eastern
Avenue, Ste. A209
Henderson,
NV
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89052
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(Address of principal
executive offices)
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(Zip Code)
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Registrant’s telephone
number, including area code: (877) 358-3444
Securities registered
pursuant to Section 12 (b) of the Act: None
Securities registered
pursuant to Section 12 (g) of the Act: Common Stock, $.001
Par Value
Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes ¨ No x
Check whether the
Registrant is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. ¨
Indicate by check mark
whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes
x No ¨
Indicate by check mark
whether the Registrant has submitted electronically every
Interactive data file required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit such files). Yes x No ¨
Indicate by check mark
whether the registrant has filed a report on and attestation to its
management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley
Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. x
Indicate by check mark
if disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained in this form, and no disclosure
will be contained, to the best of Registrant’s knowledge, in
definitive proxy or information statements incorporated by
reference in part III of this Form 10-K or any amendment to this
Form 10 K ¨.
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated
filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated
filer
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Accelerated filer
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Non-accelerated
filer
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Smaller reporting
company
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x
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Emerging growth
company
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If an emerging growth
company, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. Yes ¨ No ¨
Indicate by check mark
whether the Registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes ¨ No x
As of June 28, 2019,
the number of shares held by non-affiliates was approximately
172,779,765 shares. The approximate market value based on the last
sale (i.e. $0.94 per share as of June 28, 2019, the last business
day of the second quarter) of the Company’s Common Stock was
approximately $162,412,979.
The number of shares
issued and outstanding of the Registrant’s Common Stock, as of June
29, 2020 was 180,128,456, excluding restricted stock units issued
to officers, directors and consultants covering 50,100,000 shares
to be issued upon a change in control of the Company as described
herein. See “Item 11.”
Forward-looking Statements
Statements in this
annual report on Form 10-K that are not historical facts constitute
forward-looking statements which are made pursuant to the safe
harbor provisions of Section 21E of the Securities Exchange Act of
1934, or the Exchange Act. These statements relate to future events
or our future financial performance and involve known and unknown
risks, uncertainties and other factors that may cause our or our
industry’s actual results, levels of activity, performance or
achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or
implied by these forward-looking statements. Those factors include,
among other things, those listed under “Risk Factors” and elsewhere
in this annual report. In some cases, you can identify
forward-looking statements by terminology such as “may,” “will,”
“should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative
of these terms or other comparable terminology. These statements
are only predictions. Actual events or results may differ
materially. Moreover, neither we nor any other person assumes
responsibility.
Explanatory
Note
In accordance with the
SEC’s Order under Section 36 of the Securities Exchange Act of 1934
Granting Exemptions From Specified Provisions of the Exchange Act
and Certain Rules Thereunder dated March 4, 2020 (Release No.
34-88318) (as modified on March 25, 2020 by Release No. 34-88465,
the “Order”), the Company relied on the relief provided by the
Order in connection with the filing of this Annual Report on Form
10-K for the fiscal year ended December 31, 2019 (the “Report”) due
to the circumstances related to coronavirus or COVID-19. The impact
of the COVID-19 outbreak has resulted in the implementation, by
State and Federal authorities, of numerous measures to try to
contain the virus, such as travel bans and restrictions,
quarantines, shelter in place orders, and shutdowns. The Company
has been following the recommendations of local authorities to
minimize exposure risk to its team members, We were unable to file
this Annual Report on the extended March 30, 2020 due date because
of the impact of COVID-19 as disclosed above.
Restatement:
General. This
comprehensive Annual Report is for the year ended December 31,
2019, with expanded financial and other disclosures in lieu of
filing separate amended Annual Report on Form 10-K/A for the years
ended December 31, 2018 and 2017 and Quarterly Reports on Form
10-Q/A for each of the quarters ended March 31, 2017, June 30,
2017, September 30, 2017, March 31, 2018, June 30, 2018, September
30, 2018, March 31, 2019, June 30, 2019 and September 30, 2019. We
believe that the filing of this expanded annual report enables us
to provide information to investors in a more efficient manner than
separately filing each of the amended filings described above.
As discussed in further
detail below and in Note 2 to the accompanying financial
statements, the restatements of the prior filings are the result of
two separate transactions. The first transaction was a revenue
transaction that involved a sale of a lost in-bound shipment of
product that was recognized and recorded in the first quarter of
2017. This sale was canceled in the second quarter of 2017 and the
transaction was subsequently corrected to back out the revenue and
exclude it from the audited 2017 annual financial statements which
were included in our 2017 Annual Report on Form 10-K. The Company
inadvertently did not go back and restate the prior interim
financial statements for 2017 to reflect the correction. The second
transaction was a revenue transaction regarding product that was in
the shipping process at the end of December 2017 that was
recognized and recorded as revenue in the 2017 audited annual
financial statements where there was a question related to the
timing of revenue recognition due to the shipping and receiving
terms. The Company’s customer had not paid the Company for this
product and the Company, in consultation with its former auditor,
ultimately wrote off the receivable in the third and fourth
quarters of 2018 as a bad debt expense. Those write-offs were
reflected in the Company’s Quarterly Report on Form 10-Q for the
period ended September 30, 2018 and Company’s Annual Report on Form
10-K for the year ended December 31, 2018. However, in light of the
information currently available to the Company, the Company has
determined that no revenue should have been recognized in 2017 or
2018 due to the customer disputing the shipment and refusing to pay
the amount owed and therefore the transaction did not meet all of
the revenue recognition criteria under ASC 606, which the Company
adopted on January 1, 2018. The Company is continuing collection
efforts to recover payment from its customer, and it instituted a
lawsuit against the customer in February 2020 to recover payment,
which is ongoing. Due to uncertainties inherent in litigation, the
Company cannot predict the outcome of this action.
During the process of
restating its financial statements due to the transactions
mentioned above, other adjustments were noted and related to
inventory valuation, loss on settlement of debt and equity
transactions along adjustments to accruals based on factors known
at the time of this filing versus what was known as of the original
filing date.
Please see also
“Controls and Procedures” under Item 9A of this report for a
discussion of material weaknesses in our internal controls over
financial reporting which existed as of December 31, 2019.
PART
I
ITEM 1.
BUSINESS
Company
Overview
United Health Products, Inc. (“UHP” or the “Company”) develops,
manufactures, and markets a patented hemostatic gauze for the
healthcare and wound care sectors. The product, HemoStyp®, is
derived from all natural, regenerated oxidized cellulose and
designed to absorb exudate/drainage from superficial wounds and
help control bleeding. We currently have limited sales of products
aimed at the consumer market via Walmart.com. We are in the process
of seeking regulatory approval to sell products into the U.S. Class
III surgical market.
Recent
Developments
The following
developments in the Company’s business have occurred during
2019:
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In August 2019, the Company filed a
patent application covering methods of forming and using a
hemostatic material, and more specifically, methods of forming and
using a hemostatic hydrocolloid that is formed into a gel, foam or
spray used to control bleeding and oozing from a variety of wounds.
The approval of the new patent would allow for the HemoStyp
hydrocolloid to act as a conduit to transfer other properties
associated with the treatment of wounds within the hydrocolloid.
This would enable HemoStyp to be bundled as a suite of multiple
products for surgical and wound care applications. We cannot assure
that our patent application will be granted. |
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In August 2019, the Company
successfully completed the surgeries for its Human Trial study
“Efficacy and Safety of HemoStyp as an Adjunct for Management of
Secondary Hemostasis in the Operative Setting” which finalized
human trial enrollment |
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Furthermore, in August 2019, the
Company received the pathology results of a preclinical animal
study to assess the effect of HemoStyp on bone tissue. The Company
conducted the animal study to evaluate the suitability of HemoStyp
in contact with bone in the chronic swine model, and to validate
HemoStyp for this application. This study and indication are
independent of the current PMA application and will potentially
allow UHP to access new and significant market opportunities. The
study results determined that there was no adverse pH effect on the
bone and surrounding tissue, which UHP believes demonstrate the
potential for safe application of HemoStyp in human orthopedic
procedures. The Company is using this study as part of its
indication request in its current PMA application. |
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Also, in October 2019 the Company
received a final report by an independent reviewer of the result of
its Human Trial study, confirming the non-inferiority and
superiority of HemoStyp over Surgicel ORIGINAL, the market leader
for hemostatic agents. This report was integrated into the
Company’s Class III PMA submission for FDA approval |
Our
HemoStyp Gauze Products
HemoStyp Hemostatic
Gauze is a collagen-like natural substance created from chemically
treated cellulose. It is an effective hemostatic agent registered
with the FDA to help control bleeding from open wounds and body
cavities. The HemoStyp hemostatic material contains no chemical
additives, thrombin or collagen, and is hypoallergenic. When the
product comes in contact with blood it expands slightly and
converts to an adhesive gel that subsequently dissolves into
glucose and saline. Because of its purity and the fact that it
simply degrades to non-toxic end products, HemoStyp does not cause
significant delay in healing as do certain other hemostatic
materials. Additional testing has shown HemoStyp to be 100%
absorbable in 24 hours or less. Tests have also been conducted to
demonstrate the effectiveness of HemoStyp in thoracic and abdominal
procedures.
HemoStyp Hemostatic
Gauze is a flexible cloth-like material that is applied by folding
the gauze as needed to fit the size of the wound or incision, and
then placing the gauze onto the bleeding tissue. In surgical
situations, the product converts to a transparent gel with a
neutral pH level that allows the surgeon to monitor the coagulation
process and also avoids damage to the surrounding tissue. In first
responder or other non-surgical situations, putting a bandage on
top of the gauze is optional and, in many cases, unnecessary. Since
EMS (Emergency Medical Services) work is pre-hospital, rinsing the
gauze out with saline or water is not necessary, as a wound will be
debrided and possibly reopened prior to suturing at the
hospital.
Potential
Target Markets
Our technology can be
marketed as HemoStyp Gauze in various configurations and sizes both
nationally and internationally. Our potential customer base for our
HemoStyp includes, without limitation, the following (noting that
we have several formats of Trauma Gauze):
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Hospitals and Surgery
Centers for all Internal Surgical usage, post FDA Class III
approval
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Hospitals, Clinics and
Physicians – For external trauma
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EMS, Fire Departments
and Other First Responders
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Public Safety, Police
Departments and Military
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Correctional
Facilities
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Schools, Universities
and Day Care Facilities
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Nursing Homes and
Assisted Living Environments
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Home Care Providers
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Dental offices for oral
surgery
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Sports Medicine
Providers
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Veterinarians
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Municipalities and
Government Agencies
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Occupational and
Industrial Healthcare Professionals
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Consumers
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Island dressings to support intravenous
procedures such as kidney dialysis
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Primary
Strategy
In
2018, management made the decision that rather than focusing on
immediate sales activities of our products in targeted markets
during this period of time before receiving anticipated FDA
approval for Class III surgical markets, the Company would refocus
efforts to become a stronger, medical technology company with a
patented technology for Class III surgical markets that would
enhance the Company’s value and overall market strength. The FDA
approval process requires substantial amount of the Company’s
resources and energy so the focus was removed from sales and
marketing and full attention was focused on the FDA process and
seeking an acquisition/commercial partner candidate. Thus we made a
determination not to engage new distribution partners while
pursuing this strategy as that could create conflicts and limit or
preclude opportunities with a potential acquiror/commercial
candidate and tie the Company’s hands from a revenue or branding
perspective. The Class III surgical markets, both domestic and
international, represent the most attractive market for our
products due to the limited competition from other Class III
approved ORC (Oxidized Regenerated Cellulose) products and the
resulting premium pricing for hemostatic agents that can meet the
demanding requirements of the human surgical environment. In
addition, our preliminary tests and our completed Human Trial
study, leads us to believe that the HemoStyp technology can compete
against established market participants and allow us to gain market
share. Given this assessment, we have devoted considerable
resources since 2018 to completing the FDA process and gaining
access to this market in the U.S. As of the filing date of this
Form 10-K, the FDA review process, which was temporarily held up by
the Covid-19 virus pandemic, is ongoing.
In
anticipation of receiving Class III approval, we are evaluating the
best paths to rapidly grow our revenue and profits in all potential
market segments, which could include seeking (i) a potential sale
or merger, which may include a pre-sale commercialization
component, (ii) one or more commercial partnerships and licensing
agreements with established market participants, without there
being a sale or merger, or (iii) to raise the necessary capital to
establish and grow our own marketing and distribution capabilities
via organic growth.
The
Company has been contacted by several medical technology companies
that are active in the surgical equipment and hemostatic products
sectors, and who have expressed an interest in the Company’s
products and business strategy. In response to these inbound
contacts, and to maximize shareholder value, the Company’s board of
directors has determined to conduct a review of strategic
alternatives, which include, without limitation, identifying an
acquisition candidate, joint ventures or other commercial
partnerships, or a standalone growth plan. To assist in this review
and strategy, the Company is working with a financial advisory
firm. There can be no assurances that any specific transaction will
occur as a result of the retention of this firm. No assurances can
be given that the Company will identify an acquisition or
commercialization candidate(s) or complete a transaction with one
or more candidates on terms satisfactory to us, if at all.
Manufacturing and Packaging of our
Products
The
Company’s cellulose products are manufactured in the United States
to our specifications at various facilities. We have established
various contract manufacturing facilities. All of these facilities
have been carefully vetted and have supplied multiple Quality
Control program certificates and are registered FDA facilities.
These facilities have been submitted as part of our PMA submission,
which includes the FDA inspection records of these facilities.
Patents and
Trademarks
The Company’s hemostatic gauze products are patented in the U.S.
Patent and Trademark Office (“USPTO”), which patent protection
currently runs through 2029. However, if our intellectual property
positions are challenged, invalidated, circumvented, or expire, or
if we fail to prevail in future intellectual property litigation,
our business could be adversely affected. We have created multiple
variations of our gauze product and will protect each of these new
generation platforms and product with additional intellectual
property. Our success depends in part on our ability to defend our
intellectual property rights. The patent positions of
pharmaceutical and biotechnology companies can be highly uncertain
and often involve complex legal, scientific, and factual questions.
Third parties may seek to challenge, invalidate, or circumvent our
intellectual property rights. In addition, our patent positions
might not protect us against competitors with similar products or
technologies because competing products or technologies may not
infringe our patents. Also, there are third parties who have
patents or pending patent applications that they may claim
necessitate payment of a royalty or prevent us from commercializing
our patent in certain territories. Patent disputes are frequent,
costly and can preclude, delay, or increase the cost of
commercialization of products.
During 2019, the
Company received trademarks for the following::
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Boo Boo
Strips: |
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The Ultimate
Bandage |
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Hemostrips |
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Nik Fix |
Competition
The
disposable medical supply market in the United States is dominated
by large companies such as Baxter International, Bristol-Myers
Squibb Company, Johnson & Johnson and 3M Company, each of which
have far greater capital and operational resources than us. Our
hemostatic gauze product will directly compete in the gauze markets
dominated by these majors. However, the market for hemostatic
products, which includes gauzes, gels, bandages and powders, is
largely composed of smaller, privately-held companies with the
exception of Johnson & Johnson, which manufactures Surgicel. In
this market, competitive factors include price, product offerings,
value-added service programs, service and delivery, credit terms,
and customer support.
Government
Regulation
We
are subject to oversight by various federal and state governmental
entities and we are subject to, and affected by, a variety of
federal and state laws, regulations and policies applicable to the
healthcare and medical device industries.
Environmental Matters
The
Company may subject to, or affected by, environmental legislation
including, among others, the Toxic Substances Control Act, the
Clean Air Act, the Clean Water Act, Compensation and Liability Act
(aka CERCLA or Superfund) and the Resource Conservation and
Recovery Act. By no means do we certify this list as being
complete, as there are many laws and regulations that exist or that
may come to pass that we cannot foresee that may also have an
impact on the Company. Compliance with the multitude of regulations
issued by federal, state, provincial and local administrative
agencies that may apply to the Company can be burdensome and
costly.
Research
and Development Expenditures
In
the years ending December 31, 2019, 2018 and 2017 we incurred
$666,388, $76,951 and $19,936, respectively, in research and
development expenditures.
Personnel
As of June 29, 2020, we have five full-time employees and up to
eight additional consultants, excluding our five Medical Advisory
Board members.
ITEM 1A. RISK
FACTORS
We are engaged in
the sale and distribution of hemostatic gauze products to stop
superficial bleeding. As we develop our business, there are
numerous and varied risks, known and unknown, that may prevent us
from achieving our goals. If any of these risks actually occur, our
business, financial condition or results of operation may be
materially adversely affected. In such case, the trading price of
our common stock could decline, and investors could lose all or
part of their investment.
Impacts of
COVID-19 to Business and the General Economy
Covid -19 has recently
caused a material and substantial adverse impact on our general
economy. It has also caused there to be a temporary hold on our FDA
application for class III approval of our HemoStyp product for
internal surgical purposes while the FDA deals with the Covid-19
crisis which has delayed the process. Recently, this hold was
lifted by the FDA.
The impacts of the
global emergence of Coronavirus disease (COVID-19) on our business
and the general economy, are currently not fully known. We are
conducting business as usual with some modifications to, employee
work locations, among other modifications We have observed other
companies taking precautionary and preemptive actions to address
COVID-19 and companies may take further actions that alter their
normal business operations. We will continue to actively monitor
the situation and may take further actions that alter our business
operations as may be required by federal, state or local
authorities or that we determine are in the best interests of our
employees, potential partners, suppliers and stockholders. It is
not clear what the potential effects any such alterations or
modifications may have on our business, including the effects on
our prospects, although we do anticipate it to negatively impact
our financial results and the length of time needed to obtain FDA
approval of our HemoStyp product for internal surgical purposes
during fiscal year 2020.
Risks Related
to Our Restatement and Internal Controls
We have
identified various material weaknesses in our internal control over
financial reporting which have materially adversely affected our
ability to timely and accurately report our results of operations
and financial condition. These material weaknesses may not have
been fully remediated as of the filing date of this report and we
cannot assure you that other material weaknesses will not be
identified in the future.
As a result of the circumstances which gave rise to our
restatements discussed under “Explanatory Note” and in our
Comprehensive Form 10-K, our Chief Executive Officer and Chief
Financial Officer have concluded that, as of December 31, 2019, we
had material weaknesses in our internal controls over financial
reporting and that, as a result, our disclosure controls and
procedures and our internal controls over financial reporting were
not effective at such date. A material weakness is a deficiency, or
combination of deficiencies, in internal control over financial
reporting that creates a reasonable possibility that a material
misstatement of our annual or interim financial statements will not
be prevented or detected on a timely basis.
In addition, we believe that we continued to have material
weaknesses in our internal control over financial reporting
subsequent to December 31, 2019. See “Controls and Procedures”
under Item 9A for a detailed discussion of the material weaknesses
identified as of December 31, 2019 and possible material weaknesses
as of subsequent periods. Although we are in the process of
implementing remedial measures to address all of the identified
material weaknesses, our assessment of the impact of these measures
has not been completed as of the filing date of this report, and we
cannot assure you that these measures will be adequate. Moreover,
we cannot assure you that additional material weaknesses in our
internal control over financial reporting will not arise or be
identified in the future.
As a result, we must continue to improve our operational,
information technology, and financial systems, infrastructure,
procedures, and controls, as well as continue to expand, train,
retain, and manage our employee base. Any failure to do so, or any
difficulties we encounter during implementation, could result in
additional material weaknesses or in material misstatements in our
financial statements. These misstatements could result in a future
restatement of our financial statements, could cause us to fail to
meet our reporting obligations, or could cause investors to lose
confidence in our reported financial information, leading to a
decline in our stock price.
The
extraordinary processes underlying the preparation of the financial
statements contained in this report may not have been adequate and
our financial statements remain subject to the risk of future
restatement.
The completion of our
audits for the years ended December 31, 2019, 2018 and 2017, the
restatement of certain items and the making of other corrective
adjustments to our financial statements for the last three years,
and the revenue recognition review undertaken in connection
therewith, involved a comprehensive review and analysis of our
contracts and business practices, and other accounting rules and
pronouncements. Given the complexity and scope of these exercises,
and notwithstanding the extensive time, effort, and expense that
went into them, we cannot assure you that these processes were
adequate or that additional accounting errors will not come to
light in the future in these or other areas.
If additional
accounting errors come to light in areas reviewed as part of our
extraordinary processes or otherwise, or if ongoing interpretations
of applicable accounting rules and pronouncements result in
unanticipated changes in our accounting practices or financial
reporting, future restatements of our financial statements may be
required.
We cannot
assure that our regular financial statement preparation and
reporting processes are or will be adequate or that future
restatements will not be required.
As discussed in the
preceding risk factor, the processes underlying the preparation of
the financial statements contained in this report were
extraordinary. During the current year ending December 31, 2020, we
expect to increasingly rely on our regular financial statement
preparation and reporting processes.
While we are in the
process of changing and enhancing our processes (as described
elsewhere in this report) as of the filing date of this report, we
cannot assure you that previously identified material weaknesses
have been fully remediated and we continue to:
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make changes to our finance organization;
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adopt new accounting and reporting processes
and procedures;
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enhance our revenue recognition and other
existing accounting policies and procedures;
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introduce new or enhanced accounting systems
and processes; and
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improve our internal controls over financial
reporting.
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Many of these changes
and enhancements to our regular processes are ongoing as of the
filing date of this report and we continue to assimilate the
changes we have already made. We cannot assure you that the changes
and enhancements made to date, or those that are still in process,
are adequate, will operate as expected, or will be completed in a
timely fashion (if still in process). As a result, we cannot assure
you that we will not discover additional errors, that future
financial reports will not contain material misstatements or
omissions, that future restatements will not be required, that we
will be able to timely complete our remaining SEC filings for
periods subsequent to this report, or that we will be able to
timely comply with our reporting obligations in the future.
RISKS RELATED
TO OUR BUSINESS
We have a
history of operating losses and we may continue to lose money in
the future
For
the years ended December 31, 2019, 2018 and 2017, the Company had a
net loss of $6,602,295, $5,402,369 and $1,466,789, respectively. We
may continue to lose money in the future.
We can
provide no assurances that given that the Class III application for
internal surgical procedures will be approved by the
FDA.
In
November 2019, the Company submitted to the FDA all materials
relevant for the pre-market approval (“PMA”) for HemoStyp as a
Class III application for internal surgical procedures. There can
be no assurances given that the Class III application for internal
surgical procedures will be approved by the FDA.
We have
refocused our business activities to seek to obtain FDA approval of
our products for Class III surgical markets., of which there can be
no assurances given. Further, no
assurances can be given that our Management plans to attempt to
penetrate all market segments will be successful.
We
believe that rather than focusing on immediate sales activities of
our products in targeted markets during this period of time before
receiving anticipated FDA approval for Class III surgical markets,
that refocusing the Company to become a stronger, medical
technology corporation with a patented technology for Class III
surgical markets is a preferable strategy to enhance the Company’s
value and overall market strength. In this regard, the Class III
surgical markets, both domestic and international, represent the
most attractive market for our products due to the limited
competition from other Class III approved ORC (Oxidized Regenerated
Cellulose) products and the resulting premium pricing for
hemostatic agents that can meet the demanding requirements of the
human surgical environment. As of the filing date of this Form
10-K, the FDA review process, which was temporarily held up by the
Covid-19 virus pandemic, is ongoing. In the event we receive Class
III approval, the success of which cannot be assured, we are
evaluating the best paths to attempt to rapidly grow our revenue
and profits in all potential market segments, which could include
one or more commercial partnerships and licensing agreements with
established market participants or an acquisition/merger agreement
with any such participants, each as an alternative to raising the
necessary capital to establish and grow our own marketing and
distribution capabilities via organic growth. We will carefully
evaluate the returns on investment to create shareholder value of
each of these strategies. No assurances can be given that our
Management plans to attempt to penetrate all market segments or be
acquired/merged with an established market participant will be
successful on terms satisfactory to us, if at all.
Our
independent registered public accounting firm has expressed
substantial doubt about our ability to continue as a going concern.
This could make it more difficult for us to raise funds and
adversely affect our relationships with lenders, investors and
suppliers.
Our
independent registered public accounting firm has expressed doubt
about our ability to continue as a going concern. This indicates
that our auditors believe that substantial doubt exists regarding
our ability to continue to remain in business. We cannot provide
any assurance that we will in fact operate our business profitably
or obtain sufficient financing to sustain our business in the event
we are not successful in our efforts to generate sufficient revenue
and operating cash flow. The expression of such doubt by our
independent registered public accounting firm or our inability to
overcome the factors leading to such doubt could have a material
adverse effect on our relationships with prospective customers,
lenders, investors and suppliers, and therefore could have a
material adverse effect on our business.
We can
provide no assurances that the retention of a financial advisor to
assist in strategic review will result in the occurrence of a
specific transaction.
The
Company has been contacted by several medical technology companies
that are active in the surgical equipment and hemostatic products
sectors, and who have expressed an interest in the Company’s
products and business strategy. In response to these inbound
contacts, and to maximize shareholder value, the Company’s board of
directors has determined to conduct a review of strategic
alternatives, which include, without limitation, identifying an
acquisition candidate, joint ventures or other commercial
partnerships, or a standalone growth plan. To assist in this
review, the Company is working with a financial advisory firm.
There can be no assurances that any specific transaction will occur
as a result of the retention of this firm. No assurances can be
given that the Company will identify an acquisition or
commercialization candidate(s) or complete a transaction with one
or more candidates on terms satisfactory to us, if at all.
We will
need additional financing to execute our business plan and fund
operations, which additional financing may not be
available.
We
currently have a working capital deficit, minimal cash and limited
sales of our products. Our Chief Executive Officer has in the past
provided cash loans to us which are repayable upon demand to meet
our working capital needs. These cash loans can be terminated at
any time. As result of the Company’s financial position, we may not
be able to execute our current business plan and fund business
operations long enough to achieve profitability. Our ultimate
success may depend upon our ability to raise additional capital.
There can be no assurance that additional funds will be available
when needed from any source or, if available, will be available on
terms that are acceptable to us.
We
may be required to pursue sources of additional capital through
various means, including joint venture projects and debt or equity
financings. Future financings through equity investments are likely
to be dilutive to existing stockholders. Also, the terms of
securities we may issue in future capital transactions may be more
favorable for our new investors. Newly issued securities may
include preferences, superior voting rights, the issuance of
warrants or other derivative securities, and the issuances of
incentive awards under equity employee incentive plans, which may
have additional dilutive effects. Further, we may incur substantial
costs in pursuing future capital and/or financing, including
investment banking fees, legal fees, accounting fees, printing and
distribution expenses and other costs. We may also be required to
recognize non-cash expenses in connection with certain securities
we may issue, such as convertible notes and warrants, which will
adversely impact our financial condition.
Our
ability to obtain needed financing may be impaired by such factors
as the capital markets, both generally and specifically in the
healthcare industry; the fact that we are not profitable, which
could impact the availability and cost of future financings; and
whether we would be able to obtain capital from investors or
funding sources at all due to adverse economic conditions arising
as a result of the COVID-19 pandemic. If the amount of capital we
are able to raise from financing activities, together with our
revenues from operations, is not sufficient to satisfy our capital
needs, even to the extent that we reduce our operations
accordingly, we may be required to cease operations.
No
guarantee of market acceptance.
Our
success is dependent on market acceptance of our hemostatic gauze
products. We cannot assure you that healthcare market professionals
will conclude that our hemostatic gauze products are useful and/or
safe. We cannot assure you that our hemostatic gauze products will
ultimately achieve or maintain significant market acceptance among
distributors, patients, physicians, or healthcare payers in
general.
We are
dependent upon strategic relationships to conduct our operations
and implement our plans.
To
market and sell our hemostatic gauze products business, we will
endeavor to use the business relationships of our management to
enter into strategic relationships, which may take the form of
joint ventures with private parties and contractual arrangements
with other resource companies, to implement our strategies. We
currently do not have any strategic relationships. We may not be
able to establish these strategic relationships, or if established,
we may not be able to maintain them. In addition, the dynamics of
our relationships with strategic partners may require us to incur
expenses or undertake activities we would not otherwise be inclined
to in order to fulfill our obligations to these partners or
maintain our relationships. If our strategic relationships are not
established or maintained, our business prospects may be limited,
which could diminish our ability to conduct our operations. We can
provide no assurances that distribution agreements will be entered
into on terms satisfactory to us, if at all or that our operations
will be profitable as a result of these distribution
agreements.
We could
experience difficulties in our supply chain.
The
Company’s cellulose products are manufactured in the United States
to our specifications at various facilities. We have established
various contract manufacturing facilities. All of these facilities
have been carefully vetted and have supplied multiple Quality
Control program certificates and are registered FDA facilities.
These facilities have been submitted as part of our PMA submission,
which includes the FDA inspection records of these facilities.
Our
contract manufacturers and packaging facilities are responsible for
quality control and overseeing the packaging and labeling of our
products for distribution. We rely upon the services of our
contract manufacturer to perform its obligations in a satisfactory
manner and we could experience difficulties in our supply
chain.
We are
currently dependent on one hemostatic gauze product line to
generate income.
The
Company’s hemostatic gauze product line is currently our only
product line from which we can derive revenue. Unless we are able
to implement one of the other strategies discussed in the report,
the lack of success in developing a commercial market for this
product line will materially adversely affect our operations.
Our
business may suffer if we do not attract and retain talented
personnel.
Our
success will depend in large measure on the abilities, expertise,
judgment, discretion, integrity and good faith of our management
and other personnel in conducting our intended business. In
addition, we depend on management and employees to interpret market
data correctly and to interpret and respond to economic, market and
other conditions to locate and adopt appropriate business
opportunities. We presently have a small management team, which we
intend to expand in conjunction with our planned operations and
growth. We will have to ensure that management and any key
employees are appropriately compensated; however, their services
cannot be guaranteed. If we are unable to attract and retain
additional key management personnel and enter into satisfactory
employment and other agreements, our business may be adversely
affected.
We may not
be able to adequately protect our technologies or intellectual
property rights.
Our
ability to achieve commercial or strategic success will depend in
part on maintaining patent protection and trade secret protection
of our technologies as well as successfully defending our
intellectual property against third-party challenges. We will only
be able to protect our technologies from unauthorized use by third
parties to the extent that valid and enforceable patents or trade
secrets cover them. Furthermore, the degree of future protection of
our proprietary rights is uncertain because legal means afford only
limited protection and may not adequately protect our rights or
permit us to gain or keep our competitive advantage. Additionally,
legal enforcement of intellectual property rights is costly and we
may not have the financial resources to take the necessary legal
action to protect our rights.
RISKS RELATED
TO OUR INDUSTRY
The
healthcare industry is subject to extensive government regulation,
which can result in increased costs, delays, limits on its
operating flexibility and competitive
disadvantages.
The
healthcare industry is generally subject to extensive regulatory
requirements. Many of these requirements result in significant
costs that may adversely affect our business and financial results.
If we are unable to pass those costs on it would negatively impact
our profit margin.
Healthcare insurance legislation may lead to unintended adverse
effects for businesses involved in our industry. New legislation
that gives the Federal government greater regulatory powers may
lead to negative consequences for certain aspects of our business.
The full scope of the recently passed healthcare legislation may
not be felt for several years, it is therefore difficult to predict
any future consequences that would be challenges to our Company, or
if we can overcome them.
Failure to
comply with laws or government regulations could result in
penalties.
Certain government requirements for technologies in the healthcare
market may require licensure or mandatory minimum standards
relating to the provision of services. Failure to comply with these
requirements could materially affect our ability to expand into new
or existing markets. Future regulatory developments may also cause
disruptions to our operations.
RISKS RELATING
TO OUR ORGANIZATION
We are
subject to the reporting requirements of the federal securities
laws, which can be expensive.
We
are a public reporting company and, accordingly, subject to the
information and reporting requirements of the Exchange Act and
other federal and state securities laws, including compliance with
the Sarbanes-Oxley Act of 2002. The costs of preparing and filing
annual and quarterly reports, proxy statements and other
information with the SEC and furnishing audited reports to
stockholders increase our operating costs.
It
is time consuming, difficult and costly for us to develop and
implement the internal controls and reporting procedures required
by the Sarbanes-Oxley Act. We may need to hire additional financial
reporting, internal controls and other finance personnel in order
to develop and implement appropriate internal controls and
reporting procedures. If we are unable to comply with the internal
control’s requirements of the Sarbanes-Oxley Act, we may not be
able to obtain the independent accountant certifications required
by that Act.
Failure to
achieve and maintain effective disclosure controls or internal
controls could have a material adverse effect on our ability to
report our financial results timely and
accurately.
As
result of our analysis of our system of internal accounting
controls and accounting and financial reporting processes, we have
identified a material weakness in our disclosure controls and
internal controls. These are more specifically discussed in Item 9A
of this Annual Report. As a result of these deficiencies, we must
perform additional analysis and other post-closing procedures to
ensure that our financial statements are prepared in accordance
with US generally accepted accounting principles. As a result, we
will incur expenses and devote significant management resources to
this review process. Furthermore, effective internal controls and
procedures are necessary for us to continue to provide reliable
financial reports. If we continue to have material weaknesses in
our internal controls and procedures, we may not be able to provide
reliable financial reports and our business and operating results
could be harmed.
Public
company compliance requirements may make it more difficult to
attract and retain officers and directors.
The
Sarbanes-Oxley Act and rules subsequently implemented by the SEC
have required changes in corporate governance practices of public
companies. Compliance with the new rules and regulations increases
our operating costs and makes certain activities more time
consuming and costly than if we were not a public company. As a
public company, these new rules and regulations make it more
difficult and expensive for us to obtain director and officer
liability insurance. As a result, it may be more difficult for us
to attract and retain qualified persons to serve on our Board of
Directors or as executive officers.
There exist
risks to stockholders relating to dilution: authorization of
additional securities and reduction of percentage share ownership
following investment.
To
the extent that additional shares of common stock are issued, the
stockholders would experience dilution of their respective
ownership interests in the Company. Additionally, if the Company
issues a substantial number of shares of common stock in connection
with or following an investment, a change in control of the Company
may occur which may affect, among other things, the Company’s
ability to utilize net operating loss carry forwards, if any.
Furthermore, the issuance of a substantial number of shares of
common stock may adversely affect prevailing market prices, if any,
for the common stock and could impair the Company’s ability to
raise additional capital through the sale of its equity securities.
The Company may use consultants and other third parties providing
goods and services or additional capital. These consultants or
third parties may be paid in cash, stock, options or other
securities of the Company, and the consultants or third parties may
be Placement Agents or their affiliates.
RISKS RELATING
TO OUR COMMON STOCK
Our stock
price may be volatile.
The
market price of our common stock is likely to be highly volatile
and could fluctuate widely in price in response to various factors,
many of which are beyond our control, including the following:
|
•
|
changes in the
healthcare industry;
|
|
•
|
competitive pricing
pressures;
|
|
•
|
our ability to obtain
working capital financing;
|
|
•
|
additions or departures
of key personnel;
|
|
•
|
limited “public float”,
in the hands of a small number of persons whose sales or lack of
sales, could result in positive or negative pricing pressure on the
market price for our common stock;
|
|
•
|
our ability to execute
our business plan;
|
|
•
|
operating results that
fall below expectations;
|
|
•
|
loss of any strategic
relationship;
|
|
•
|
regulatory
developments;
|
|
•
|
economic and other
external factors, including among others, effects on the markets
stemming from the COVID-19 pandemic; and
|
|
•
|
period-to-period
fluctuations in our financial results.
|
In
addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These market
fluctuations may also materially and adversely affect the market
price of our common stock.
We have not
paid dividends in the past and do not expect to pay dividends in
the future. Any return on investment may be limited to the value of
our common stock.
We
have never paid cash dividends on our common stock and do not
anticipate doing so in the foreseeable future. The payment of cash
dividends on our common stock will depend on earnings, financial
condition and other business and economic factors affecting us at
such time as our board of directors may consider relevant. If we do
not pay dividends, our common stock may be less valuable because a
return on investment will only occur if our stock price
appreciates.
There is
currently established market for our common stock, and we cannot
ensure that one will ever develop or be
sustained.
The
Company’s common stock is available for trading on the OTC Pink.
Management considers the market for our common stock to be limited.
We can provide no assurances that an established trading market for
our common stock will exist in the future.
Our common
stock is deemed a “penny stock”, which may make it more difficult
for our investors to sell their shares.
Our
common stock is subject to the “penny stock” rules adopted under
Section 15(g) of the Securities Exchange Act of 1934. The penny
stock rules apply to companies whose common stock is not listed on
a national securities exchange and trades at less than $5.00 per
share or that have tangible net worth of less than $5,000,000
($2,000,000 if the company has been operating for three or more
years). These rules require, among other things, that brokers who
trade penny stock to persons other than “established customers”
complete certain documentation, make suitability inquiries of
investors and provide investors with certain information concerning
trading in the security, including a risk disclosure document and
quote information under certain circumstances. Many brokers have
decided not to trade penny stocks because of the requirements of
the penny stock rules and, as a result, the number of
broker-dealers willing to act as market makers in such securities
is limited. If we remain subject to the penny stock rules for any
significant period, it could have an adverse effect on the market,
if any, for our securities. In as much as our securities are
subject to the penny stock rules, investors will find it more
difficult to dispose of our securities.
Offers or
availability for sale of a substantial number of shares of our
common stock may cause the price of our common stock to
decline.
If
our stockholders sell substantial amounts of our common stock in
the public market, or upon the expiration of any holding period
under Rule 144, or expiration of lock-up periods applicable to
outstanding shares, or issued upon the exercise of outstanding
options or warrants, it could create a circumstance commonly
referred to as an “overhang” and in anticipation of which the
market price of our common stock could fall. The existence of an
overhang, whether or not sales have occurred or are occurring, also
could make more difficult our ability to raise additional financing
through the sale of equity or equity-related securities in the
future at a time and price that we deem reasonable or
appropriate.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None
ITEM 2.
DESCRIPTION OF PROPERTY
The
Company is utilizing on a temporary basis rent free, as a central
mailing address as its principal executive office, space located at
10624 S. Eastern Avenue, Ste. A209, Henderson, NV 89052. Conference
facilities are available upon request at a fee. The Company is a
virtual company with personnel in Nevada and six other states.
ITEM 3. LEGAL
PROCEEDINGS
The
following material legal proceedings are pending against us:
A
Complaint was filed with the United States District Court, Southern
District of New York by Steven Safran as Plaintiff against the
Company and Douglas Beplate, its CEO, as Defendant. This court case
was transferred to the United States District Court in Las Vegas,
Nevada. Mr. Safran is seeking damages and monies allegedly owed
pursuant to an employment agreement of approximately $734,000 and
allegedly unpaid loans of $245,824 provided to Defendants. The
Company has denied Plaintiff’s allegations and intends to
vigorously defend said lawsuit. The parties have held various
depositions and the Company had a motion to dismiss which was
denied. The Plaintiff filed a motion to amend his complaint and the
Company has submitted opposition papers and are awaiting an order
from the Court.
In
July 2015, the Company entered into a consulting agreement
retaining the services of Maxim Group LLC. An amended agreement was
executed in January 2018. A total of 4 million shares of common
stock were issued to Maxim in exchange for its obligation to
perform certain advisory and other services. In the fourth quarter
of 2018, the Company notified Maxim of its intent to file for
arbitration pursuant to the consulting agreement. Maxim, without
providing a similar notice to the Company, immediately filed a
complaint with FINRA seeking release of a restrictive legend from a
Company stock certificate in the amount of 500,000 shares. The
Company filed an affirmative defense that the required notice of
arbitration was not provided to the Company prior to filing. The
Company also filed a counterclaim for breach of contract seeking
restitution of the original 4 million shares issued to Maxim. This
case was settled on December 13, 2019, with Maxim agreeing to make
certain payments to the Company post sale of their 500,000 Company
shares, in an amount equal to one-half of their sales proceeds. To
date, the Company has not received any payments.
During 2018, a vendor filed a judgement against the Company related
to disputed invoices. The Company paid $15,000 to settle the
judgement in full during the year ended December 31, 2018.
Philip Forman, who served in positions as Chairman, a director,
Chief Executive Officer and Chief Medical Advisor at various time
between 2011 and October 2015, filed a lawsuit against the Company
and our Chief Executive Officer, Douglas Beplate, in the United
States District Court of the District of Nevada. The claimant is
claiming, among other things, that: the June 25, 2015 Amendment to
his November 10, 2014 Employment Agreement with the Company, which
terminated the Employment Agreement on October 1, 2015, is not
valid because of lack of consideration; that a July 22, 2015 Stock
Purchase Agreement pursuant to which the claimant sold Company
shares issued to him under the Amendment to a third a party is
unenforceable (despite the fact that all payment for the shares
under the Stock Purchase Agreement was made); that the plaintiff’s
2014 Employment Agreement is enforceable and that he is entitled to
cash and stock compensation under that Employment Agreement
(without giving regard to the Amendment); that if the Amendment is
enforceable, he is entitled to the shares issued under the
Amendment (without mention that those shares were sold to a third
party under the Stock Purchase Agreement described above); and that
the Company and Mr. Beplate defrauded the plaintiff relating to the
foregoing. The plaintiff is seeking declaratory judgment regarding
the parties’ relative rights under the Employment Agreement, the
Amendment and the Stock Purchase Agreement; money damages of no
less than $2,795,000; and punitive damages of $8,280,000. The
Company believes that it has meritorious defenses to the matters
claimed as well as counterclaims against the claimant. A motion to
dismiss the plaintiff’s claims was filed and on March 19, 2020 the
motion to dismiss was denied. Discovery is now taking place.
FSR
Inc. commenced a lawsuit in 2018 against Korsair Holdings A.G. in
the U.S. District Court for the Southern District of New York,
seeking among other claims for relief, rescission of the transfer
of 3,050,000 shares of United Health Products that FSR sold to
Korsair in 2011. Third-Party Plaintiff, JEC Consulting Associates,
LLC as Liquidator of LeadDog Capital L.P., Intervenor
(“Intervenor”) in the above matter, filed a third-party complaint
against United Health Products, and Douglas Beplate alleging among
other things that the Company and Mr. Beplate refused to have the
Rule 144 restrictive legend removed from the Korsair certificate
held by JEC, and concomitantly fraudulently deprive JEC as
Liquidator of LeadDog of the ability to sell the Shares in the open
market, knowingly, intentionally and directly causing economic harm
to LeadDog Capital L.P. Intervenor as Third Party Plaintiff further
alleges that the Company and Mr. Beplate as Third-Party Defendants
are not only monetarily liable to Third-Party Plaintiff for
compensatory damages of $2,500,000 but should be made to pay
exemplary damages in an amount determined by the Court, but not
less than an equal amount - $2,500,000. Third-Party Plaintiff
demands judgment for the above referenced amounts and for the Court
to also declare that the 3,050,000 shares are free trading; that
Third-Party Plaintiff’s rights to 2.5 million of the Shares are
superior to the claims of Plaintiff FSR; that Plaintiff FSR has no
claim to 2.5 million of the 3,050,000 Shares reflected by the
Korsair certificate; that the Company and Mr. Beplate are to
instruct its current transfer agent to remove the restrictive
legend on the Korsair certificate for the Shares; and an order
directing the Company and Mr. Beplate to instruct the Company’s
transfer agent to exchange the Korsair certificate for new
free-trading, unrestricted certificates. The Company believes that
it had legal right to decline to instruct the transfer agent to
remove the restrictive legend from the Korsair Shares where the
ownership of the aforementioned shares have been in dispute and the
Korsair shares have not been submitted for transfer to its transfer
agent in proper form under the uniform commercial code. Recently,
the Court granted the motion for a default by FSR, Inc against
Korsair Holdings, AG., but denied any claim for relief against UHP,
Inc. The Court ruled that the SEC must review the claim before the
matter can proceed in Court.
In
2019 the Company commenced the following legal proceeding:
In
October 2019 the Company filed a defamation, trade libel and
unlawful and deceptive practices lawsuit against White Diamond
Research LLC, Adam Gefvert, Streetsweeper.org, Sonya Colberg and
others in response to a stock manipulation scheme to injure UHP for
illegitimate personal gain. The complaint alleged that in August
2019 the above defendants published false and defamatory statements
about UHP in “short and distort” schemes to artificially drive down
the market price of UHP’s common stock while at the same time
having a short position in UHP’s stock, so they could obtain
illicit profits on their short sale positions. This lawsuit was
settled in April 2020 on terms mutually agreed to by the Company
and the defendant parties, without the exchange of monetary payment
or other economic consideration.
In 2020 the Company commenced the following legal proceeding:
On February 7, 2020, the Company filed the Original Petition for
Fraud and Breach of Contract in the 215th Judicial District of
Harris County. The demand for trial by jury was made. Defendants
Patterson Companies Inc., and Patterson Management, L.P., were
served on February 24, 2020. Defendants Patterson Veterinary, Inc.
and Patterson Logistics Services, Inc. were served on February 25,
2020. Defendant Animal Health was served on February 27, 2020. On
March 5, 2020, the Defendants removed to federal court. The
defendants filed their answer in federal court on March 12, 2020.
An “initial pretrial and schedule conference” is set before the
Magistrate Judge on August 25, 2020. Discovery is ongoing.
ITEM 4. MINE
SAFETY DISCLOSURES
None.
PART
II
ITEM 5. MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
PURCHASES OF EQUITY SECURITIES.
(a) Market
information
The
common shares of the Company trade on the OTC Pink under the symbol
UEEC. There has been only limited trading activity to date. The
following table sets forth the high and low sales price of the
common stock on a quarterly basis for the periods presented,
rounded to the nearest penny.
|
|
|
High
|
|
|
Low
|
|
|
For Year Ended
2019
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
1.01
|
|
|
$
|
0.64
|
|
|
Second Quarter
|
|
$
|
0.99
|
|
|
$
|
0.80
|
|
|
Third Quarter
|
|
$
|
2.45
|
|
|
$
|
0.94
|
|
|
Fourth Quarter
|
|
$
|
1.48
|
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
|
|
|
|
For Year Ended
2018
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
1.49
|
|
|
$
|
0.04
|
|
|
Second Quarter
|
|
$
|
1.02
|
|
|
$
|
0.75
|
|
|
Third Quarter
|
|
$
|
0.84
|
|
|
$
|
0.40
|
|
|
Fourth Quarter
|
|
$
|
0.69
|
|
|
$
|
0.30
|
|
(b)
Holders
As
of June 29, 2020, there were approximately 374 holders of record of
the Company’s issued and outstanding shares of common stock.
(c)
Dividends
The
Company has not paid any dividends to date, has not yet generated
earnings sufficient to pay dividends, and currently does not intend
to pay dividends in the foreseeable future.
(d) Stock
Issuances and Repurchases
During the year ended December 31, 2019, the Company issued the
following unregistered securities to accredited investors:
|
Date of
Sale
|
|
Title of
Security
|
|
Number
Sold
|
|
Consideration
Received
and Description
of
Underwriting or
Other
Discounts to
Market Price
or Convertible
Security,
Afforded to
Purchasers
|
|
Exemption from
Registration Claimed
|
|
If
Option,
Warrant or
Convertible Security, terms of
exercise
or
conversion
|
|
|
Jan – March 31,
2019
|
|
Common Stock
|
|
2,700,000 shares
|
|
$75,000 in cash,
$2,401,000 in services rendered, no commissions paid
|
|
Rule 506; Section
4(2)
|
|
Not applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April – September 30,
2019
|
|
Common Stock
|
|
2,095,769 shares
|
|
$1,035,750 in cash,
$205,000 conversion of notes payable and accrued liabilities
|
|
Rule 506; Section
4(2)
|
|
Not applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October – December 31,
2019
|
|
Common Stock
|
|
1,471,430 shares
|
|
$120,000 in cash,
$1,285,250 in services rendered; No commissions paid
|
|
Rule 506; Section
4(2)
|
|
Not applicable
|
|
During the period January 1, 2019 through December 31, 2019, there
were no repurchases of the Company’s unregistered securities.
ITEM 6.
SELECTED FINANCIAL DATA
Not
applicable.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
You should read the following discussion and analysis of our
financial condition and results of operations together with the
section entitled “Explanatory Note” immediately preceding Item 1 of
this Annual Report, ‘‘Selected Financial Data’’ and our financial
statements and related notes appearing elsewhere in this annual
report on Form 10-K. This discussion and analysis contain
forward-looking statements that involve risks, uncertainties and
assumptions. The actual results may differ materially from those
anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, those set forth
under ‘Risk Factors’ and elsewhere in this annual report on Form
10-K.
Restatement
The accompanying
Management’s Discussion and Analysis gives effect to the
restatement adjustments made to the previously reported Financial
Statements for the years ended December 31, 2018 and 2017. For
additional information and a detailed discussion of the
restatement, see Note 2, “Restatement” included in this Annual
Report under the caption Item 8, “Financial Statements and
Supplementary Data”.
It also gives effect to
the restatement adjustments made to the previously reported
unaudited Financial Statements for the quarterly and year to date
periods ended March 31, 2017, June 30, 2017, September 30, 2017,
March 31, 2018, June 30, 2018, September 30, 2018, March 31, 2019,
June 30, 2019 and September 30, 2019. For additional information
and a detailed discussion of the restatements, see Note 2,
“Restatement” included in this Annual Report under the caption Item
8, “Financial Statements and Supplementary Data”.
Results of
Operations years ending December 31, 2019, 2018 and
2017
The following table
sets forth a summary of certain key financial information for the
years ended December 31, 2019, 2018, and 2017:
|
|
|
For the Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
Revenue
|
|
$ |
4,927 |
|
|
$ |
34,876 |
|
|
$ |
183,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$ |
3,611 |
|
|
$ |
12,606 |
|
|
$ |
82,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (expenses)
|
|
$ |
(6,097,723 |
) |
|
$ |
(1,909,580 |
) |
|
$ |
(1,010,603 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss)
|
|
$ |
(6,094,112 |
) |
|
$ |
(1,896,974 |
) |
|
$ |
(928,418 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
$ |
(508,183 |
) |
|
$ |
(3,505,395 |
) |
|
$ |
(538,371 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$ |
(6,602,295 |
) |
|
$ |
(5,402,369 |
) |
|
$ |
(1,466,789 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
Year ended
December 31, 2019 versus year ended December 31,
2018
During the year ended December 31, 2019 and 2018, the Company had
$4,927 and $34,876 of revenues, respectively. The decrease in
revenues is due to the continued focus which commenced in 2018 of
substantially all the Company’s energy and resources being devoted
towards making our technology and product more commercially viable,
by seeking to obtain FDA class III approval for internal surgical
purposes. The Company is continuing this strategy based on our
belief that the greatest value to our shareholders will come from
this FDA Class III approval for general surgical use, and pursuing
opportunities that we anticipate will be available to the Company
if this FDA approval is obtained, including, among other things,
fostering interest from potential merger and acquisition
candidates. In this strategy and approach, the Company made a
determination not to engage new distribution partners as that could
create conflicts with a potential acquiror/commercialization
candidate and tie the Company’s hands from a revenue or branding
perspective. The Company expects that if an acquisition candidate
is identified it may also include a pre-acquisition
commercialization component and in that case current vendor and
future relationships and all pending purchase orders will likely be
facilitated by that company. No assurances can be given that the
Company will identify an acquisition or commercialization candidate
or complete a transaction with such a candidate on terms
satisfactory to us, if at all.
Total operating expenses for the year ended December 31, 2019 and
2018 were $6,097,723 and $1,909,580, respectively. The increase in
operating expenses is due primarily to an increase in
consulting/professional fees and an increase in research and
development expenses. The increase in consulting/professional fees
include the issuance of 1,925,000 shares of our common stock for
services valued at $1,859,250 and stock based modification expense
of $2,021,000 due to the change in vesting conditions of 2,150,000
shares of common stock previously held in escrow during the year
ended December 31, 2019 compared to the Company issuing 850,000
shares of common stock valued at $697,000 for services, including
800,000 shares of common stock to various medical advisors during
the year ended December 31, 2018. The increase in research and
development of $589,437 is due to higher expenses related to the
continued efforts to obtain FDA Class III approval during the
current year relative to the prior year.
Other income (expense) for 2019 and 2018 was $(508,183) and
$(3,505,395), respectively. The decrease in other expense was due
to the decrease in loss on debt settlement of $3,509,330 offset by
an increase in interest expense of $508,183. The decrease in loss
on debt settlement was due to the Company issuing a total of
3,387,000 shares of common stock to settle notes payable balance of
$172,500 and $10,000 of accrued interest. The Company recorded a
$3,509,330 loss on settlement of debt related to this transaction
during the year ended December 31, 2018 and did not have these
transactions during the year ended December 31, 2019. The increase
in interest expense is due to amortization of beneficial conversion
features on convertible notes payable – related party during the
current year and the Company not having these transactions in the
prior year.
Our
net loss for the year ended December 31, 2019 was $6,602,295 as
compared to a net loss of $5,402,369 for the prior year. The
increase in the net loss is due to an increase in stock based stock
compensation of $3,183,250, an increase in research and development
expenses $589,437 and an increase in interest expense of $508,183
offset by a decrease in loss on debt settlement of $3,509,330
compared to the prior year for the reasons described above.
Year ended
December 31, 2018 versus year ended December 31,
2017
During the year ended December 31, 2018 and 2017, the Company had
$34,876 and $183,174 of revenues, respectively. The decrease in
revenues is due to a change in focus and a pivot substantially of
all the Company’s energy in making our technology and product more
commercially viable, by attempting to obtain FDA class III approval
for internal surgical purposes as noted under the heading “Year
ended December 31, 2019 versus year ended December 31, 2018”
above. We continued this strategic focus though 2019.
Total operating expenses for the year ended December 31, 2018 and
2017 were $1,909,580 and $1,010,603, respectively. The increase in
operating expenses is due primarily to an increase in research and
development expenses of approximately $57,000, an increase in
advertising and marketing expenses of approximately $124,000 and an
increase of approximately $696,000 in consulting/professional fees,
which includes the Company issuing 850,000 shares of common stock
valued at $697,000, including 800,000 shares to eight medical
advisors.
Other income (expense) for 2018 and 2017 was $(3,505,395) and
$(538,371), respectively. The increase in other expense was due to
the Company issuing a total of 3,387,000 shares of common stock to
settle notes payable balance of $172,500 and $10,000 of accrued
interest. The Company recorded a $3,509,330 loss on settlement of
debt related to this transaction. During 2017, the Company issued
4,200,000 shares of common stock to settle notes payable balance of
$162,500 and accounts payable balances totaling $82,774. The fair
value of the stock issued was $664,000 and the Company recorded
loss on debt settlement of $418,726. In 2017, the Company had
$82,166 related to a loss on disputed inventory due to shipping
product to a customer and the customer subsequently not paying for
the invoice. The Company determined that due to knowledge currently
available this transaction was not recorded as revenue and recorded
on a loss on the inventory. The Company had $0 interest expense in
2018 due to paying off its notes payable in the first quarter of
2018 compared to $39,479 interest expense in 2017.
Our
net loss for the 2018 was $5,402,369 as compared to a net loss of
$1,466,789 for 2017. The increase in the net loss is due to the
decrease in revenues for the reasons described above and shares
issued for services of $697,000 as mentioned above along with the
issuance of 3,387,000 shares of common stock to settle $172,500 of
outstanding notes payable and $10,000 of accrued interest. The
Company recorded a $3,509,330 loss on settlement of debt related to
this transaction.
UNAUDITED
QUARTERLY DISCUSSION AND ANALYSIS
The following table
sets forth selected unaudited financial data for each of the
periods indicated.
|
|
|
For the Quarters
Ended (Unaudited)
|
|
|
|
|
Sept.
30,
|
|
|
Jun.
30,
|
|
|
Mar.
31,
|
|
|
Sept.
30,
|
|
|
Jun.
30,
|
|
|
Mar.
31,
|
|
|
Sept.
30,
|
|
|
Jun.
30,
|
|
|
Mar.
31
|
|
|
|
|
2019
(Restated)
|
|
|
2019
(Restated)
|
|
|
2019
(Restated)
|
|
|
2018
(Restated)
|
|
|
2018
(Restated)
|
|
|
2018
(Restated)
|
|
|
2017
(Restated)
|
|
|
2017
(Restated)
|
|
|
2017
(Restated)
|
|
|
Revenue
|
|
$ |
- |
|
|
$ |
4,927 |
|
|
$ |
- |
|
|
$ |
9,048 |
|
|
$ |
1,850 |
|
|
$ |
18,943 |
|
|
$ |
67,598 |
|
|
$ |
41,816 |
|
|
|
96,404 |
|
|
Cost of goods sold
|
|
|
- |
|
|
|
502 |
|
|
|
- |
|
|
|
3,480 |
|
|
|
1,790 |
|
|
|
14,760 |
|
|
|
21,290 |
|
|
|
21,296 |
|
|
|
15,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
- |
|
|
|
4,425 |
|
|
|
- |
|
|
|
5,568 |
|
|
|
60 |
|
|
|
4,183 |
|
|
|
46,308 |
|
|
|
20,520 |
|
|
|
81,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
328,720 |
|
|
|
393,893 |
|
|
|
2,635,993 |
|
|
|
289,833 |
|
|
|
901,951 |
|
|
|
369,199 |
|
|
|
181,819 |
|
|
|
129,290 |
|
|
|
149,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
149,994 |
|
|
|
214,863 |
|
|
|
27,405 |
|
|
|
13,527 |
|
|
|
39,041 |
|
|
|
9,391 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total operating expenses
|
|
|
478,714 |
|
|
|
608,756 |
|
|
|
2,663,398 |
|
|
|
303,360 |
|
|
|
940,992 |
|
|
|
378,590 |
|
|
|
181,819 |
|
|
|
129,290 |
|
|
|
149,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(478,714 |
) |
|
|
(604,331 |
) |
|
|
(2,663,398 |
) |
|
|
(297,792 |
) |
|
|
(940,932 |
) |
|
|
(374,407 |
) |
|
|
(135,511 |
) |
|
|
(108,770 |
) |
|
|
(68,729 |
) |
|
Other income (expense)
|
|
|
(46,154 |
) |
|
|
(202,752 |
) |
|
|
- |
|
|
|
- |
|
|
|
3,886 |
|
|
|
(3,509,330 |
) |
|
|
(5,000 |
) |
|
|
(8,854 |
) |
|
|
(15,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
- |
|
|
|
-- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(524,868 |
) |
|
$
|
(807,084 |
) |
|
$
|
(2,663,398 |
) |
|
$
|
(297,792 |
) |
|
$
|
(937,046 |
) |
|
$
|
(3,883,737 |
) |
|
$
|
(140,511 |
) |
|
$
|
(117,624 |
) |
|
$
|
(84,354 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic & diluted
|
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
|
(0.00 |
) |
|
Weight average number of shares
outstanding
|
|
|
176,588,907
|
|
|
|
175,270,956
|
|
|
|
174,322,581
|
|
|
|
172,822,654
|
|
|
|
171,939,365
|
|
|
|
169,970,509
|
|
|
|
154,385,816
|
|
|
|
153,704,591
|
|
|
|
153,591,591
|
|
Three
Months ended September 30, 2019 versus Three Months ended September
30, 2018
During the three months ended September 30, 2019 and 2018, the
Company had $0 and $9,048 of revenues, respectively. The decrease
in revenues is due to the Company not pursuing sales in the current
quarter compared to achieving minimal revenues in the comparable
quarter of the prior year.
Total operating expenses for the three months ended September 30,
2019 and 2018 were $478,714 and $297,972, respectively. The
increase in operating expenses is due primarily to an increase in
research and development expenses from $13,527 to $149,994. The
increase in research and development expenses is due to higher
expenditures on the ongoing process to obtain FDA Class III
approval during the current period.
Our
net loss for the three months ended September 30, 2019 and 2018 was
$524,868 and $297,792, respectively. The increase in the net loss
is due to reduced revenue, increased spending on research and
development along with $46,154 of interest expense related to
amortization of debt discount on convertible notes.
Three
Months Ended June 30, 2019 compared to Three Months Ended June 30,
2018
During the three months ended June 30, 2019 and 2018, the Company
had $4,927 and $1,850 of revenues, respectively. The increase in
revenues is due to the Company having one customer order product
during the current year compared to minimal revenues in the
comparable quarter of the prior year.
Total operating expenses for the three months ended June 30, 2019
and 2018 were $608,756 and $940,992, respectively. The decrease in
operating expenses is due primarily to a decrease in
consulting/professional fees offset by an increase in research and
development expenses of $175,822. The decrease in
consulting/professional fees is due to the Company issuing 800,000
shares of common stock for services valued at $642,500 to various
medical advisors during the three months ended June 30, 2018 and
during the three months ended June 30, 2019 the Company did not
issue any stock for services. The increase in research and
development expenses is due to the Company going through the
process to obtain FDA class III approval during the current period
and not having these expenses in the prior year.
Our
net loss for the three months ended June 30, 2019 and 2018 was
$807,084 and $937,046, respectively. The decrease in the net loss
is due to the Company not issuing shares for services during the
period compared to shares issued for services of $642,500 as
mentioned above, offset by an increase in research and development
expense of $175,822 and interest expense of $202,752 related to
amortization of debt discount related to beneficial conversion
feature on notes payable – related party.
Three
Months Ended March 31, 2019 compared to Three Months Ended March
31, 2018
During the first quarter of 2019 and 2018, the Company had $0 and
$18,943 of revenues, respectively. Revenues decreased compared to
the prior year due to the continued focus which commenced in 2018
of substantially all the Company’s energy in making our technology
and product more commercially viable, by attempting to obtain FDA
Class III approval for internal surgical purposes. This process
requires substantially all of the Company’s resources and energy so
the focus and resources were redirected from sales and marketing
efforts to the FDA process. See the discussion under the heading
“Year ended December 31, 2019 versus year ended December 31,
2018” above for the strategic reasons for our change in
focus.
Total operating expenses for the first quarter of 2019 and 2018
were $2,663,398 and $378,590, respectively. The increase in
operating expenses is due primarily to an increase in
consulting/professional fees. The Company issued 400,000 shares of
common stock for services valued at $380,000 and 2,150,000 shares
of common stock valued at $2,021,000 vested during the first
quarter of 2019 compared to 50,000 shares of common stock for
services valued at $54,500 during the first quarter of 2018.
Our
net loss for the quarter ended March 31, 2019 was $2,663,398 as
compared to net loss of $3,883,737 for the comparable period of the
prior year. The decrease in the net loss is due to the Company
having an increase in operating expenses of $2,284,808 as explained
above offset by a decrease of $3,509,330 in loss on settlement of
debt.
Three
Months Ended September 30, 2018 compared to Three Months Ended
September 30, 2017
During the three month ended September 30, 2018 and 2017, the
Company had $9,048 and $67,598 of revenues, respectively. Revenues
decreased compared to the prior year due to the change in focus
which commenced in 2018 of substantially all the Company’s energy
in making our technology and product more commercially viable, by
seeking to obtain FDA class III approval for internal surgical
purposes. See the discussion under the heading “Year ended
December 31, 2019 versus year ended December 31, 2018” above
for the strategic reasons for our change in focus.
Total operating expenses for the three months ended September 30,
2018 and 2017 were $303,360 and $181,819, respectively. The
increase in operating expenses is due primarily to an increase in
consulting/professional fees of approximately $57,000, an increase
in advertising and marketing expenses of approximately $24,200 and
an increase in travel expenses of approximately $25,140.
Our
net loss for the three months ended September 30, 2018 and 2017 was
$297,792 and $140,511, respectively. The increase in the net loss
is due to the decrease in revenues and the increase in the expenses
mentioned in the preceding paragraph.
Three
Months Ended June 30, 2018 compared to Three Months Ended June 30,
2017
During the three months ended June 30, 2018 and 2017, the Company
had $1,850 and $41,816 of revenues, respectively. Revenues
decreased compared to the prior year due to the change in focus
which commenced in 2018 of substantially all the Company’s energy
in making our technology and product more commercially viable, by
seeking to obtain FDA class III approval for internal surgical
purposes. See the discussion under the heading “Year ended
December 31, 2019 versus year ended December 31, 2018” above
for the strategic reasons for our change in focus. Total operating
expenses for the three months ended June 30, 2018 and 2017 were
$940,992 and $129,290, respectively. The increase in operating
expenses is due primarily to an increase in consulting/professional
fees. The Company issued 800,000 shares of common stock valued at
$642,500 to various medical advisors during the three months ended
June 30, 2018.
Our
net loss for the three months ended June 30, 2018 and 2017 was
$937,046 and $117,624, respectively. The increase in the net loss
is due to the shares issued for services of $620,000 as mentioned
above. The Company did not have this transaction during the three
months ended June 30, 2017.
Three
Months Ended March 31, 2018 compared to Three Months Ended March
31, 2017
During the first quarter of 2018 and 2017, the Company had $18,943
and $96,404 of revenues, respectively. Revenues decreased compared
to the prior year due to a change in focus of substantially all the
Company’s energy in making our technology and product more
commercially viable, by seeking to obtain FDA class III approval
for internal surgical purposes. See the discussion under the
heading “Year ended December 31, 2019 versus year ended
December 31, 2018” above for the strategic reasons for our
change in focus. Total operating expenses for the first quarter of
2018 and 2017 were $378,590 and $149,754, respectively. The
increase in operating expenses is due primarily to an increase in
consulting/professional fees. The Company issued 50,000 shares of
common stock for services valued at $54,500 during the first
quarter of 2018 compared to $0 during the first quarter of 2017.
The Company has also hired additional consultants as the Company’s
operations have begun to increase.
Our
net loss for the quarter ended March 31, 2018 was $3,883,737 as
compared to $84,354 for the comparable period of the prior year.
The increase in the net loss is due to the shares issued for
services of $54,500 as mentioned above along with the issuance of
3,877,000 shares of common stock to settle $172,500 of outstanding
notes payable and $10,000 of accrued interest. The Company recorded
a $3,509,330 loss on settlement of debt related to this
transaction. The Company did not have either of these transactions
during the first quarter of 2017.
Financial
Condition, Liquidity and Capital Resources
As of December 31, 2019, the Company had a negative working capital
of $903,805. The Company has not yet attained a level of
operations, and for the foreseeable future will not be pursuing
commercial operations, which will allow the it to meet its current
overhead while it focuses on its strategy of seeking FDA class III
approval for internal surgical purposes, and opportunities which
may arise from that including, among other things, fostering
interest from potential merger and acquisition candidates or
commercial partners. If we are not successful in our strategy, we
cannot assure that we will be able to adjust to and fund a
marketing and sale strategy, and if we do, we are unable to assure
we will attain profitable operations within the next few business
operating cycles or at all. The report of our independent
registered public accounting firm on our 2019, 2018 and 2017
financial statements includes an explanatory paragraph expressing
substantial doubt about our ability to continue as a going concern.
While the Company has funded its initial operations with private
placements, and secured loans from related parties, there can be no
assurance that adequate financing will continue to be available to
the Company and, if available, on terms that are favorable to the
Company. Our ability to continue as a going concern is also
dependent on many events outside of our direct control, including,
among other things, our ability to achieve our business goals and
objectives, as well as improvement in the economic climate.
Cash
Flows
The
Company’s cash on hand at December 31, 2019, December 31, 2018 and
December 31, 2017 was $16,624, $31,273 and $189,942,
respectively.
The
following table summarizes selected items from our statements of
cash flows for the years ended December 31, 2019, 2018, and
2017:
|
|
|
For the Years
Ended December 31,
|
|
|
(in thousands)
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
Net cash used in operating activities
|
|
$ |
(1,766,764 |
) |
|
$ |
(1,278,662 |
) |
|
$ |
(649,675 |
) |
|
Net cash used in investing activities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Net cash provided by financing activities
|
|
|
1,752,115 |
|
|
|
1,119,993 |
|
|
|
810,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
$ |
(14,649 |
) |
|
$ |
(158,669 |
) |
|
$ |
160,575 |
|
Net Cash
Provided by (Used in) Operating Activities
Net
cash used in operating activities for the year ended December 31,
2019 was $1,766,764. The Company had a net loss of $6,602,295
offset by stock-based compensation of $3,880,250 and amortization
of debt discount of $508,183. The Company also had an increase in
inventory of $44,868, an increase in accounts payable and accrued
expenses of $367,836, an increase in accrued liabilities – related
party of $74,130 and a decrease if prepaid and other assets of
$50,000.
Net cash used in operating activities for the year ended December
31, 2018 was $1,278,662. The Company had net loss of $5,402,369
offset by stock issued for services of $697,000, expenses paid by
an officer of $30,000 and loss on settlement of debt of $3,509,330.
The Company also had a decrease in accounts receivable of $371, a
decrease in inventory of $5,411, an increase in prepaids and other
current assets of $37,886, a decrease in accounts payable and
accrued expenses of $14,019 and a decrease in accrued liabilities –
related party of $71,500.
Net cash used in operating activities was $649,675 for the year
ended December 31, 2017. The Company incurred a net loss of
$1,466,789, an increase in inventory of $71,040 and an increase in
prepaid and other current assets of $12,114 offset by a decrease in
accounts receivable of $99,910, $144,000 in stock for services,
$416,726 in loss on debt settlement, $8,479 related to common stock
issued as debt financing costs, $82,166 related to loss on disputed
inventory an increase in accounts payable and accrued expenses of
$61,432 and an increase in accrued liabilities – related party of
$87,555.
Net Cash
Used by Investing Activities
The
Company did not have any investing activities during the years
ended December 31, 2019, 2018 or 2017.
Net Cash
Provided by (Used in) Financing Activities
Net cash provided by financing activities for the year ended
December 31, 2019 was $1,752,115. This was due to the Company
receiving $1,255,750 in proceeds from the sale of stock and
receiving net proceeds of $496,365 from a related party.
Net cash provided by financing activities for the year ended
December 31, 2018 was $1,119,993. This was due to the Company
receiving $1,415,200 in proceeds from the sale of stock and
repaying a net amount of $280,207 in related party advances and
$15,000 in notes payable.
Net
cash provided by financing activities for the year ended December
31, 2017 was $810,250. The Company received net proceeds from
related party of $133,750, net proceeds on notes payable of $32,500
and $644,000 from the sale of common stock.
Off-Balance
Sheet Arrangements
As
of December 31, 2019, 2018, and 2017, we have no off-balance sheet
arrangements.
Related
Parties
Information concerning related party transactions is included in
the financial statements and related notes, appearing elsewhere in
this annual report on Form 10-K.
Critical
Accounting Policies
Revenue
Recognition
During the year ended December 31, 2017, the Company recognized
revenue per ASC 605 – Revenue Recognition. Under ASC 605
revenue was recognized when persuasive evidence of an arrangement
existed, product had been delivered or services had been rendered,
the price was fixed or determinable and collectability was
reasonably assured. Revenue was recognized net of estimated sales
returns and allowances.
Effective January 1, 2018, the Company adopted ASC 606 — Revenue
from Contracts with Customers. Under ASC 606, the Company
recognizes revenue from the sale of its HemoStyp product by
applying the following steps: (1) identify the contract with a
customer; (2) identify the performance obligations in the contract;
(3) determine the transaction price; (4) allocate the transaction
price to each performance obligation in the contract; and (5)
recognize revenue when each performance obligation is
satisfied.
The Company receives orders for its HemoStyp products directly from
its customers. Revenues are recognized based on the agreed upon
sales or transaction price with the customer when control of the
promised goods are transferred to the customer. The transfer
of goods to the customer and satisfaction of the Company’s
performance obligation will occur either at the time when products
are shipped or when the products arrive and are received by the
customer. The Company provided a 3% net 30 discount to one of
its customers. No other discounts were offered by the Company. The
Company does not provide an estimate for returns as there is no
anticipation for any returns in the normal course of business.
Stock Based
Compensation
The
Company accounts for share-based compensation under the provisions
of ASC 718, Compensation-Stock Compensation. Under the
fair value recognition provisions, stock-based compensation expense
is measured at the fair value of the consideration received, or the
fair value of the equity instruments issued, or liabilities
incurred, whichever is more reliably measured. Share-based
compensation for all stock-based awards to employees and directors
is recognized as an expense over the requisite service period,
which is generally the vesting period.
The Company accounted for stock compensation arrangements with
non-employees in accordance with ASC 505-50-30-11, until January 1,
2019, which provides that an issuer shall measure the fair value of
the equity instruments in these transactions using the stock price
and other measurement assumptions as of the earlier of the
following dates, referred to as the measurement date:
|
|
i.
|
The date at which a
commitment for performance by the counterparty to earn the equity
instruments is reached (a performance commitment); and
|
|
|
|
|
|
|
ii.
|
The date at which the
counterparty’s performance is complete.
|
As of January 1, 2019, the Company accounted for stock compensation
arrangements with non-employees in accordance with Accounting
Standard Update (ASU) 2018-07, Compensation—Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting, which requires that such equity instruments are
recorded at the value on the grant date.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial
statements required by Item 8 can be found beginning on Page F-3 of
this report.
Report of
Independent Registered Public Accounting Firm
To the Stockholders and the Board of
Directors of United Health Products, Inc.
Opinion on the Financial
Statements
We have audited the accompanying balance
sheets of United Health Products, Inc. (the Company) as of December
31, 2019, 2018, and 2017, the related statements of operations,
stockholders' deficiency and cash flows for each of the three years
in the period ended December 31, 2019, and the related notes to the
financial statements (collectively, the financial statements). In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2019, 2018, and 2017, and the results of its
operations and its cash flows for each of the three years in the
period ended December 31, 2019, in conformity with accounting
principles generally accepted in the United States of America.
We have also audited,
in accordance with the standards of the Public
Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial
reporting as of December 31, 2019, based on criteria established in
Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission in 2013. Our
report dated July 9, 2020 expressed an opinion that the Company had
not maintained effective internal control over financial reporting
as of December 31, 2019, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission in 2013.
Restatement
As discussed in Note 2 to the
financial statements, the 2018 and 2017 financial statements have
been restated to correct a misstatement.
Quarterly Financial
Information
The selected quarterly financial data
included in Note 2 to the financial statements contains information
that we did not audit, and, accordingly, we do not express an
opinion on that data. Further, we did not review the quarterly data
in accordance with the standards of the Public Company Accounting
Oversight Board.
Going
Concern
The accompanying financial
statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses
from operations, its total liabilities exceed its total assets, and
its operations have not provided adequate cash flows. This raises
substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters also
are described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
Adoption of New
Accounting Pronouncements
As discussed in Note 3
to the financial statements, the Company has changed its method of
accounting for revenue recognition effective January 1, 2018 due to
the adoption of Accounting Standards Codification 606. Also
discussed in Note 3 to the financial statements, the Company
changed its method of accounting for stock compensation
arrangements with non-employees effective January 1, 2019 due to
the adoption of Accounting Standards Codification 718.
Basis for Opinion
These financial statements are the
responsibility of the Company’s management. Our responsibility is
to express an opinion on the Company’s financial statements based
on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the
Company in accordance with U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Mac Accounting Group, LLP
We have served as the Company's auditor since
2019.
Midvale, Utah
July 9, 2020
Report of
Independent Registered Public Accounting Firm
To the Stockholders and the Board of
Directors of United Health Products, Inc.
Opinion on the Internal Control Over
Financial Reporting
We have audited United
Health Products, Inc.'s (the Company) internal control over
financial reporting as of December 31, 2019, based on criteria
established in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission in 2013. In our opinion, because of the effect of the
material weaknesses described below on the achievement of the
objectives of the control criteria, the Company has not maintained
effective internal control over financial reporting as of December
31, 2019, based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 2013.
We have also audited,
in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (PCAOB), the balance sheets of
United Health Products, Inc. (the Company) as of December 31, 2019,
2018, and 2017, the related statements of operations, stockholders'
deficiency and cash flows for each of the three years in the period
ended December 31, 2019, and the related notes to the financial
statements of the Company and our report dated July 9, 2020
expressed an unqualified opinion.
A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a
material misstatement of the company's annual or interim financial
statements will not be prevented or detected on a timely basis. The
following material weaknesses have been identified and included in
management's assessment:
|
|
-
|
Inadequate Corporate
Governance
|
|
|
-
|
Inadequate Internal
Control Structure and Control Environment
|
|
|
-
|
Lack of IT General
Controls
|
|
|
-
|
Lack of Segregation of
Duties
|
|
|
-
|
Lack of Sufficient
Accounting Resources with SEC Experience, US GAAP Experience, and
Tax Accounting Expertise
|
These material
weaknesses were considered in determining the nature, timing and
extent of audit tests applied in our audit of the 2019 financial
statements, and this report does not affect our report dated July
9, 2020 on those financial statements.
Basis for Opinion
The Company’s management is responsible for
maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over
financial reporting in the accompanying Report on Internal Control
over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the
Company in accordance with U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Definition and Limitations of
Internal Control Over Financial Reporting
A company's internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A
company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition
of the company's assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Mac Accounting Group, LLP
Midvale, Utah
July 9, 2020
UNITED HEALTH
PRODUCTS, INC
Balance
Sheets
|
|
|
December
31,
2019
|
|
|
December
31,
2018
|
|
|
December
31,
2017
|
|
|
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
ASSETS
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$ |
16,624 |
|
|
$ |
31,273 |
|
|
$ |
189,942 |
|
|
Accounts receivable
|
|
|
- |
|
|
|
- |
|
|
|
371 |
|
|
Inventory
|
|
|
76,848 |
|
|
|
31,980 |
|
|
|
37,391 |
|
|
Prepaid
and other current assets
|
|
|
- |
|
|
|
50,000 |
|
|
|
12,114 |
|
|
Total
current assets
|
|
|
93,472 |
|
|
|
113,253 |
|
|
|
239,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
93,472 |
|
|
$ |
113,253 |
|
|
$ |
239,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ DEFICIENCY
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$ |
512,476 |
|
|
$ |
152,970 |
|
|
$ |
176,990 |
|
|
Accrued
liabilities – related party
|
|
|
119,016 |
|
|
|
36,556 |
|
|
|
108,055 |
|
|
Loans
payable – related parties
|
|
|
- |
|
|
|
74,421 |
|
|
|
324,628 |
|
|
Convertible loans payable - related parties
|
|
|
365,785 |
|
|
|
- |
|
|
|
- |
|
|
Notes
payable
|
|
|
- |
|
|
|
- |
|
|
|
182,500 |
|
|
Total
current liabilities
|
|
|
997,277 |
|
|
|
263,947 |
|
|
|
792,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
997,277 |
|
|
|
263,947 |
|
|
|
792,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock - $.001 par value, 300,000,000
shares authorized, 178,300,337, 173,943,138 and 165,152,410 shares
issued at December 31, 2019, 2018 and 2017
|
|
|
178,300 |
|
|
|
173,943 |
|
|
|
165,152 |
|
|
Additional paid-in capital
|
|
|
25,045,754 |
|
|
|
19,200,927 |
|
|
|
13,405,688 |
|
|
Accumulated deficit
|
|
|
(26,127,859 |
) |
|
|
(19,525,564 |
) |
|
|
(14,123,195 |
) |
|
Total
stockholders’ deficiency
|
|
|
(903,805 |
) |
|
|
(150,694 |
) |
|
|
(552,355 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
|
$ |
93,472 |
|
|
$ |
113,253 |
|
|
$ |
239,818 |
|
See notes to financial
statements.
UNITED HEALTH
PRODUCTS, INC
Statements of
Operations
|
|
|
For the Years
Ended
December
31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
4,927 |
|
|
$ |
34,876 |
|
|
$ |
183,174 |
|
|
Cost of sales
|
|
|
1,316 |
|
|
|
22,270 |
|
|
|
100,989 |
|
|
Gross profit
|
|
|
3,611 |
|
|
|
12,606 |
|
|
|
82,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Costs and
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
5,431,335 |
|
|
|
1,832,629 |
|
|
|
990,667 |
|
|
Research
and development expenses
|
|
|
666,388 |
|
|
|
76,951 |
|
|
|
19,936 |
|
|
Total Operating
Expenses
|
|
|
6,097,723 |
|
|
|
1,909,580 |
|
|
|
1,010,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
Operations
|
|
|
(6,094,112 |
) |
|
|
(1,896,974 |
) |
|
|
(928,418 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
(508,183 |
) |
|
|
- |
|
|
|
(39,479 |
) |
|
Other
income
|
|
|
- |
|
|
|
3,935 |
|
|
|
- |
|
|
Loss on
disputed inventory
|
|
|
- |
|
|
|
- |
|
|
|
(82,166 |
) |
|
Loss on
settlement of debt
|
|
|
- |
|
|
|
(3,509,330 |
) |
|
|
(416,726 |
) |
|
Total other income
(expense)
|
|
|
(508,183 |
) |
|
|
(3,505,395 |
) |
|
|
(538,371 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$ |
(6,602,295 |
) |
|
$ |
(5,402,369 |
) |
|
$ |
(1,466,789 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares outstanding
|
|
|
175,876,273 |
|
|
|
172,119,786 |
|
|
|
155,826,936 |
|
See notes to financial
statements.
UNITED HEALTH
PRODUCTS, INC
Statement of
Stockholders’ Deficiency
For the Years
Ended December 31, 2019, 2018 and 2017
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016 - Restated
|
|
|
153,591,590 |
|
|
$ |
153,591 |
|
|
$ |
11,956,770 |
|
|
$ |
(12,656,406 |
) |
|
$ |
(546,045 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for notes
payable
|
|
|
2,500,000 |
|
|
|
2,500 |
|
|
|
232,500 |
|
|
|
- |
|
|
|
235,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for accounts
payable
|
|
|
1,700,000 |
|
|
|
1,700 |
|
|
|
427,300 |
|
|
|
- |
|
|
|
429,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services
|
|
|
200,000 |
|
|
|
200 |
|
|
|
143,800 |
|
|
|
- |
|
|
|
144,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
|
|
|
7,047,820 |
|
|
|
7,048 |
|
|
|
636,952 |
|
|
|
- |
|
|
|
644,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued as debt financing
costs
|
|
|
113,000 |
|
|
|
113 |
|
|
|
8,366 |
|
|
|
- |
|
|
|
8,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
- Restated
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,466,789 |
) |
|
|
(1,466,789 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017 - Restated
|
|
|
165,152,410 |
|
|
|
165,152 |
|
|
|
13,405,688 |
|
|
|
(14,123,195 |
) |
|
|
(552,355 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for notes payable and
accrued interest
|
|
|
3,387,000 |
|
|
|
3,387 |
|
|
|
3,688,443 |
|
|
|
- |
|
|
|
3,691,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services
|
|
|
850,000 |
|
|
|
850 |
|
|
|
696,150 |
|
|
|
- |
|
|
|
697,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock held in
escrow
|
|
|
2,150,000 |
|
|
|
2,150 |
|
|
|
(2,150
|
)
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common Stock
|
|
|
2,403,728 |
|
|
|
2,404 |
|
|
|
1,412,796 |
|
|
|
- |
|
|
|
1,415,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss - Restated
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5,402,369 |
) |
|
|
(5,402,369 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018 - Restated
|
|
|
173,943,138 |
|
|
|
173,943 |
|
|
|
19,200,927 |
|
|
|
(19,525,564 |
) |
|
|
(150,694 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation modification expense
on shares held in escrow
|
|
|
- |
|
|
|
- |
|
|
|
2,021,000 |
|
|
|
- |
|
|
|
2,021,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services
|
|
|
1,925,000 |
|
|
|
1,925 |
|
|
|
1,857,325 |
|
|
|
- |
|
|
|
1,859,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for notes payable –
related party
|
|
|
410,000 |
|
|
|
410 |
|
|
|
204,590 |
|
|
|
- |
|
|
|
205,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
|
|
|
2,022,199 |
|
|
|
2,022 |
|
|
|
1,253,728 |
|
|
|
- |
|
|
|
1,255,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature
|
|
|
- |
|
|
|
- |
|
|
|
508,183 |
|
|
|
- |
|
|
|
508,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
(6,602,295 |
) |
|
|
(6,602,295 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
178,300,337 |
|
|
$ |
178,300 |
|
|
$ |
25,045,754 |
|
|
$ |
(26,127,859 |
) |
|
$ |
(903,805 |
) |
See notes to financial
statements.
UNITED HEALTH
PRODUCTS, INC
Statements of
Cash Flows
|
|
|
For the Years
Ended
December
31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(6,602,295 |
) |
|
$ |
(5,402,369 |
) |
|
$ |
(1,466,789 |
) |
|
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
based compensation
|
|
|
3,880,250 |
|
|
|
697,000 |
|
|
|
144,000 |
|
|
Loss on
settlement of debt
|
|
|
- |
|
|
|
3,509,330 |
|
|
|
416,726 |
|
|
Expenses paid by officer
|
|
|
- |
|
|
|
30,000 |
|
|
|
- |
|
|
Loss on
disputed inventory
|
|
|
- |
|
|
|
- |
|
|
|
82,166 |
|
|
Common
stock issued for debt financing costs
|
|
|
- |
|
|
|
- |
|
|
|
8,479 |
|
|
Amortization of debt discount
|
|
|
508,183 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
- |
|
|
|
371 |
|
|
|
99,910 |
|
|
Inventory
|
|
|
(44,868 |
) |
|
|
5,411 |
|
|
|
(71,040 |
) |
|
Prepaid
and other current assets
|
|
|
50,000 |
|
|
|
(37,886 |
) |
|
|
(12,114 |
) |
|
Accounts
payable and accrued expenses
|
|
|
367,836 |
|
|
|
(9,019 |
) |
|
|
61,432 |
|
|
Accrued
liabilities – related party
|
|
|
74,130 |
|
|
|
(71,500 |
) |
|
|
87,555 |
|
|
Net Cash Used In
Operating Activities
|
|
|
(1,766,764 |
) |
|
|
(1,278,662 |
) |
|
|
(649,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in
Investing Activities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment to related parties
|
|
|
(161,135 |
) |
|
|
(295,207 |
) |
|
|
(21,500 |
) |
|
Proceeds from related parties
|
|
|
657,500 |
|
|
|
15,000 |
|
|
|
155,250 |
|
|
Repayments on notes payable
|
|
|
- |
|
|
|
(15,000 |
) |
|
|
(77,500 |
) |
|
Proceeds from loans payable
|
|
|
- |
|
|
|
- |
|
|
|
110,000 |
|
|
Proceeds from issuance of common stock
|
|
|
1,255,750 |
|
|
|
1,415,200 |
|
|
|
644,000 |
|
|
Net Cash Provided By
Financing Activities
|
|
|
1,752,115 |
|
|
|
1,119,993 |
|
|
|
810,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in
Cash and Cash Equivalents
|
|
|
(14,649 |
) |
|
|
(158,669 |
) |
|
|
160,575 |
|
|
Cash and Cash
Equivalents - Beginning of period
|
|
|
31,273 |
|
|
|
189,942 |
|
|
|
29,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS - END OF PERIOD
|
|
$ |
16,624 |
|
|
$ |
31,273 |
|
|
|
189,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
16,000 |
|
|
Cash
paid for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Non-Cash
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for accounts payable
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
429,000 |
|
|
Shares
issued and held in escrow
|
|
$ |
- |
|
|
$ |
2,150 |
|
|
$ |
- |
|
|
Shares
issued for loans payable – related party
|
|
$ |
205,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
Accounts payable converted to note payable
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
162,500 |
|
|
Common
stock issued for settlement of debt and accrued interest
|
|
$ |
- |
|
|
$ |
182,500 |
|
|
$ |
235,000 |
|
See notes to financial
statements.
UNITED HEALTH
PRODUCTS, INC. AND SUBSIDIARY COMPANY
NOTES TO
FINANCIAL STATEMENTS
FOR THE YEARS
ENDED DECEMBER 31, 2019, 2018 AND 2017
Note 1.
Description of the Business
United Health Products, Inc. (“United” or the “Company”) is a
product development and solutions company focusing on the
wound-care industry and disposable medical supplies markets. The
Company produces an innovative gauze product that absorbs exudate
(fluids which have been discharged from blood vessels) by forming a
gel-like substance upon contact.
Note 2.
Restatement of Financial Statements
The
Company’s management, concluded that, because of two separate
transactions, as discussed in further detail below, the Company’s
previously issued financial statements for all periods beginning
with the quarterly period ended March 31, 2017 through December 31,
2018 (collectively, the “Affected Periods”) should no longer be
relied upon. As such, the Company is restating in this Annual
Report its financial statements for the following periods: (i) the
years ended December 31, 2018 and December 31, 2017, and (ii) all
quarterly periods of 2019, 2018 and 2017.
The first transaction was a revenue transaction that involved a
sale of a lost in-bound shipment of product that was recognized and
recorded in the first quarter of 2017. This sale was canceled in
the second quarter of 2017 and the transaction was subsequently
corrected to back out the revenue and exclude it from the audited
2017 annual financial statements which were included in our 2017
Annual Report on Form 10-K. The Company inadvertently did not go
back and restate the prior interim financial statements for 2017 to
reflect the correction. The second transaction was a revenue
transaction regarding product that was in the shipping process at
the end of December 2017 that was recognized and recorded as
revenue in the 2017 audited annual financial statements where there
was a question related to the timing of revenue recognition due to
the shipping and receiving terms. The Company’s customer has not
paid the Company for this product and the Company, in consultation
with its former auditor, ultimately wrote off the receivable in the
third and fourth quarters of 2018 as a bad debt expense. Those
write-offs were reflected in the Company’s Quarterly Report on Form
10-Q for the period ended September 30, 2018 and Company’s Annual
Report on Form 10-K for the year ended December 31, 2018. However,
in light of the information currently available to the Company, the
Company determined that no revenue should have been recognized in
2017 or 2018 due to the customer disputing the shipment and
refusing to pay the amount owed and therefore the transaction did
not meet all of the revenue recognition criteria under ASC 606,
which the Company adopted on January 1, 2018. The Company is
continuing collection efforts to recover payment from its customer,
and it instituted a lawsuit against the customer in February 2020
to recover payment, which is ongoing (see “Note 10”). Due to
uncertainties inherent in litigation, the Company cannot predict
the outcome of this action.
During the process of restating its financial statements due to the
transaction mentioned above, other adjustments were noted and
related to inventory valuation, loss on settlement of debt and
equity transactions along with adjustments to accruals based on
factors known at the time of this filing versus what was known as
of the original filing date. There was no impact on the
statement of operations for the 3 months ended September 30,
2017
Impact of the
Restatement – December 31, 2018 and December 31, 2017
|
|
|
Year Ended
December 31, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
45,862 |
|
|
$
|
(10,986 |
) |
|
$ |
34,876 |
|
|
Cost of sales
|
|
$
|
96,701 |
|
|
$
|
(74,431 |
) |
|
$
|
22,270 |
|
|
Gross profit
|
|
$
|
(50,839 |
) |
|
$
|
63,445 |
|
|
$
|
12,606 |
|
|
Selling, general and
administrative expenses
|
|
$
|
2,249,780 |
|
|
$
|
(417,151 |
) |
|
$
|
1,832,629 |
|
|
Total operating expenses
|
|
$
|
2,326,731 |
|
|
$
|
(417,151 |
) |
|
$
|
1,909,580 |
|
|
Loss from operations
|
|
$
|
(2,377,570 |
) |
|
$
|
480,596 |
|
|
$
|
(1,896,974 |
) |
|
Loss on settlement of debt
|
|
$
|
(3,632,500 |
) |
|
$
|
123,170 |
|
|
$
|
(3,509,330 |
) |
|
Total other income (expense)
|
|
$
|
(3,628,565 |
) |
|
$
|
123,170 |
|
|
$
|
(3,505,395 |
) |
|
Net loss
|
|
$
|
(6,006,135 |
) |
|
$
|
603,766 |
|
|
$
|
(5,402,369 |
) |
|
Net loss per share, basic and
diluted
|
|
$ |
(0.04 |
) |
|
$
|
0.01 |
|
|
$ |
(0.03 |
) |
|
|
|
As of December
31, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
11,010 |
|
|
$
|
(11,010 |
) |
|
$ |
- |
|
|
Inventory
|
|
$
|
83,694 |
|
|
$
|
(51,714 |
) |
|
$
|
31,980 |
|
|
Prepaid and other current
assets
|
|
$
|
- |
|
|
$
|
50,000 |
|
|
$
|
50,000 |
|
|
Total current assets
|
|
$
|
125,977 |
|
|
$
|
(12,724 |
) |
|
$
|
113,253 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
243,713 |
|
|
$
|
(90,743 |
) |
|
$
|
152,970 |
|
|
Accrued liabilities – related
party
|
|
$
|
25,000 |
|
|
$
|
11,556 |
|
|
$
|
36,556 |
|
|
Liability for unissued
shares
|
|
$
|
201,843 |
|
|
$
|
(201,843 |
) |
|
$
|
- |
|
|
Loans payable – related
party
|
|
$
|
8,121 |
|
|
$
|
66,300 |
|
|
$
|
74,421 |
|
|
Total liabilities
|
|
$
|
478,677 |
|
|
$
|
(214,730 |
) |
|
$
|
263,947 |
|
|
Common stock
|
|
$
|
185,943 |
|
|
$
|
(12,000 |
) |
|
$
|
173,943 |
|
|
Additional paid-in
capital
|
|
$
|
19,198,343 |
|
|
$
|
2,584 |
|
|
$
|
19,200,927 |
|
|
Accumulated deficit
|
|
$
|
(19,736,986 |
) |
|
$
|
211,422 |
|
|
$
|
(19,525,564 |
) |
|
Total stockholders’
deficiency
|
|
$ |
(352,700 |
) |
|
$
|
202,006 |
|
|
$ |
(150,694 |
) |
|
|
|
Year Ended
December 31, 2018
|
|
|
|
|
As
Previously
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(6,006,135 |
) |
|
$
|
603,766 |
|
|
$ |
(5,402,369 |
) |
|
Loss on debt settlement
|
|
$
|
3,632,500 |
|
|
$
|
(123,170 |
) |
|
$
|
3,509,330 |
|
|
Write-off of inventory
|
|
$
|
60,789 |
|
|
$
|
(60,789 |
) |
|
$
|
- |
|
|
Stock for services
|
|
$
|
674,500 |
|
|
$
|
22,500 |
|
|
$
|
697,000 |
|
|
Bad debt expense
|
|
$
|
447,574 |
|
|
$
|
(447,574 |
) |
|
$
|
- |
|
|
Accounts receivable
|
|
$
|
(10,614 |
) |
|
$
|
10,985 |
|
|
$
|
371 |
|
|
Inventory
|
|
$
|
19,051 |
|
|
$
|
(13,640 |
) |
|
$
|
5,411 |
|
|
Prepaid and other current
assets
|
|
$
|
12,114 |
|
|
$
|
(50,000 |
) |
|
$
|
(37,886 |
) |
|
Accounts payable and accrued
expenses
|
|
$
|
(71,941 |
) |
|
$
|
57,922 |
|
|
$
|
(14,019 |
) |
|
Accrued liabilities – related
party
|
|
$
|
(61,500 |
) |
|
$
|
(10,000 |
) |
|
$
|
(71,500 |
) |
|
Total cash used in operating
activities
|
|
$
|
(1,273,662 |
) |
|
$
|
(10,000 |
) |
|
$
|
(1,283,662 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment to related parties
|
|
$
|
(305,207 |
) |
|
$
|
10,000 |
|
|
$
|
(295,207 |
) |
|
Total cash provided by financing
activities
|
|
$ |
1,114,993 |
|
|
$
|
10,000 |
|
|
$ |
1,124,993 |
|
|
|
|
Year Ended
December 31, 2017
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
Adjustment
|
|
|
|
As
Restated
|
|
|
Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
645,652 |
|
|
$
|
(462,474 |
) |
|
$ |
183,174 |
|
|
Cost of sales
|
|
$
|
67,016 |
|
|
$
|
33,973 |
|
|
$
|
100,989 |
|
|
Gross profit
|
|
$
|
578,636 |
|
|
$
|
(496,451 |
) |
|
$
|
82,185 |
|
|
General and administrative
|
|
$
|
1,278,018 |
|
|
$
|
(287,351 |
) |
|
$
|
990,667 |
|
|
Total operating expenses
|
|
$
|
1,297,954 |
|
|
$
|
(287,351 |
) |
|
$
|
1,010,603 |
|
|
Loss from operations
|
|
$
|
(719,318 |
) |
|
$
|
(209,100 |
) |
|
$
|
(928,418 |
) |
|
Interest expense
|
|
$
|
(31,000 |
) |
|
$
|
(8,479 |
) |
|
$
|
(39,479 |
) |
|
Loss on customer disputed
inventory shipment
|
|
$
|
- |
|
|
$
|
(82,166 |
) |
|
$
|
(82,166 |
) |
|
Loss on settlement of debt
|
|
$
|
(184,650 |
) |
|
$
|
(232,076 |
) |
|
$
|
(416,726 |
) |
|
Total other income (expense)
|
|
$
|
(215,650 |
) |
|
$
|
(322,721 |
) |
|
$
|
(538,371 |
) |
|
Net loss
|
|
$ |
(934,968 |
) |
|
$
|
(531,821 |
) |
|
$ |
(1,466,789 |
) |
|
|
|
As of December
31, 2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
447,970 |
|
|
$
|
(447,599 |
) |
|
$ |
371 |
|
|
Inventory
|
|
$
|
163,534 |
|
|
$
|
(126,143 |
) |
|
$
|
37,391 |
|
|
Total current assets
|
|
$
|
813,560 |
|
|
$
|
(573,742 |
) |
|
$
|
239,818 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
325,654 |
|
|
$
|
(148,665 |
) |
|
$
|
176,989 |
|
|
Accrued liabilities – related
parties
|
|
$
|
86,500 |
|
|
$
|
21,556 |
|
|
$
|
108,056 |
|
|
Liability for unissued
shares
|
|
$
|
211,843 |
|
|
$
|
(211,843 |
) |
|
$
|
- |
|
|
Loans payable – related
parties
|
|
$
|
268,328 |
|
|
$
|
56,300 |
|
|
$
|
324,628 |
|
|
Total liabilities
|
|
$
|
1,074,825 |
|
|
$
|
(282,652 |
) |
|
$
|
792,173 |
|
|
Common stock
|
|
$
|
164,969 |
|
|
$
|
183 |
|
|
$
|
165,152 |
|
|
Additional paid-in
capital
|
|
$
|
13,304,617 |
|
|
$
|
101,071 |
|
|
$
|
13,405,688 |
|
|
Accumulated deficit
|
|
$
|
(13,730,851 |
) |
|
$
|
(392,344 |
) |
|
$
|
(14,123,195 |
) |
|
Total stockholders’
deficiency
|
|
$ |
(261,265 |
) |
|
$
|
(291,090 |
) |
|
$ |
(552,355 |
) |
|
|
|
Year Ended
December 31, 2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(934,968 |
) |
|
$
|
(531,821 |
) |
|
$ |
(1,466,789 |
) |
|
Stock based compensation
|
|
$
|
429,000 |
|
|
$
|
(285,000 |
) |
|
$
|
144,000 |
|
|
Loss on settlement of
debt
|
|
$
|
184,650 |
|
|
$
|
232,076 |
|
|
$
|
416,726 |
|
|
Loss on customer disputed
inventory shipment
|
|
$
|
- |
|
|
$
|
82,166 |
|
|
$
|
82,166 |
|
|
Bad debt expense
|
|
$
|
20,226 |
|
|
$
|
(20,226 |
) |
|
$
|
- |
|
|
Common stock issued for debt
financing costs
|
|
$
|
- |
|
|
$
|
8,479 |
|
|
$
|
8,479 |
|
|
Accounts receivable
|
|
$
|
(362,569 |
) |
|
$
|
462,479 |
|
|
$
|
99,910 |
|
|
Inventory
|
|
$
|
(101,566 |
) |
|
$
|
30,526 |
|
|
$
|
(71,040 |
) |
|
Accounts payable and accrued
expenses
|
|
$
|
44,941 |
|
|
$
|
16,491 |
|
|
$
|
61,432 |
|
|
Accrued liabilities – related
party
|
|
$ |
86.500 |
|
|
$
|
1,055 |
|
|
$ |
87,555 |
|
|
Total cash used in operating
activities
|
|
$
|
(645,900 |
) |
|
$
|
(3,775 |
) |
|
$
|
(649,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from related
parties
|
|
$
|
111,500 |
|
|
$
|
43,750 |
|
|
$
|
155,250 |
|
|
Proceeds from issuance of
common stock
|
|
$
|
683,975 |
|
|
$
|
(39,975 |
) |
|
$
|
644,000 |
|
|
Total cash provided by
financing activities
|
|
$
|
806,475 |
|
|
$
|
3,775 |
|
|
$
|
810,250 |
|
Impact of the
Restatement – Quarterly Interim Periods
(Unaudited)
|
|
|
Three Months
Ended September 30, 2019
|
|
|
|
|
As
Previously
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
$ |
294,847 |
|
|
$
|
33,873 |
|
|
$ |
328,720 |
|
|
Research and development
expenses
|
|
$
|
141,820 |
|
|
$
|
8,174 |
|
|
$
|
149,994 |
|
|
Total operating expenses
|
|
$
|
436,667 |
|
|
$
|
42,047 |
|
|
$
|
478,714 |
|
|
Loss from operations
|
|
$
|
(436,667 |
) |
|
$
|
(42,047 |
) |
|
$
|
(478,714 |
) |
|
Interest expense
|
|
$
|
- |
|
|
$
|
(46,154 |
) |
|
$
|
(46,154 |
) |
|
Total other income (expense)
|
|
$
|
- |
|
|
$
|
(46,154 |
) |
|
$
|
(46,154 |
) |
|
Net loss
|
|
$ |
(436,667 |
) |
|
$
|
(88,201 |
) |
|
$ |
(524,868 |
) |
|
|
|
Nine Months
Ended September 30, 2019
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
25,009 |
|
|
$
|
(20,082 |
) |
|
$ |
4,927 |
|
|
Cost of goods sold
|
|
$ |
9,887 |
|
|
$
|
(9,385 |
) |
|
$ |
502 |
|
|
Gross profit
|
|
$
|
15,122 |
|
|
$
|
(10,697 |
) |
|
$
|
4,425 |
|
|
Selling, general and
administrative expenses
|
|
$
|
3,609,708 |
|
|
$
|
(251,101 |
) |
|
$
|
3,358,607 |
|
|
Research and development
expenses
|
|
$
|
384,088 |
|
|
$
|
8,175 |
|
|
$
|
392,263 |
|
|
Total operating expense
|
|
$
|
3,993,796 |
|
|
$
|
(242,926 |
) |
|
$
|
3,750,870 |
|
|
Loss from operations
|
|
$
|
(3,978,674 |
) |
|
$
|
232,229 |
|
|
$
|
(3,746,445 |
) |
|
Interest expense
|
|
$
|
(156,890 |
) |
|
$
|
(92,016 |
) |
|
$
|
(248,906 |
) |
|
Total other income (expense)
|
|
$
|
(156,890 |
) |
|
$
|
(92,016 |
) |
|
$
|
(248,906 |
) |
|
Net loss
|
|
$ |
(4,135,564 |
) |
|
$
|
140,213 |
|
|
$ |
(3,995,351 |
) |
|
|
|
Three Months
Ended September 30, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
$ |
403,359 |
|
|
$
|
(113,526 |
) |
|
$ |
289,833 |
|
|
Research and development
expenses
|
|
$
|
- |
|
|
$
|
13,527 |
|
|
$
|
13,527 |
|
|
Total operating expenses
|
|
$
|
403,359 |
|
|
$
|
(100,000 |
) |
|
$
|
303,359 |
|
|
Loss from operations
|
|
$
|
(397,791 |
) |
|
$
|
100,000 |
|
|
$
|
(297,791 |
) |
|
Net loss
|
|
$ |
(397,791 |
) |
|
$
|
100,000 |
|
|
$ |
(297,791 |
) |
|
|
|
Nine Months
Ended September 30, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
40,826 |
|
|
$
|
(10,985 |
) |
|
$ |
29,841 |
|
|
Cost of goods sold
|
|
$ |
14,147 |
|
|
$
|
5,884 |
|
|
$ |
20,031 |
|
|
Gross profit
|
|
$
|
26,679 |
|
|
$
|
(16,869 |
) |
|
$
|
9,810 |
|
|
Selling, general and
administrative expenses
|
|
$
|
1,700,442 |
|
|
$
|
(139,459 |
) |
|
$
|
1,560,983 |
|
|
Research and development
expenses
|
|
$
|
- |
|
|
$
|
61,958 |
|
|
$
|
61,958 |
|
|
Total operating expense
|
|
$
|
1,700,442 |
|
|
$
|
(77,500 |
) |
|
$
|
1,622,942 |
|
|
Loss from operations
|
|
$
|
(1,673,763 |
) |
|
$
|
60,632 |
|
|
$
|
(1,613,131 |
) |
|
Loss on settlement of debt
|
|
$
|
(3,632,500 |
) |
|
$
|
123,170 |
|
|
$
|
(3,509,330 |
) |
|
Total other income (expense)
|
|
$
|
(3,628,614 |
) |
|
$
|
123,170 |
|
|
$
|
(3,505,444 |
) |
|
Net loss
|
|
$
|
(5,302,377 |
) |
|
$
|
183,802 |
|
|
$
|
(5,118,575 |
) |
|
|
|
Nine Months
Ended September 30, 2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
336,543 |
|
|
$
|
(130,725 |
) |
|
$ |
205,818 |
|
|
Gross profit
|
|
$
|
278,578 |
|
|
$
|
(130,725 |
) |
|
$
|
147,853 |
|
|
Loss from operations
|
|
$
|
(182,285 |
) |
|
$
|
(130,725 |
) |
|
$
|
(313,010 |
) |
|
Interest expense
|
|
$
|
(21,000 |
) |
|
$
|
(8,479 |
) |
|
$
|
(29,479 |
) |
|
Total other income
(expense)
|
|
$
|
(21,000 |
) |
|
$
|
(8,479 |
) |
|
$
|
(29,479 |
) |
|
Net loss
|
|
$ |
(203,285 |
) |
|
$
|
(139,204 |
) |
|
$ |
(342,489 |
) |
|
|
|
As of September
30, 2019
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
36,019 |
|
|
$
|
(31,092 |
) |
|
$ |
4,927 |
|
|
Inventory
|
|
$
|
109,627 |
|
|
$
|
(42,328 |
) |
|
$
|
67,299 |
|
|
Total current assets
|
|
$
|
233,865 |
|
|
$
|
(73,421 |
) |
|
$
|
160,444 |
|
|
Total assets
|
|
$
|
233,865 |
|
|
$
|
(73,421 |
) |
|
$
|
160,444 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
306,895 |
|
|
$
|
(53,715 |
) |
|
$
|
253,180 |
|
|
Accrued liabilities – related
party
|
|
$
|
17,251 |
|
|
$
|
8,979 |
|
|
$
|
26,230 |
|
|
Liability for unissued
shares
|
|
$
|
201,843 |
|
|
$
|
(201,843 |
) |
|
$
|
- |
|
|
Loans payable – related
party
|
|
$
|
- |
|
|
$
|
61,421 |
|
|
$
|
61,421 |
|
|
Total current liabilities
|
|
$
|
525,989 |
|
|
$
|
(185,158 |
) |
|
$
|
340,831 |
|
|
Total liabilities
|
|
$
|
525,989 |
|
|
$
|
(185,158 |
) |
|
$
|
340,831 |
|
|
Additional paid-in capital
|
|
$
|
23,403,837 |
|
|
$
|
(239,898 |
) |
|
$
|
23,163,939 |
|
|
Accumulated deficit
|
|
$
|
(23,872,550 |
) |
|
$
|
351,636 |
|
|
$
|
(23,520,914 |
) |
|
Total stockholders’
deficiency
|
|
$ |
(292,124 |
) |
|
$
|
111,737 |
|
|
$ |
(180,387 |
) |
|
|
|
As of September
30, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
356,399 |
|
|
$
|
(347,599 |
) |
|
$ |
8,800 |
|
|
Inventory
|
|
$
|
160,833 |
|
|
$
|
(143,013 |
) |
|
$
|
17,820 |
|
|
Total current assets
|
|
$
|
648,120 |
|
|
$
|
(490,612 |
) |
|
$
|
157,508 |
|
|
Total assets
|
|
$
|
648,120 |
|
|
$
|
(490,612 |
) |
|
$
|
157,508 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
273,891 |
|
|
$
|
(141,212 |
) |
|
$
|
132,679 |
|
|
Accrued liabilities – related
party
|
|
$
|
86,500 |
|
|
$
|
4,100 |
|
|
$
|
90,600 |
|
|
Liability for unissued
shares
|
|
$
|
326,843 |
|
|
$
|
(326,843 |
) |
|
$
|
- |
|
|
Loans payable – related
party
|
|
$
|
169,828 |
|
|
$
|
66,300 |
|
|
$
|
236,128 |
|
|
Total current liabilities
|
|
$
|
857,062 |
|
|
$
|
(397,655 |
) |
|
$
|
459,407 |
|
|
Total liabilities
|
|
$
|
857,062 |
|
|
$
|
(397,655 |
) |
|
$
|
459,407 |
|
|
Common stock
|
|
$
|
184,823 |
|
|
$
|
(11,750 |
) |
|
$
|
173,073 |
|
|
Additional paid-in capital
|
|
$
|
18,639,463 |
|
|
$
|
127,334 |
|
|
$
|
18,766,797 |
|
|
Accumulated deficit
|
|
$
|
(19,033,228 |
) |
|
$
|
(208,542 |
) |
|
$
|
(19,241,770 |
) |
|
Total stockholders’
deficiency
|
|
$ |
(208,942 |
) |
|
$
|
(92,957 |
) |
|
$ |
(301,899 |
) |
|
|
|
As of September
30, 2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Balance Sheet Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
165,609 |
|
|
$
|
(136,071 |
) |
|
$ |
29,538 |
|
|
Inventory
|
|
$
|
79,863 |
|
|
$
|
(10,005 |
) |
|
$
|
69,858 |
|
|
Total current assets
|
|
$
|
305,795 |
|
|
$
|
(146,076 |
) |
|
$
|
159,719 |
|
|
Total assets
|
|
$
|
305,795 |
|
|
$
|
(146,076 |
) |
|
$
|
159,719 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
460,681 |
|
|
$
|
(88,287 |
) |
|
$
|
372,394 |
|
|
Liability for unissued
shares
|
|
$
|
145,543 |
|
|
$
|
(145,543 |
) |
|
$
|
- |
|
|
Loans payable – related
parties
|
|
$
|
262,078 |
|
|
$
|
12,550 |
|
|
$
|
274,628 |
|
|
Total current liabilities
|
|
$
|
1,070,802 |
|
|
$
|
(221,280 |
) |
|
$
|
849,522 |
|
|
Common stock
|
|
$
|
156,697 |
|
|
$
|
(76 |
) |
|
$
|
156,621 |
|
|
Additional paid-in capital
|
|
$
|
12,077,464 |
|
|
$
|
75,005 |
|
|
$
|
12,152,469 |
|
|
Accumulated deficit
|
|
$
|
(12,999,168 |
) |
|
$
|
272 |
|
|
$
|
(12,998,896 |
) |
|
Total stockholders’
deficiency
|
|
$ |
(765,007 |
) |
|
$
|
75,201 |
|
|
$ |
(689,806 |
) |
|
|
|
Nine Months
Ended September 30, 2019
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Cash Flows Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(4,135,564 |
) |
|
$
|
140,214 |
|
|
$ |
(3,995,350 |
) |
|
Stock based compensation
|
|
$
|
2,723,500 |
|
|
$
|
(322,500 |
) |
|
$
|
2,401,000 |
|
|
Amortization of debt
discount
|
|
$
|
156,890 |
|
|
$
|
92,018 |
|
|
$
|
248,908 |
|
|
Accounts receivable
|
|
$ |
(25,009 |
) |
|
$
|
20,082 |
|
|
$ |
(4,927 |
) |
|
Inventory
|
|
$
|
(25,933 |
) |
|
$
|
(9,386 |
) |
|
$
|
(35,319 |
) |
|
Prepaid and other current
assets
|
|
$
|
- |
|
|
$
|
50,000 |
|
|
$
|
50,000 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
63,182 |
|
|
$
|
29,572 |
|
|
$
|
92,754 |
|
|
|
|
Nine Months
Ended September 30, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Cash Flows Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(5,302,377 |
) |
|
$
|
183,802 |
|
|
$ |
(5,118,575 |
) |
|
Stock based compensation
|
|
$
|
674,500 |
|
|
$
|
22,500 |
|
|
$
|
697,000 |
|
|
Loss on settlement of debt
|
|
$
|
3,632,500 |
|
|
$
|
(123,170 |
) |
|
$
|
3,509,330 |
|
|
Bad debt expense
|
|
$ |
100,000 |
|
|
$
|
(100,000 |
) |
|
$ |
- |
|
|
Inventory
|
|
$ |
2,701 |
|
|
$
|
16,871 |
|
|
$ |
19,572 |
|
|
Accrued liabilities – related
party
|
|
$
|
- |
|
|
$
|
(10,000 |
) |
|
$
|
(10,000 |
) |
|
Cash used in operating
activities
|
|
$
|
(900,754 |
) |
|
$
|
(10,000 |
) |
|
$
|
(910,754 |
) |
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Proceeds from notes payable –
related party
|
|
$
|
15,000 |
|
|
$
|
10,000 |
|
|
$
|
25,000 |
|
|
Cash provided by financing
activities
|
|
$
|
841,700 |
|
|
$
|
10,000 |
|
|
$
|
851,700 |
|
|
|
|
Nine Months
Ended September 30, 2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(203,285 |
) |
|
$
|
(139,204 |
) |
|
$ |
(342,489 |
) |
|
Shares issued for debt financing
costs
|
|
$
|
- |
|
|
$
|
8,479 |
|
|
$
|
8,479 |
|
|
Accounts receivable
|
|
$ |
(59,982 |
) |
|
$
|
130,725 |
|
|
$ |
70,743 |
|
|
Inventory
|
|
$
|
(17,895 |
) |
|
$
|
(3,447 |
) |
|
$
|
(21,342 |
) |
|
Accounts payable and accrued
expenses
|
|
$
|
(14,382 |
) |
|
$
|
3,447 |
|
|
$
|
(10,935 |
) |
|
|
|
Three Months
Ended June 30, 2019
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
25,009 |
|
|
$
|
(20,082 |
) |
|
$ |
4,927 |
|
|
Cost of goods sold
|
|
$ |
9,887 |
|
|
$
|
(9,385 |
) |
|
$ |
502 |
|
|
Gross profit
|
|
$
|
15,122 |
|
|
$
|
(10,697 |
) |
|
$
|
4,425 |
|
|
Selling, general and
administrative expenses
|
|
$ |
356,369 |
|
|
$
|
37,524 |
|
|
$ |
393,893 |
|
|
Total operating expenses
|
|
$
|
571,232 |
|
|
$
|
37,524 |
|
|
$
|
608,756 |
|
|
Loss from operations
|
|
$
|
(556,110 |
) |
|
$
|
(48,222 |
) |
|
$
|
(604,332 |
) |
|
Interest expense
|
|
$
|
(156,890 |
) |
|
$
|
(45,862 |
) |
|
$
|
(202,752 |
) |
|
Total other income (expense)
|
|
$
|
(156,890 |
) |
|
$
|
(45,862 |
) |
|
$
|
(202,752 |
) |
|
Net loss
|
|
$ |
(713,000 |
) |
|
$
|
(94,084 |
) |
|
$ |
(807,084 |
) |
|
|
|
Six Months Ended
June 30, 2019
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
25,009 |
|
|
$
|
(20,082 |
) |
|
$ |
4,927 |
|
|
Cost of goods sold
|
|
$ |
9,887 |
|
|
$
|
(9,385 |
) |
|
$ |
502 |
|
|
Gross profit
|
|
$
|
15,122 |
|
|
$
|
(10,697 |
) |
|
$
|
4,425 |
|
|
Selling, general and
administrative expenses
|
|
$
|
3,314,861 |
|
|
$
|
(284,975 |
) |
|
$
|
3,029,886 |
|
|
Total operating expense
|
|
$
|
3,557,129 |
|
|
$
|
(284,975 |
) |
|
$
|
3,272,154 |
|
|
Loss from operations
|
|
$
|
(3,542,007 |
) |
|
$
|
274,277 |
|
|
$
|
(3,267,730 |
) |
|
Interest expense
|
|
$
|
(156,890 |
) |
|
$
|
(45,862 |
) |
|
$
|
(202,752 |
) |
|
Total other income (expense)
|
|
$
|
(156,890 |
) |
|
$
|
(45,862 |
) |
|
$
|
(202,752 |
) |
|
Net loss
|
|
$ |
(3,698,897 |
) |
|
$
|
228,415 |
|
|
$ |
(3,470,482 |
) |
|
|
|
Three Months
Ended June 30, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
$ |
918,491 |
|
|
$ |
(16,540 |
) |
|
$ |
901,951 |
|
|
Research and development
expenses
|
|
$ |
- |
|
|
$ |
39,041 |
|
|
$ |
39,041 |
|
|
Total operating expenses
|
|
$ |
918,491 |
|
|
$ |
22,501 |
|
|
$ |
940,992 |
|
|
Loss from operations
|
|
$ |
(918,491 |
) |
|
$ |
(22,501 |
) |
|
$ |
(940,992 |
) |
|
Net loss
|
|
$ |
(914,545 |
) |
|
$ |
(22,501 |
) |
|
$ |
(937,046 |
) |
|
|
|
Six Months Ended
June 30, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
31,778 |
|
|
$
|
(10,985 |
) |
|
$
|
20,793 |
|
|
Cost of goods sold
|
|
$ |
10,667 |
|
|
$
|
5,884 |
|
|
$ |
16,551 |
|
|
Gross profit
|
|
$
|
21,111 |
|
|
$
|
(16,869 |
) |
|
$
|
4,242 |
|
|
General and administrative
expenses
|
|
$
|
1,297,083 |
|
|
$
|
22,498 |
|
|
$
|
1,271,150 |
|
|
Total operating expenses
|
|
$
|
1,297,083 |
|
|
$
|
22,498 |
|
|
$
|
1,319,581 |
|
|
Loss from operations
|
|
$
|
(1,275,972 |
) |
|
$
|
(39,367 |
) |
|
$
|
(1,315,339 |
) |
|
Loss on settlement of debt
|
|
$
|
(3,632,500 |
) |
|
$
|
123,170 |
|
|
$
|
(3,509,330 |
) |
|
Total other income (expense)
|
|
$
|
(3,628,614 |
) |
|
$
|
123,170 |
|
|
$
|
(3,505,444 |
) |
|
Net loss
|
|
$ |
(4,904,586 |
) |
|
$
|
83,803 |
|
|
$ |
(4,820,783 |
) |
|
|
|
Three Months
Ended June 30, 2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$ |
(11,000 |
) |
|
$ |
2,146 |
|
|
$ |
(8,854 |
) |
|
Total other income
(expense)
|
|
$ |
(11,000 |
) |
|
$ |
2,146 |
|
|
$ |
(8,854 |
) |
|
Net loss
|
|
$ |
(119,768 |
) |
|
$ |
2,146 |
|
|
$ |
117,622 |
|
|
|
|
Six Months Ended
June 30, 2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Statement of Operations
Data (unaudited):
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
268,945 |
|
|
$
|
(130,725 |
) |
|
$ |
138,220 |
|
|
Gross profit
|
|
$
|
232,270 |
|
|
$
|
(130,725 |
) |
|
$
|
101,545 |
|
|
Loss from operations
|
|
$
|
(46,777 |
) |
|
$
|
(130,725 |
) |
|
$
|
(177,502 |
) |
|
Interest expense
|
|
$
|
(16,000 |
) |
|
$
|
(8,479 |
) |
|
$
|
(24,479 |
) |
|
Total other income (expense)
|
|
$
|
(16,000 |
) |
|
$
|
(8,479 |
) |
|
$
|
(24,479 |
) |
|
Net loss
|
|
$ |
(62,777 |
) |
|
$
|
(139,204 |
) |
|
$ |
(201,981 |
) |
|
|
|
As of June 30,
2019
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
36,019 |
|
|
$
|
(31,092 |
) |
|
$ |
4,927 |
|
|
Inventory
|
|
$
|
99,807 |
|
|
$
|
(42,328 |
) |
|
$
|
57,479 |
|
|
Total current assets
|
|
$
|
636,721 |
|
|
$
|
(73,421 |
) |
|
$
|
563,300 |
|
|
Total assets
|
|
$
|
636,721 |
|
|
$
|
(73,421 |
) |
|
$
|
563,300 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
235,214 |
|
|
$
|
(95,763 |
) |
|
$
|
139,451 |
|
|
Accrued liabilities – related
party
|
|
$
|
55,121 |
|
|
$
|
8,979 |
|
|
$
|
64,100 |
|
|
Liability for unissued
shares
|
|
$
|
211,843 |
|
|
$
|
(211,843 |
) |
|
$
|
- |
|
|
Loans payable – related
party
|
|
$
|
- |
|
|
$
|
61,421 |
|
|
$
|
61,421 |
|
|
Total current liabilities
|
|
$
|
502,178 |
|
|
$
|
(237,205 |
) |
|
$
|
264,973 |
|
|
Total liabilities
|
|
$
|
502,178 |
|
|
$
|
(237,205 |
) |
|
$
|
264,973 |
|
|
Additional paid-in capital
|
|
$
|
23,403,837 |
|
|
$
|
(286,052 |
) |
|
$
|
23,117,785 |
|
|
Accumulated deficit
|
|
$
|
(23,435,883 |
) |
|
$
|
439,837 |
|
|
$
|
(22,996,046 |
) |
|
Total stockholders’
deficiency
|
|
$ |
144,543 |
|
|
$
|
153,785 |
|
|
$ |
298,328 |
|
|
|
|
As of June 30,
2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
453,611 |
|
|
$
|
(447,599 |
) |
|
$ |
6,012 |
|
|
Inventory
|
|
$
|
157,318 |
|
|
$
|
(143,013 |
) |
|
$
|
14,305 |
|
|
Total current assets
|
|
$
|
940,183 |
|
|
$
|
(590,612 |
) |
|
$
|
349,571 |
|
|
Total assets
|
|
$
|
940,183 |
|
|
$
|
(590,612 |
) |
|
$
|
349,571 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
273,162 |
|
|
$
|
(141,211 |
) |
|
$
|
131,951 |
|
|
Accrued liabilities – related
party
|
|
$
|
86,500 |
|
|
$
|
14,100 |
|
|
$
|
100,600 |
|
|
Liability for unissued
shares
|
|
$
|
211,843 |
|
|
$
|
(211,843 |
) |
|
$
|
- |
|
|
Loans payable – related
party
|
|
$
|
189,828 |
|
|
$
|
56,300 |
|
|
$
|
246,128 |
|
|
Total current liabilities
|
|
$
|
761,333 |
|
|
$
|
(282,654 |
) |
|
$
|
478,679 |
|
|
Total liabilities
|
|
$
|
761,333 |
|
|
$
|
(282,654 |
) |
|
$
|
478,679 |
|
|
Common stock
|
|
$
|
184,809 |
|
|
$
|
(11,930 |
) |
|
$
|
172,879 |
|
|
Additional paid-in capital
|
|
$
|
18,629,478 |
|
|
$
|
12,513 |
|
|
$
|
18,641,991 |
|
|
Accumulated deficit
|
|
$
|
(18,635,437 |
) |
|
$
|
(308,541 |
) |
|
$
|
(18,943,978 |
) |
|
Total stockholders’ equity
(deficiency)
|
|
$ |
178,850 |
|
|
$
|
(307,958 |
) |
|
$ |
(129,108 |
) |
|
|
|
As of June 30,
2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
167,546 |
|
|
$
|
(136,071 |
) |
|
$ |
31,475 |
|
|
Inventory
|
|
$
|
89,525 |
|
|
$
|
(10,004 |
) |
|
$
|
79,521 |
|
|
Total current assets
|
|
$
|
260,300 |
|
|
$
|
(146,076 |
) |
|
$
|
114,224 |
|
|
Total assets
|
|
$
|
260,300 |
|
|
$
|
(146,076 |
) |
|
$
|
114,224 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
481,928 |
|
|
$
|
(88,287 |
) |
|
$
|
393,641 |
|
|
Liabilities for unissued
shares
|
|
$
|
145,543 |
|
|
$
|
(145,543 |
) |
|
$
|
- |
|
|
Loans payable – related
party
|
|
$
|
235,078 |
|
|
$
|
12,550 |
|
|
$
|
247,628 |
|
|
Total current liabilities
|
|
$
|
1,075,049 |
|
|
$
|
(221,280 |
) |
|
$
|
853,769 |
|
|
Total liabilities
|
|
$
|
1,075,049 |
|
|
$
|
(221,280 |
) |
|
$
|
853,769 |
|
|
Common stock
|
|
$
|
153,780 |
|
|
$
|
(76 |
) |
|
$
|
153,704 |
|
|
Additional paid-in capital
|
|
$
|
11,890,131 |
|
|
$
|
75,005 |
|
|
$
|
11,965,136 |
|
|
Accumulated deficit
|
|
$
|
(12,858,660 |
) |
|
$
|
276 |
|
|
$
|
(12,858,384 |
) |
|
Total stockholders’
deficiency
|
|
$ |
(814,749 |
) |
|
$
|
75,205 |
|
|
$ |
(739,544 |
) |
|
|
|
Six Months Ended
June 30, 2019
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Cash Flows Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,698,897 |
) |
|
$
|
228,416 |
|
|
$ |
(3,470,481 |
) |
|
Stock based compensation
|
|
$
|
2,723,500 |
|
|
$
|
(322,500 |
) |
|
$
|
2,401,000 |
|
|
Amortization of debt
discount
|
|
$
|
156,890 |
|
|
$
|
45,862 |
|
|
$
|
202,752 |
|
|
Accounts receivable
|
|
$ |
(25,009 |
) |
|
$
|
20,082 |
|
|
$ |
(4,927 |
) |
|
Inventory
|
|
$
|
(16,113 |
) |
|
$
|
(9,385 |
) |
|
$
|
(25,498 |
) |
|
Prepaid and other current
assets
|
|
$
|
- |
|
|
$
|
50,000 |
|
|
$
|
50,000 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
(8,499 |
) |
|
$
|
(12,475 |
) |
|
$
|
(20,974 |
) |
|
|
|
Six Months Ended
June 30, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Cash Flows Data
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(4,904,586 |
) |
|
$
|
83,803 |
|
|
$ |
(4,820,783 |
) |
|
Stock based compensation
|
|
$
|
674,500 |
|
|
$
|
22,500 |
|
|
$
|
697,000 |
|
|
Loss on settlement of debt
|
|
$
|
3,632,500 |
|
|
$
|
(123,170 |
) |
|
$
|
3,509,330 |
|
|
Inventory
|
|
$ |
6,216 |
|
|
$
|
16,868 |
|
|
$ |
26,084 |
|
|
|
|
Six Months Ended
June 30, 2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Cash Flows Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(62,777 |
) |
|
$
|
(139,201 |
) |
|
$ |
(201,978 |
) |
|
Stock issued for debt financing
costs
|
|
$
|
- |
|
|
$
|
8,479 |
|
|
$
|
8,479 |
|
|
Accounts receivable
|
|
$ |
(61,919 |
) |
|
$
|
130,725 |
|
|
$ |
68,806 |
|
|
Inventory
|
|
$
|
(27,557 |
) |
|
$
|
(3,447 |
) |
|
$
|
(31,004 |
) |
|
Accounts payable and accrued
expenses
|
|
$
|
6,865 |
|
|
$
|
3,444 |
|
|
$
|
10,309 |
|
|
|
|
Three Months
Ended March 31, 2019
|
|
|
|
|
As
Previously |
|
|
|
|
|
|
|
|
|
|
Reported |
|
|
Adjustment
|
|
|
As Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
$ |
2,958,492 |
|
|
$
|
(322,499 |
) |
|
$ |
2,635,993 |
|
|
Total operating expense
|
|
$
|
2,985,897 |
|
|
$
|
(322,499 |
) |
|
$
|
2,663,398 |
|
|
Loss from operations
|
|
$
|
(2,985,897 |
|
|
$
|
(322,499 |
) |
|
$
|
(2,663,398 |
) |
|
Net loss
|
|
$ |
(2,985,897 |
|
|
$
|
(322,499 |
) |
|
$ |
(2,663,398 |
) |
|
|
|
Three Months
Ended March 31, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
29,928 |
|
|
$
|
(10,985 |
) |
|
$ |
18,943 |
|
|
Cost of goods sold
|
|
$ |
8,877 |
|
|
$
|
5,883 |
|
|
$ |
14,760 |
|
|
Gross profit
|
|
$
|
21,051 |
|
|
$
|
(16,868 |
|
|
$
|
4,183 |
|
|
Loss from operations
|
|
$
|
(357,540 |
) |
|
$
|
(16,868 |
|
|
$
|
(374,408 |
|
|
Loss on settlement of debt
|
|
$
|
(3,632,500 |
) |
|
$
|
123,170 |
|
|
$
|
(3,509,330 |
|
|
Total other income (expense)
|
|
$
|
(3,632,500 |
) |
|
$
|
123,170 |
|
|
$
|
(3,509,330 |
|
|
Net loss
|
|
$ |
(3,990,040 |
) |
|
$
|
106,303 |
|
|
$ |
(3,883,737 |
|
|
|
|
Three Months
Ended March 31, 2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment |
|
|
As
Restated
|
|
|
Statement of Operations Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
227,129 |
|
|
$
|
(130,725 |
) |
|
$ |
96,404 |
|
|
Gross profit
|
|
$
|
211,747 |
|
|
$
|
(130,725 |
) |
|
$
|
81,022 |
|
|
Gain (loss) from operations
|
|
$
|
61,993 |
|
|
$
|
(130,725 |
) |
|
$
|
(68,732 |
) |
|
Interest expense
|
|
$
|
(10,000 |
)
|
|
$
|
(5,625 |
) |
|
$
|
(15,625 |
) |
|
Total other income (expense)
|
|
$
|
(10,000 |
)
|
|
$
|
(5,625 |
) |
|
$
|
(15,625 |
) |
|
Net income (loss)
|
|
$ |
51,993 |
|
|
$
|
(136,350 |
) |
|
$ |
(84,357 |
) |
|
|
|
As of March 31,
2019
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
11,010 |
|
|
$
|
(11,010 |
) |
|
$ |
- |
|
|
Inventory
|
|
$
|
83,694 |
|
|
$
|
(51,713 |
) |
|
$
|
31,981 |
|
|
Prepaid and other current
assets
|
|
$
|
- |
|
|
$
|
50,000 |
|
|
$
|
50,000 |
|
|
Total current assets
|
|
$
|
101,014 |
|
|
$
|
(12,723 |
) |
|
$
|
88,291 |
|
|
Total assets
|
|
$
|
101,014 |
|
|
$
|
(12,723 |
) |
|
$
|
88,291 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
240,147 |
|
|
$
|
(83,288 |
) |
|
$
|
156,859 |
|
|
Accrued liabilities – related
party
|
|
$
|
70,000 |
|
|
$
|
4,100 |
|
|
$
|
74,100 |
|
|
Liability for unissued
shares
|
|
$
|
201,843 |
|
|
$
|
(201,843 |
) |
|
$
|
- |
|
|
Loans payable – related
party
|
|
$
|
129,121 |
|
|
$
|
66,300 |
|
|
$
|
195,421 |
|
|
Total current liabilities
|
|
$
|
641,111 |
|
|
$
|
(214,730 |
) |
|
$
|
426,381 |
|
|
Total liabilities
|
|
$
|
641,111 |
|
|
$
|
(214,730 |
) |
|
$
|
426,381 |
|
|
Additional paid-in capital
|
|
$
|
22,008,293 |
|
|
$
|
(331,915 |
) |
|
$
|
21,676,378 |
|
|
Accumulated deficit
|
|
$
|
(22,722,883 |
) |
|
$
|
533,921 |
|
|
$
|
(22,188,962 |
) |
|
Total stockholders’
deficiency
|
|
$ |
(540,097 |
) |
|
$
|
202,007 |
|
|
$ |
(338,090 |
) |
|
|
|
As of March 31,
2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
451,810 |
|
|
$
|
(447,599 |
) |
|
$ |
4,211 |
|
|
Inventory
|
|
$
|
157,538 |
|
|
$
|
(143,011 |
) |
|
$
|
14,527 |
|
|
Total current assets
|
|
$
|
781,128 |
|
|
$
|
(590,610 |
) |
|
$
|
190,518 |
|
|
Total assets
|
|
$
|
781,128 |
|
|
$
|
(590,610 |
) |
|
$
|
190,518 |
|
|
Accounts payable and accrued
liabilities
|
|
$
|
298,162 |
|
|
$
|
(141,211 |
) |
|
$
|
156,951 |
|
|
Accrued liabilities – related
party
|
|
$
|
86,500 |
|
|
$
|
14,100 |
|
|
$
|
100,600 |
|
|
Liability for unissued
shares
|
|
$
|
298,843 |
|
|
$
|
(298,843 |
) |
|
$
|
- |
|
|
Loans payable – related
party
|
|
$
|
198,328 |
|
|
$
|
56,300 |
|
|
$
|
254,628 |
|
|
Total current liabilities
|
|
$
|
881,833 |
|
|
$
|
(369,653 |
) |
|
$
|
512,180 |
|
|
Total liabilities
|
|
$
|
881,833 |
|
|
$
|
(369,653 |
) |
|
$
|
512,180 |
|
|
Common stock
|
|
$
|
183,173 |
|
|
$
|
(11,856 |
) |
|
$
|
171,317 |
|
|
Additional paid-in capital
|
|
$
|
17,437,013 |
|
|
$
|
76,940 |
|
|
$
|
17,513,953 |
|
|
Accumulated deficit
|
|
$
|
(17,720,891 |
) |
|
$
|
(286,040 |
) |
|
$
|
(18,006,931 |
) |
|
Total stockholders’
deficiency
|
|
$ |
(100,705 |
) |
|
$
|
(220,956 |
) |
|
$ |
(321,661 |
) |
|
|
|
As of March 31,
2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
234,214 |
|
|
$
|
(136,072 |
) |
|
$ |
98,142 |
|
|
Inventory
|
|
$
|
62,039 |
|
|
$
|
(10,005 |
) |
|
$
|
52,034 |
|
|
Total current assets
|
|
$
|
311,468 |
|
|
$
|
(146,077 |
) |
|
$
|
165,391 |
|
|
Total assets
|
|
$
|
311,468 |
|
|
$
|
(146,077 |
) |
|
$
|
165,391 |
|
|
Accounts payable and accrued
expenses
|
|
$
|
458,576 |
|
|
$
|
(88,288 |
) |
|
$
|
370,288 |
|
|
Liability for unissued
shares
|
|
$
|
145,543 |
|
|
$
|
(145,543 |
) |
|
$
|
- |
|
|
Loans payable -related party
|
|
$
|
182,328 |
|
|
$
|
12,550 |
|
|
$
|
194,878 |
|
|
Total current liabilities
|
|
$
|
1,011,447 |
|
|
$
|
(221,281 |
) |
|
$
|
790,166 |
|
|
Total liabilities
|
|
$
|
1,011,447 |
|
|
$
|
(221,281 |
) |
|
$
|
790,166 |
|
|
Common stock
|
|
$
|
153,780 |
|
|
$
|
(114 |
) |
|
$
|
153,666 |
|
|
Additional paid-in capital
|
|
$
|
11,890,131 |
|
|
$
|
72,189 |
|
|
$
|
11,962,320 |
|
|
Accumulated deficit
|
|
$
|
(12,743,890 |
) |
|
$
|
3,129 |
|
|
$
|
(12,740,761 |
) |
|
Total stockholders’
deficiency
|
|
$ |
(699,979 |
) |
|
$
|
75,204 |
|
|
$ |
(624,775 |
) |
|
|
|
Three Months
Ended March 31, 2019
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Consolidated Cash Flows Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(2,985,897 |
) |
|
|
322,500 |
|
|
$ |
(2,663,397 |
) |
|
Stock based compensation
|
|
$ |
2,723,500 |
|
|
|
(322,500 |
) |
|
$ |
2,401,000 |
|
|
|
|
Three Months
Ended March 31, 2018
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Consolidated Cash Flows Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,990,040 |
) |
|
$
|
106,304 |
|
|
$ |
(3,883,736 |
) |
|
Loss on settlement of debt
|
|
$
|
3,632,500 |
|
|
$
|
(123,170 |
) |
|
$
|
3,509,330 |
|
|
Inventory
|
|
$ |
5,997 |
|
|
$
|
16,866 |
|
|
$ |
22,863 |
|
|
|
|
Three Months
Ended March 31, 2017
|
|
|
|
|
As
Previously
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Consolidated Cash Flows Data
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
51,993 |
|
|
$
|
(136,348 |
) |
|
$ |
(84,355 |
) |
|
Shares issued for debt financing
costs
|
|
$
|
- |
|
|
$
|
5,625 |
|
|
$
|
5,625 |
|
|
Accounts receivable
|
|
$ |
(128,587 |
) |
|
$
|
130,726 |
|
|
$ |
2,139 |
|
|
Inventory
|
|
$
|
(71 |
) |
|
$
|
(3,446 |
) |
|
$
|
(3,517 |
) |
|
Accounts payable and accrued
expenses
|
|
$
|
(16,487 |
) |
|
$
|
3,443 |
|
|
$
|
(13,044 |
|
Note 3.
Significant Accounting Policies
Going
Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has
incurred recurring net losses, has negative working capital and
operations have not provided cash flows. Additionally, the Company
does not currently have sufficient revenue producing operations to
cover its operating expenses and meet its current obligations. In
view of these matters, there is substantial doubt about the
Company’s ability to continue as a going concern. The Company
intends on financing its future development activities and its
working capital needs largely from the sale of public equity
securities with some additional funding from other traditional
financing sources, including term notes until such time that funds
provided by operations are sufficient to fund working capital
requirements. The financial statements of the Company do not
include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and
classifications of liabilities that might be necessary should the
Company be unable to continue as a going concern.
The
Chief Executive Officer has agreed to advance funds or make
payments of the Company’s obligations at his discretion. There is
no written agreement to continue this support.
Use of
Estimates
The
preparation of financial statements in conformity with generally
accepted accounting principles requires the Company’s 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 income and expenses during the reported
period. Changes in the economic environment, financial markets, as
well as in the healthcare industry, and any other parameters used
in determining these estimates, could cause actual results to
differ.
Cash and Cash
Equivalents
The
Company considers all highly liquid debt investments purchased with
a maturity of three months or less to be cash equivalents.
Fair Value
Measurements
Accounting principles generally accepted in the United States
define fair value as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in
an orderly transaction between market participants at the
measurement date. Additionally, the inputs used to measure fair
value are prioritized based on a three-level hierarchy. This
hierarchy requires entities to maximize the use of observable
inputs and minimize the use of unobservable inputs. The three
levels of inputs used to measure fair value are as follows:
Level 1