The financial statements required by Item 8 can be found beginning on Page F-3 of this report.
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 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1. We value assets and liabilities included in this level using dealer and broker quotations, bid prices, quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2019 and 2018. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
Income Taxes
The Company accounts for income taxes using a method that requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company’s assets and liabilities which is commonly known as the asset and liability method. In assessing the ability to realize deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company evaluates its tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are ‘‘more-likely-than-not’’ of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as an expense in the applicable year. The Company does not have a liability for any unrecognized tax benefits. Management’s evaluation of uncertain tax positions may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof, with due consideration given to the fact that tax periods are open to examination by tax authorities. The Company is no longer subject to U.S federal or state income tax examinations by tax authorities before 2015.
As of December 31, 2019, 2018 and 2017, the Company has approximately $15.6, $13.5 and $12.2 million of net operating loss carry-forwards, respectively, available to affect future taxable income and has established a valuation allowance equal to the tax benefit of the net operating loss carry forwards and temporary differences as realization of the asset is not assured.
Trade Accounts Receivable and Concentration Risk
We record accounts receivable at the invoiced amount and we do not charge interest. We review the accounts receivable by amounts due from customers which are past due, to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, we make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. We will also maintain a sales allowance to reserve for potential credits issued to customers. We will determine the amount of the reserve based on historical credits issued.
There was no provision for doubtful accounts recorded at December 31, 2019, 2018 and 2017. The Company recorded $0 in bad debt expense for the years ended December 31, 2019, 2018 and 2017.
For the year ended December 31, 2019 one customer accounted for 100% of the Company’s net revenue.
For the year ended December 31, 2018 there were two customers accounted for 61% and 28% of the Company’s net revenue.
For the year ended December 31, 2017 one customer accounted for 85% of the Company’s net revenue.
Inventory
Inventory is valued at the lower of cost or market using the first-in, first-out (FIFO) method. Inventory on the balance sheet consists of raw materials purchased by the Company and finished goods.
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
Raw materials
|
|
$
|
54,774
|
|
|
$
|
27,302
|
|
|
$
|
31,250
|
|
Finished goods
|
|
|
22,074
|
|
|
|
4,678
|
|
|
|
6,141
|
|
|
|
$
|
76,848
|
|
|
$
|
31,980
|
|
|
$
|
37,391
|
|
During the years ended December 31, 2019, 2018 and 2017, the Company determined that no inventory needed to be impaired and written-off to cost of goods sold.
As mentioned above in Note 2, the Company shipped product to a customer at the end of 2017 and in light of the information currently available to the Company, the Company determined that no revenue should be recognized 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. The Company determined the inventory related to that shipment should be written down to $0 and expensed. Accordingly, the Company recorded a loss of $82,166 to loss on disputed inventory in the Statement of Operations during the year ended December 31, 2017.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred. The Company incurred $214,810, $176,999 and $53,050 in advertising and marketing costs during the years ended December 31, 2019, 2018 and 2017, respectively.
Shipping and Handling Costs
The Company includes shipping and handling cost as part of cost of goods sold.
Research and Development
The Company charges research and development costs to expense when incurred. The Company incurred $666,388, $76,951 and $19,936 in research and development expenses during the years ended December 31, 2019, 2018 and 2017, respectively.
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.
Per Share Information
Basic earnings per share are calculated using the weighted average number of common shares outstanding for the period presented. Diluted earnings per share is computed using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. The dilutive effect of potential common shares is not reflected in diluted earnings per share because the Company incurred a net loss for the years ended December 31, 2019, 2018 and 2017 and the effect of including these potential common shares in the net loss per share calculations would be anti-dilutive.
The total potential common shares as of December 31, 2019 include 50,100,000 of restricted stock units, and 579,556 shares for convertible loans payable – related party. There were no potential common shares as of December 31, 2018 and 2017.
New Accounting Pronouncements, Recently Adopted Accounting Pronouncements
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.
The standard became effective for the Company beginning January 1, 2018 and permits two methods of adoption: the full retrospective method, which requires the standard to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company adopted the standard using the modified retrospective method. There was no effect for any adjustments to retained earnings upon adoption of the standard on January 1, 2018.
The Company considers all new pronouncements and management has determined that there have been no other recently adopted or issued accounting standards that had or will have a material impact on its financial statements.
Note 4. Related Party Transactions
Related party loans and related party convertible loans payables
As of December 31, 2019, 2018 and 2017, loans payable to related parties totaled $0, $74,421 and $324,628, respectively. These amounts are owed to Doug Beplate, our Chief Executive Officer.
As of December 31, 2019, 2018, 2017, convertible loans payable - related parties totaled $365,785, $0 and $0, respectively. These amounts are owed to Doug Beplate, our Chief Executive Officer.
During the year ended December 31, 2019, Mr. Beplate advanced the Company a total of $657,500 and the Company made repayments to Mr. Beplate totaling $161,135. These loans were for operating expenses of the Company, are due on demand and have no interest rate.
On April 22, 2019, the Company agreed to allow Mr. Beplate to convert all previous outstanding cash loans made to the Company. For any outstanding loans made on or before April 15, 2019, the loans are convertible at $0.50 per share and for all loans subsequent to April 15, 2019, the amounts are convertible at $0.65 per share, in each case at the sole discretion of Mr. Beplate. The Company’s stock price on April 22, 2019 was $0.90 which resulted in a beneficial conversion feature of $193,137 which was recorded to interest expense.
During the year ended December 31, 2019, Mr. Beplate converted $205,000 of loans payable at a conversion price of $0.50 into 410,000 shares of common stock.
From the April 15, 2019 through December 31, 2019, Mr. Beplate loaned the Company $490,500 which were convertible at $0.65 as mentioned above. These loans resulted in a beneficial conversion feature of $315,046 which was recorded to interest expense upon issuance. The outstanding balance of convertible loans payable – related party was $365,785, $0 and $0 as of December 31, 2019, 2018 and 2017, respectively. There is $0 remaining as unamortized debt discount.
During the year ended December 31, 2018, Mr. Beplate gave a personal vehicle to an employee of the Company valued at $30,000 in lieu of the Company paying travel expenses and consulting expenses. During 2018, Mr. Beplate provided loans to the Company of $15,000 and was repaid $295,207 of the outstanding loans payable balance. During the year ended December 31, 2017, Mr. Beplate provided loans to the Company of $155,250 and was repaid $21,500. These loans were for operating expenses of the Company, are due on demand and have no interest rate.
Accrued liabilities
As of December 31, 2017, $76,500 was owed to him for accrued compensation. During the year ended December 31, 2018, Mr. Beplate received compensation of $180,000 and $71,500 of previously accrued compensation was paid, leaving a balance of $5,000. During the year ended December 31, 2019, $75,000 of compensation was accrued and $2,870 of previously accrued compensation was paid leaving a balance of $77,130.
As of December 31, 2019, 2018 and 2017, $24,100 was owed to Nate Knight, the Chief Financial Officer, for accrued compensation.
Equity transactions
During the year ended December 31, 2018, the Company issued 1,600,000 shares to Nate Knight who is the Chief Financial Officer of the Company, 500,000 shares issued to the office administrator, who is a person affiliated with the Company’s CEO, 5,000,000 shares to the Chief Operating Officer (which were later cancelled and replaced with restricted stock units (RSU’s) as described below) and 50,000 shares to a Technical Product Supervisor, who is the son of the office administrator. These shares, were placed in escrow and were to be released when a change of control occurred. Management was unable to determine when a change of control would occur and $0 was expensed as of December 31, 2018.
During the year ended December 31, 2019, the 1,600,000 shares to Nate Knight who is the Chief Financial Officer of the Company, 500,000 shares to the office administrator, who is a person affiliated with the Company’s CEO and 50,000 shares to a Technical Product Supervisor, who is the son of the office administrator, all of which were held in escrow as of December 31, 2018 became vested as modified by the Board of Directors for services provided. Per ASC 718-20-35, the change in vesting conditions resulted in a modification of the stock-based compensation awards. The modification is considered a Type III modification as described in ASC 718-20-55 and resulted in recording $2,021,000 of stock-based compensation expense which was the fair value of the shares on the date of the modification.
In March 2019, the Company granted Mr. Beplate and Louis Schiliro 33,000,000 and 8,000,000 Restricted Stock Units (RSU’s), respectively, which vest and are issuable upon the achievement of certain conditions described in Note 4. These RSU’s were included as part of the Company’s grant of an aggregate of 50,100,000 RSUs to various officers, directors and consultants which all vest on substantially the same terms. The RSUs granted to Mr. Beplate replaced an executive compensation stock bonus package that was granted to Mr. Beplate in December 2018 which had provided that upon the sale of all or substantially all of the assets of the Company or other change in control or merger transaction in which the Company is involved, or in the event that no such transaction occurred by December 31, 2019, Mr. Beplate would have been entitled to receive a number of shares equal to 15% post issuance of the then outstanding shares of the Company’s common stock on a fully diluted basis. The December 2018 executive compensation stock bonus package had, in turn, replaced a previously issued 5% stock bonus granted to Mr. Beplate that would have been issuable in the event of a sale of the Company’s assets or change in control or merger transaction, per his services agreement. The 8,000,000 RSU’s granted to Mr. Schiliro replaced the 5,000,000 shares of common stock which were previously held in escrow and subsequently cancelled. See “Note 6” regarding the granting of the RSUs.
During the year ended December 31, 2019, the Company issued a total of 1,000,000 shares of common stock to directors and officers of the Company and 50,000 shares of common stock to the office administrator, who is a person affiliated with the Company’s CEO and 50,000 shares to a Technical Product Supervisor, who is the son of the office administrator for services rendered. The shares had a fair market value of $1,063,000.
Note 5. Prepaid and Other Current Assets
The Company had a balance of $50,000 as of December 31, 2018 related to a retainer payment for professional services. The $50,000 retainer was refunded to the Company during 2019.
Note 6. Issuances of Securities
Share issuances 2017
In 2017, the Company sold 7,047,820 shares of its common stock in a private placement offering for gross proceeds of $644,000. Exemption from registration is claimed under Rule 506 of Regulation D of the Securities Act of 1933, as amended.
During 2017, in conjunction with issuing three notes payable, the Company agreed to issue a total of 113,000 shares of common stock. These shares had a fair market value of $8,479 and were considered financing costs and recorded as interest expense.
During 2017, the Company issued 1,700,000 shares of stock with a fair value of $429,000 to settle accounts payable balances of $82,774. The Company recorded $346,226 as loss on settlement of debt.
During 2017, the Company’s securities counsel converted $162,500 in accounts payable to a promissory note. The securities counsel then converted this promissory note into 2,500,000 shares of common stock. The shares of stock had a fair value of $235,000 and the Company recorded $72,500 as loss on settlement of debt.
In December 2017, the Company issued 200,000 shares of common stock to an unaffiliated individual for services performed. The shares had a total fair market value of $144,000.
Share issuances 2018
The Company issued 800,000 shares of common stock to its medical advisors with a total fair market value of $642,500 for services, 50,000 shares of common stock to an unaffiliated individual with a total fair market value of $54,500 for services, 2,403,728 shares of common stock were sold for total proceeds of $1,415,200.
The Company issued 3,387,000 shares of common stock to non-affiliated investors to convert $172,500 of notes payable and $10,000 of accrued interest. The shares were valued at their fair market value of $1.09 which resulted in a loss on debt settlement of $3,509,330. See “Note 8” below.
The Company issued a total of 14,150,000 shares of common stock to officers and various consultants for services to be provided related to a change of control of the Company and placed in escrow The Company canceled 12,000,000 of these shares in the first quarter of 2019, therefore only 2,150,000 of the shares were treated as issued and outstanding in 2018. The shares were to be released from escrow upon the change of control of the Company. Management was unable to determine when a change of control would occur therefore $0 was expensed as of December 31, 2018 related to these shares.
Share issuances 2019
During 2019, 1,622,199 shares of common stock were sold to non-affiliated investors in a private placement for total cash proceeds of $1,055,750: 400,000 shares of common stock were sold to securities counsel for total cash proceeds of $200,000: 350,000 shares of common stock were issued to securities counsel for services rendered with a fair value of $335,500: 1,100,000 shares of common stock were issued to officers and directors of the Company for services rendered with a fair value of $1,063,000: 50,000 shares of common stock to the office administrator, who is a person affiliated with the Company’s CEO, for services rendered with a fair value of $48,500: 425,000 shares of common stock were issued to various consultants and advisors for services rendered with a fair value of $412,250: and 410,000 shares of common stock were issued to the Company’s CEO for conversion of notes payable totaling $205,000.
During the year ended December 31, 2019, the previously disclosed 2,150,000 shares that were awarded in 2018 (see Note 4 above) and reported as issued and outstanding with no related expense recognized as of December 31, 2018, were modified by the Board of Directors and deemed vested. The modification resulted in recording $2,021,000 of stock-based compensation expense which was the fair value of the shares on the date of the modification.
Restricted stock units
The Board approved Restricted Stock Unit Agreements (“RSU Agreements”) with certain of its officers, directors and consultants representing an aggregate of 50,100,000 shares of common stock to be issued and delivered to such persons upon the earlier of (i) a change in control of the Company by a cash tender offer, merger, acquisition or otherwise or (ii) the Company achieving quarterly gross revenue that, when annualized, represents gross annual revenues of at least $20,000,000 by December 31, 2019, or (iii) the commencement of an action or event by a third party without the Board’s approval to effect, or seek to effect, a change in control of the Company or change in the Company’s management.
Activity related to our restricted stock units during the year ended December 31, 2019 was as follows:
|
|
Number of
Units
|
|
|
Weighted
Average
Grant
Date Fair
Value
|
|
Total awards outstanding at December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
Units granted
|
|
|
50,100,000
|
|
|
$
|
0.94
|
|
Units Exercised/Released
|
|
|
-
|
|
|
$
|
-
|
|
Units Cancelled/Forfeited
|
|
|
-
|
|
|
$
|
-
|
|
Total awards outstanding at December 31, 2019
|
|
|
50,100,000
|
|
|
$
|
0.94
|
|
Management is unable to determine when a change of control will occur and as of December 31, 2019, there was $47,094,000 of unrecognized compensation cost related to unvested restricted stock unit awards.
Note 7. Litigation
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 received no money.
During 2018, a vendor filed a judgement against the Company related 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.
Due to uncertainties inherent in litigation, we cannot predict the outcome of the above legal proceedings.
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.
Note 8. Notes Payable
During the year ended December 31, 2016, the Company received $150,000 related to a note payable. The note was due on December 11, 2018 and interest accrued at the rate of 10% per annum. During the year ended December 31, 2018, the Company issued 2,500,000 shares of common stock to settle the outstanding note payable balance of $150,000 and accrued interest of $15,000. The balance of this note was $0, $0 and $150,000 as of December 31, 2019, 2018 and 2017, respectively.
During the year ended December 31, 2017, the Company received a total of $75,000 related to three separate notes payable. One note payable for $50,000 had a maturity date of March 31, 2017 and the other two notes totaling $25,000 had maturity dates of May 15, 2017. The notes accrued interest at the rate of 20% per annum and as consideration for entering into the notes, the Company agreed to issue 113,000 shares of common stock, which were recorded as issued and outstanding in 2017. The shares of common stock had a fair market value of $8,479 and were considered financing costs and recorded as interest expense during the year ended December 31, 2017.
The Company also paid down $42,500 of the principal balance during 2017 and $12,500 of accrued interest leaving a balance of $32,500 and $0 as the principal and interest amounts owing, respectively, as of December 31, 2017. During the year ended December 31, 2018, the Company paid $15,000 of the balance of the outstanding note payable principal balance and issued 887,000 shares of common stock to settle the remaining balance of $17,500. The balance was $0, $0 and $32,500 as of December 31, 2019, 2018 and 2017, respectively.
The Company borrowed $35,000 in April 2017 related to a note payable, with original issue discount of $3,500. The note was paid off in full in May 2017.
Note 9. Income Tax
The Company accounts for income taxes under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 740, Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the Tax Act) was enacted into law including a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, remeasuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities. The Company does not have any foreign earnings and therefore, we do not anticipate any impact of a transition tax. We have remeasured our U.S. deferred tax assets at a statutory income tax rate of 21%.
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the years ended December 31, 2019, 2018 or 2017.The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the period presented. The Company had no accruals for interest and penalties at December 31, 2019.
The Company’s federal income tax returns for the years ended December 31, 2016 through December 31, 2019 remain subject to examination by the Internal Revenue Service as of December 31, 2019.
During 2019, 2018 and 2017, the Company incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved.
Net deferred tax assets consist of the following components as of December 31, 2019, 2018 and 2017.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
3,282,100
|
|
|
$
|
2,832,800
|
|
|
$
|
2,566,600
|
|
Accrued related party payroll
|
|
|
21,700
|
|
|
|
6,100
|
|
|
|
21,100
|
|
Valuation allowance
|
|
|
(3,303,800
|
)
|
|
|
(2,838,900
|
)
|
|
|
(2,587,700
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The income tax provision differs from the amount on income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2019, 2018 and 2017 due to the following:
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Book income
|
|
$
|
(1,386,500
|
)
|
|
$
|
(1,134,500
|
)
|
|
$
|
(308,000
|
)
|
Related party accrued payroll
|
|
|
15,500
|
|
|
|
(15,000
|
)
|
|
|
21,200
|
|
Loss on debt settlement
|
|
|
-
|
|
|
|
737,000
|
|
|
|
87,500
|
|
Stock based compensation
|
|
|
814,900
|
|
|
|
146,400
|
|
|
|
30,200
|
|
Interest amortization
|
|
|
106,700
|
|
|
|
-
|
|
|
|
1,800
|
|
Valuation allowance
|
|
|
449,400
|
|
|
|
266,100
|
|
|
|
167,300
|
|
Income tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
As of December 31, 2019, 2018 and 2017, the Company has taxable net loss carryovers of approximately $15.6 million, $13.5 million and $12.2 million, respectively.
Note 10. Subsequent Events
The Company has evaluated events from December 31, 2019, through the date whereupon the financial statements were issued and has determined that there are no other material events that need to be disclosed, except as follows:
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1,653,119 shares of common stock were sold for cash proceeds of $765,446 and issued to various non-affiliated investors at $0.50 per share to $0.90 a share.
50,000 shares of common stock with a fair market value of $50,000 were issued to a former medical advisor and 125,000 shares of common stock were issued for services with a fair market value of $100,625 to a consultant.
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The Company received a total $380,230 in loans. $130,230 was received from the Company's Chief Executive Officer, $50,000 was received from the Company's Chief Operating Officer and $200,000 was received from a non-related party.
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.
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