0000924515true30092223160001000.03300.0800.01000.01400.03200.000012600050000000013138000136730000.0010.0010.0010.0010.0010.0010.0010.0019000.09000.020300.050000006000.05000.01500.03500.03500.000001049000326300076300017360000000300.01000.03300.0800.01700.03200.00003300.03300.0800.0800.01700.01700.01400.001000.01000.0300.0300.0300.01000086428290000000000000000000000000000000000000000000000010684231313828213673583535301131804171360760913138282223164122231641214360009.9932620.25100015000009800021140002260000925000000.250.25Each
share of Series F-2 Preferred is convertible, at any time for a
period of 5 years after issuance, into that number of shares of
Common Stock, determined by dividing the Stated Value by $0.25,
subject to certain adjustments set forth in the Series F-2
Certificate of Designation (the “Series F-2 Conversion Price”). The
conversion of Series F-2 Preferred is subject to a 4.99% beneficial
ownership limitation, which may be increased to 9.99% at the
election of the holders of the Series F-2 Preferred. If the average
of the VWAPs (as defined in the Series F-2 Certificate of
Designation) for any consecutive 5 trading day period (“Measurement
Period”) exceeds 200% of the then Series F-2 Conversion Price and
the average daily trading volume of the Common Stock on the primary
trading market exceeds 1,000 shares per trading day during the
Measurement Period (subject to adjustments), the Company may redeem
the then outstanding Series F-2 Preferred, for cash in an amount
equal to aggregate Stated Value then outstanding plus accrued but
unpaid dividends. As of December 31, 2021, the Company had not
issued shares as payment of Series F-2 Preferred Stock dividends.
As of December 31, 2021, the Company had accrued dividends of
$94,907.400075000075000015000004000763968141110003237During
February 2021, the Company finalized an investment by Power Up
Lending Group Ltd. Power Up invested $53,500, net to the Company is
$50,000, for 62,000 shares of Series G preferred stock with
additional tranches of financing up to $925,000 in the aggregate
over the terms of the Series G preferred stock. Series G will be
non-voting on any matters requiring shareholder vote. The Series G
Preferred Stock will have cumulative dividends at the rate per
share of 8% per annum. At any time during the period indicated
below, after the date of the issuance of shares of Series G
preferred stock, the Company will have the right, at the Company’s
option, to redeem all of the shares of Series G preferred stock by
paying an amount equal to: (i) the number of shares of Series G
preferred stock multiplied by then stated value (including accrued
dividends); (ii) multiplied by the corresponding percentage as
follows: Day 1-60, 105%; Day 61-90, 110%; Day 91-120, 115%; and Day
121-180, 122%. After the expiration of the 180 days following the
issuance date, except for mandatory redemption, the Company shall
have no right to redeem the Series G preferred stock. Mandatory
redemption occurs within 24 months. In addition, if the Company
does not redeem the Series G preferred stock then Power Up will
have the option to convert to common stock shares. The variable
conversion price will be the value equal to a discount of 19% off
of the trading price; which is calculated as the average of the
three lowest closing bid prices over the last fifteen trading days.
The conversion of Series G Preferred is subject to a 4.99%
beneficial ownership limitation, which may be increased to 9.99% at
the election of the holder of the Series G
Preferred.1411153000007630000.00150001000104910497500010491024925400014261.0000.502000910001000124327109930700000.09990.09995
years5 years5
years1049143665245002098500535003262326215600001998915929250009250000.190.0615866225540195535368505143600010000750006600018
months500000ten yearsfour years35000071500004800026400The notes
carried annual interest rates between 0% and 10% and have default
rates as high as 20%.The notes were initially issued with 0%
interest, however interest increased to 6.0%
interest04100050001000000400000350000161000148970002400000.02400000.06477840000016118436428250000318891000000.160.12The
exchange price will be on a $1 for $1 basis such that Auctus will
receive $2,349,997 of units consisting of common
stock745972200075000006350000.206350006500057000089250680003500003500007000007000003500003500007000004000003130000.10.24The
variable conversion prices equaled the lesser of: (i) the lowest
trading price on the issue date, and (ii) the variable conversion
price. The variable conversion price was 95% multiplied by the
market price (the market price means the average of the five lowest
trading prices during the period beginning on the issue date and
ending on the maturity date), minus $0.04 per share, provided
however that in no event could the variable conversion price be
less than $0.15. If an event of default under this note occurred
and/or the note was not extinguished in its entirety prior to
December 17, 2020 the $0.15 price floor no longer applied0.24The
variable conversion prices shall equal the lesser of: (i) the
lowest trading price on the issue date, and (ii) the variable
conversion price. The variable conversion price shall mean 95%
multiplied by the market price (the market price means the average
of the five lowest trading prices during the period beginning on
the issue date and ending on the maturity date), minus $0.04 per
share, provided however that in no event shall the variable
conversion price be less than $0.15. If an event of default under
this note occurs and/or the note is not extinguished in its
entirety prior to December 17, 2020 the $0.15 price shall no longer
apply. The last tranche of $1.3 million will be received within 60
days of the S-1 registration statement becoming effective. The
conversion price of the notes will be at market value with a
minimum conversion amount of $0.15. In addition, as part of this
transaction the Company was required to pay a 2.0% fee to a
registered broker-dealer.
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As filed with the Securities and Exchange Commission on
June 29, 2022
Registration No. 333-259871
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form S-1/A
Amendment No. 3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GUIDED THERAPEUTICS,
INC.
|
(Exact name of Registrant as specified in its
charter)
|
Delaware
|
|
3845
|
|
58-2029543
|
(State or other jurisdiction of
incorporation or organization)
|
|
(Primary Standard
Industrial
Classification Code Number)
|
|
(I.R.S. Employer
Identification No.)
|
5835 Peachtree Corners East, Suite B
Norcross, Georgia
(770)
242-8723
(Address, including zip code and telephone number,
including area code, of registrant’s principal executive
offices)
Mr. Gene S. Cartwright, Ph.D.
President and Chief Executive Officer
5835 Peachtree Corners East, Suite B
Norcross, Georgia
(770)
242-8723
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Robert F. Charron, Esq.
Sarah E. Williams, Esq.
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, New York 10105
Phone: (212) 370-1300
Fax: (212) 370-7889
|
|
M. Ali Panjwani, Esq.
Michael T. Campoli, Esq.
Pryor Cashman LLP
7 Times Square
New York, New York 10036
Phone: (212) 421-4100
|
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this registration
statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, as amended, check the following box.
☒
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ☐
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.
Large Accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated Filer
|
☒
|
Smaller reporting company
|
☒
|
|
|
Emerging growth company
|
☐
|
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.
☐
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration
statement shall become effective on such date as the Commission
acting pursuant to said Section 8(a), may determine.
The information in this preliminary
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not
soliciting offers to buy these securities in any state or other
jurisdiction where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED June 29, 2022
PRELIMINARY PROSPECTUS
Up to 890,000 Shares of Common Stock
and
Up to 178,000 Pre-Funded Warrants to Purchase Shares of
Common Stock
and
890,000 Warrants to Purchase Shares of Common
Stock

Guided Therapeutics,
Inc.
We are offering 890,000 shares of common stock pursuant to this
prospectus at a public offering price of $10.00 per share, together
with warrants (“Public Warrants”) to purchase shares of common
stock. Each Public Warrant is exercisable to purchase one share of
common stock at an exercise price of $12.40, exercisable upon
issuance and will expire five years from the date of issuance. The
shares of common stock and Public Warrants will be separately
issued, but the shares and warrants will be issued and sold to
purchasers together. This prospectus also relates to the offering
of the shares of common stock issuable upon exercise of Public
Warrants.
We are also offering to certain purchasers whose purchase of common
stock in this offering that would otherwise result in the
purchaser, together with its affiliates and certain related
parties, beneficially owning more than 4.99% (or, at the election
of the purchaser, 9.99%) of the outstanding shares of our common
stock immediately following the consummation of this offering, the
opportunity to purchase, if any such purchaser so chooses, up to
178,000 pre-funded warrants, in lieu of shares of common stock that
would otherwise result in such purchaser’s beneficial ownership
exceeding 4.99% (or, at the election of the purchaser, 9.99%) of
the outstanding shares of our common stock. Each pre-funded warrant
will be exercisable for one share of common stock. The purchase
price of each pre-funded warrant and the accompanying Public
Warrant will be equal to the price at which a share of common stock
and accompanying Public Warrant are sold to the public in this
offering, minus $0.001, and the exercise price of each pre-funded
warrant will be $0.001 per share of common stock. The pre-funded
warrants will be immediately exercisable and may be exercised at
any time until all of the pre-funded warrants are exercised in
full. This offering also relates to the shares of common stock
issuable upon exercise of any pre-funded warrants sold in this
offering. Each pre-funded warrant is being sold together with one
Public Warrant. For each pre-funded warrant we sell, the number of
shares of common stock we are offering will be decreased on a
one-for-one basis. Because we will issue one Public Warrant for
each share of common stock and for each pre-funded warrant to
purchase one share of common stock sold in this offering, the
number of Public Warrants sold in this offering will not change as
a result of a change in the mix of the shares of common stock and
pre-funded warrants sold. The shares of common stock and pre-funded
warrants, and the accompanying Public Warrants, can only be
purchased together in this offering but will be issued separately
and will be immediately separable upon issuance.
Our common stock is currently quoted under the symbol “GTHP” on the
OTC Markets. We have applied to list our common stock and the
Public Warrants offered pursuant to this prospectus on the Nasdaq
Capital Market (“Nasdaq”) under the symbols “GTHP” and “GTHPW”,
respectively. The successful listing of our common stock and Public
Warrants on Nasdaq is a condition of this offering. No assurance
can be given that our application will be approved. We do not
intend to apply for listing of the pre-funded warrants on any
national securities exchange or trading system.
Investing in our common stock involves a high degree of
risk. Please read “Risk Factors” beginning on page 11 of this
prospectus.
Neither the Securities and Exchange Commission nor any
state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
|
|
Per Common Share and related Public Warrant
|
|
|
Per Pre-Funded Warrant and related
Public
Warrant
|
|
|
Total
|
|
Public offering price
|
|
$ |
10.00 |
|
|
$ |
10.00 |
|
|
$ |
8,900,000 |
|
Underwriting discount(1)(2)
|
|
$ |
.70 |
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|
$ |
.70 |
|
|
$ |
541,000 |
|
Proceeds, before expenses, to us
|
|
$ |
9.30 |
|
|
$ |
9.30 |
|
|
$ |
8,359,000 |
|
(1)
|
Does not include our obligation to reimburse the underwriters for
their expenses in an amount not to exceed $100,000. We refer you to
“Underwriting” beginning on page 94 of this prospectus for
information regarding expenses reimbursable by us to the
underwriter.
|
|
|
(2)
|
The public offering price and underwriting discount corresponds to
(x)(i) a public offering price per share of common stock of $9.99
and (ii) a public offering price per Public Warrant of $0.01, and
(y)(i) a public offering price per pre-funded warrant of $9.989 and
(ii) a public offering price per Public Warrant of $0.01.
|
|
|
(3)
|
The underwriters may also exercise their option to purchase up to
an additional shares of common stock and/or Public Warrants to
purchase up to an aggregate of shares of common stock from us, in
any combination thereof, at the public offering price, less the
underwriting discounts and commissions, for 45 days after the date
of this prospectus.
|
Roth Capital Partners
Prospectus dated , 2022.
TABLE OF CONTENTS
ABOUT THIS
PROSPECTUS
Neither we nor the underwriters have authorized anyone to provide
you with information different from, or in addition to, that
contained in this prospectus or any free writing prospectus
prepared by or on behalf of us or to which we may have referred you
in connection with this offering. We take no responsibility for and
can provide no assurance as to the reliability of, any other
information that others may give you. Neither we nor the
underwriters are making an offer to sell or seeking offers to buy
these securities in any jurisdiction where, or to any person to
whom, the offer or sale is not permitted. The information in this
prospectus is accurate only as of the date on the front cover of
this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our securities and the information in
any free writing prospectus that we may provide you in connection
with this offering is accurate only as of the date of that free
writing prospectus. Our business, financial condition, results of
operations and future growth prospects may have changed since those
dates.
We obtained the industry, market and competitive position data in
this prospectus from our own internal estimates and research as
well as from industry and general publications and research surveys
and studies conducted by third parties. This information involves
many assumptions and limitations, and you are cautioned not to give
undue weight to these estimates. We have not independently verified
the accuracy or completeness of the data contained in these
industry publications and reports. The industry in which we operate
is subject to a high degree of uncertainty and risk due to a
variety of factors, including those described in “Risk Factors,”
that could cause results to differ materially from those expressed
in these.
This prospectus contains references to our trademark and to
trademarks belonging to other entities. Solely for convenience,
trademarks and trade names referred to in this prospectus,
including logos, artwork and other visual displays, may appear
without the ® or ™ symbols, but such references are not intended to
indicate, in any way, that we will not assert, to the fullest
extent under applicable law, our rights or the rights of the
applicable licensor to these trademarks and trade names. We do not
intend our use or display of other companies’ trade names or
trademarks to imply a relationship with, or endorsement or
sponsorship of us by, any other companies.
Unless otherwise indicated, references in this prospectus to “$”,
“dollars”, “USD” or “United States dollars” are to United States
dollars.
PROSPECTUS
SUMMARY
This summary highlights information contained in other parts of
this prospectus. Because it is only a summary, it does not contain
all of the information that you should consider before investing in
our securities and it is qualified in its entirety by, and should
be read in conjunction with, the more detailed information
appearing elsewhere in this prospectus. Investing in our securities
involves a high degree of risk. You should carefully consider the
risks and uncertainties described below, together with all of the
other information in this prospectus, including our financial
statements and related notes, before investing in our securities.
If any of the following risks materialize, our business, financial
condition, operating results and prospects could be materially and
adversely affected. In that event, the price of our securities
could decline, and you could lose part or all of your
investment.
Unless the context indicates otherwise, as used in this prospectus,
the terms “Guided,” “Guided Therapeutics,” “we,” “us,” “our,” “our
company” and “our business” refer to Guided Therapeutics, Inc.
On December 30, 2021 our Board approved a 1-for-20 reverse stock
split of all outstanding shares of our common stock, and the
Company filed a Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of the Company with the
Secretary of State of the State of Delaware (the “Certificate of
Amendment”) to effect the Reverse Stock Split. An Issuer Company
Related Action Notification regarding a reverse stock split (the
“Reverse Stock Split”) was submitted to Financial Industry
Regulatory Authority (“FINRA”) on November 18, 2021, which was
approved on May 9, 2022 and will be effective on the approximate
date of the Nasdaq uplisting and financing, expected to be on or
near June 30, 2022. Throughout this prospectus, references to a
number of our issued and outstanding shares of common gives effect
to the Reverse Stock Split, unless otherwise indicated.
Our Company
Overview
We are a medical technology company focused on developing
innovative medical devices that have the potential to improve
healthcare. Our primary focus is the sales and marketing of our
LuViva® Advanced Cervical Scan non-invasive cervical cancer
detection device. The underlying technology of LuViva primarily
relates to the use of biophotonics for the non-invasive detection
of cancers. LuViva is designed to identify cervical cancers and
precancers painlessly, non-invasively and at the point of care by
scanning the cervix with light, then analyzing the reflected and
fluorescent light.
LuViva is designed to provide a less invasive and painless
alternative to conventional tests for cervical cancer screening and
detection. Additionally, LuViva is designed to improve patient
well-being not only because it eliminates pain, but also because it
is convenient to use and provides rapid results at the point of
care. We focus on two primary applications for LuViva: first, as a
cancer screening tool in the developing world, where infrastructure
to support traditional cancer-screening methods is limited or
non-existent, and second, as a triage following traditional
screening in the developed world, where a high number of false
positive results cause a high rate of unnecessary and ultimately
costly follow-up tests.
Screening for cervical cancer represents one of the most
significant demands on the practice of diagnostic medicine. As
cervical cancer is linked to a sexually transmitted disease -the
human papillomavirus (HPV)-every woman essentially becomes “at
risk” for cervical cancer simply after becoming sexually active. In
the developing world, there are approximately 2.0 billion women
aged 15 and older who are potentially eligible for screening with
LuViva. Guidelines for screening intervals vary across the world,
but U.S. guidelines call for screening every three years.
Traditionally, the Pap smear screening test, or Pap test, is the
primary cervical cancer screening methodology in the developed
world. However, in developing countries, cancer screening using Pap
tests is expensive and requires infrastructure and skill not
currently existing, and not likely to be developed in the near
future, in these countries.
We believe LuViva is the answer to the developing world’s cervical
cancer screening needs. Screening for cervical cancer in the
developing world often requires working directly with foreign
governments or non-governmental agencies (NGOs). By partnering with
governments or NGOs, we can provide immediate access to cervical
cancer detection to large segments of a nation’s population as part
of national or regional governmental healthcare programs,
eliminating the need to develop expensive and resource-intensive
infrastructures.
In the developed world, we believe LuViva offers a more accurate
and ultimately cost-effective triage medical device, to be used
once a traditional Pap test or HPV test indicates the possibility
of cervical cancer. Due to the high number of false positive
results from Pap tests, traditional follow-on tests entail
increased medical treatment costs. We believe these costs can be
minimized by utilizing LuViva as a triage to determine whether and
to what degree follow-on tests are warranted.
We believe our non-invasive cervical cancer detection technology
can be applied to the early detection of other cancers as well. For
example, we have developed prototypes and conducted limited
clinical studies using our biophotonic technology for the detection
of esophageal cancer. We believe that skin cancer detection is also
a promising target for our biophotonic technology, but currently we
are focused primarily on the large-scale commercialization of
LuViva.
Our Potential Market
The Developing World
According to the most recent data published by the World Health
Organization (WHO), cervical cancer is the fourth most frequent
cancer in women worldwide, with an estimated 570,000 new cases in
2018, an increase of 40,000 cases from 2012. For women living in
less developed regions, however, cervical cancer is the second most
common cancer, and 9 out of 10 women who die from cervical cancer
reside in low- and middle-income countries. In 2018, GLOBOCAN, the
international cancer tracking agency, estimated that approximately
311,000 women died from cervical cancer, with 85% of these deaths
occurring in low- and middle-income countries.
As noted by the WHO, in developed countries, programs are in place
that enable women to get screened, making most pre-cancerous
lesions identifiable at stages when they can easily be treated.
Early treatment prevents up to 80% of cervical cancers in these
countries. In developing countries, however, limited access to
effective screening means that the disease is often not identified
until it is further advanced and symptoms develop. In addition,
prospects for treatment of such late-stage disease may be poor,
resulting in a higher rate of death from cervical cancer in these
countries.
We have executed formal distribution agreement covering 40
countries, some of which have since expired. Presently, we still
have active contracts in place for 24 countries that cover roughly
half of the world’s population, including China and certain
countries in Southeast Asia (including Indonesia), and certain
countries in Eastern Europe and Russia.
We believe that the greatest need and market opportunity for LuViva
lies in screening for cervical cancer in developing countries where
the infrastructure for traditional screening may be limited or
non-existent.
In addition to private care markets, we are actively working with
distributors in the following countries to implement
government-sponsored screening programs: Turkey, Indonesia and
several countries in Eastern Europe. The number of screening
candidates in those countries is approximately 155 million.
The Developed World
The Pap test, which involves a sample of cervical tissue being
placed on a slide and observed in a laboratory, is currently the
most common form of cervical cancer screening. Since the
introduction of screening and diagnostic methods, the number of
cervical cancer deaths in the developed world has declined
dramatically, due mainly to the increased use of the Pap test.
However, the Pap test has a wide variation in sensitivity, which is
the ability to detect the disease, and specificity, which is the
ability to exclude false positives. A study by Duke University for
the U.S. Agency for Health Care Policy and Research published in
1999 showed Pap test performance ranging from a 22%-95% sensitivity
and 78%-90% specificity, although new technologies improving the
sensitivity and specificity of the Pap test have recently been
introduced and are finding acceptance in the marketplace.
Currently, about 50 million Pap tests are given annually in the
United States, and combined with a pelvic exam as the standard of
care, has an average price of approximately $380 per exam.
After a Pap test returns a positive result for cervical cancer,
accepted protocol calls for a visual examination of the cervix
using a colposcope, usually followed by a biopsy, or tissue
sampling, at one or more locations on the cervix. This method looks
for visual changes attributable to cancer. There are about two
million colposcope examinations annually in the United States and
Europe. According to industry reports by MD Save and Costhelper
Health, leading online medical service providers, the average cost
of a colposcopy examination with biopsy in the United States is
currently $943.
Given this landscape, we believe that there is a material need and
market opportunity for LuViva as a triage device in the developed
world where LuViva represents a more cost- effective method of
verifying a positive Pap test than the alternatives.
The LuViva Advanced Cervical Scan
LuViva is designed to identify cervical cancers and precancers
painlessly, non-invasively and at the point of care by scanning the
cervix with light, then analyzing the light reflected from the
cervix. The information presented by the light would be used to
indicate the likelihood of cervical cancer or precancers. Our
product, in addition to detecting the structural changes attributed
to cervical cancer, is also designed to detect the biochemical
changes that precede the development of visual lesions. In this
way, cervical cancer may be detected earlier in its development,
which should increase the chances of effective treatment. In
addition to the device itself, operation of LuViva requires
employment of our single-use, disposable calibration and alignment
cervical guide.
To date, thousands of women in multiple international clinical
settings have been tested with LuViva. As a result, more than 25
papers and presentations have been published regarding LuViva in a
clinical setting, including at the International Federation of
Gynecology and Obstetrics Congress in London in 2015 and at the
Indonesian National Obstetrics and Gynecology (POGI) Meeting in
Solo in 2016.
Internationally, we contract with country-specific or regional
distributors. We believe that the international market will be
significantly larger than the U.S. market due to the international
demand for cervical cancer screening. We have executed formal
distribution agreements covering over 40 countries, some of which
have expired. We still have active contracts in place for countries
including China and Southeast Asia (including Indonesia), Eastern
Europe and Russia. In 2022, we intend to focus on other large
markets such as those in the European Union, India and certain
Latin American countries, such as Mexico. The ongoing conflict in
Ukraine may delay filing and approval to market in Russia.
We currently have regulatory approval to sell LuViva in 44
countries, including the 33 countries in Europe under our Edition 3
CE Mark. In addition, we have approval to sell LuViva in 11
additional countries under country specific approvals including
India, Indonesia, Singapore and Kenya. Finally, several non-EU
countries such as Saudi Arabia, Egypt and South Africa rely on the
CE Mark for medical devices. LuViva has also previously obtained
marketing approval from Health Canada and COFEPRIS in Mexico but
these have expired. In addition, in 2018, we were approved for
sales and marketing in India. We currently are seeking regulatory
approval to market LuViva in the United States but have not yet
received approval from the U.S. Food and Drug Administration
(“FDA”). As of March 31, 2022, we have sold 144 LuViva devices and
approximately 76,980 single-use disposable cervical guides to
international distributors.
We believe our non-invasive cervical cancer detection technology
can be applied to the early detection of other cancers as well. As
we develop LuViva as a commercial product, we continue to seek new
collaborative partners focused on marketing and sales of our
biophotonic technology.
Manufacturing, Sales, Marketing and
Distribution
We manufacture LuViva at our Norcross, Georgia facility. Most of
the components of LuViva are custom made for us by third-party
manufacturers. We adhere to ISO 13485:2003 quality standards in our
manufacturing processes. Our single-use cervical guides are
manufactured by a vendor that specializes in injection molding of
plastic medical products. On January 22, 2017, we entered into a
license agreement with Shandong Yaohua Medical Instrument
Corporation (“SMI”), as amended on March 28, 2017, pursuant to
which we granted SMI an exclusive global license to manufacture the
LuViva device and related disposables (subject to a carve-out for
manufacture in Turkey). On December 18, 2018, we entered into a
co-development agreement with Newmars Technologies, Inc. (“NTI”),
whereby NTI will perform final assembly of the LuViva device for
its contracted distribution countries in Eastern Europe and Russia
at its ISO 13485 facility in Hungary. This additional carve out has
been agreed to by SMI. On August 12, 2021 the Company entered into
a second amendment with SMI pursuant to which the Company has
continued to grant SMI exclusive distribution, sales and
manufacturing rights of the LuViva for China, Taiwan, Hong Kong and
Macau.
We rely on distributors to sell our products. Distributors can be
country exclusive or cover multiple countries in a region. We
manage these distributors, provide them marketing materials and
train them to demonstrate and operate LuViva. We seek distributors
that have experience in gynecology and in introducing new
technology into their assigned territories. Currently, we rely on
SMI in distributing our products in the People's Republic of China,
Macau, Hong Kong and Taiwan; we rely on NTI in distributing our
products in Eastern Europe and Russia.
We have only limited experience in the production planning, quality
system management, facility development, and production scaling
that will be needed to bring production to increased sustained
commercial levels. We will likely need to develop additional
expertise in order to successfully manufacture, market, and
distribute any future products.
Our Team
Our management team is comprised of highly experienced
pharmaceutical and biotechnology executives with successful track
records in researching, developing, gaining approval for and
commercializing novel medicines to treat serious diseases. Each
member of our management team has over 20 to 30 years of industry
experience, including our CEO and COO. These individuals have held
leadership positions with industry leaders such as Abbott
Laboratories, and GE Health among others, and also with early stage
biotechnology and emerging technology companies such as Biofield
Corp and SpectRx, Inc. Additionally, the team has significant
experience in company formation, capital raises,
mergers/acquisitions, business development, and sales and marketing
in the pharmaceutical industry. Our board of directors (the
“Board”) is constituted by individuals with significant experience
in the pharmaceutical and biotechnology industries.
Our Strengths
Currently, we are the only commercial stage company with a
biophotonic technology that potentially addresses a large primary
screening market and a potential R&D pipeline that could
improve the early detection of numerous cancers that afflict men
and women. Key strengths include:
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The engineering and production risks have been largely addressed as
we have sold over 100 working systems worldwide.
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Regulatory approvals have been granted covering over 40
countries.
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We
have legitimate pathways for securing marketing approvals in the
two largest medical markets - the US and China, within a 2-3 year
period.
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The clinical results of our technology have been published in
leading peer-reviewed journals by world-famous, thought-leading
physicians.
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Our Business Strategy
Our near term goals are to accomplish the following over the next
two years by pursuing the following strategies:
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Seek US FDA approval by completing a clinical trial.
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Contingent upon FDA approval, discuss opportunities to partner with a larger U.S. based company for distribution in the U.S. At the same time, we intend to build a small dedicated
sales force based near major metropolitan centers and focused on
generating sales at large centralized Ob-Gyn practices.
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Seek Chinese FDA approval working
with our existing partner in China, Shandong Medical
Instrumentation Co. Ltd. |
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Pursue regulatory approval in
Russia and work with our partner in Eastern Europe, Newmars
Technology, Inc. to generate sales in Europe. |
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Continue to selectively support
sales through our distributors in large countries such as
Indonesia. |
While we plan to pursue regulatory approval in Russia, the ongoing
conflict in Ukraine may delay filing and approval to market.
Risk Factor Summary
Our ability to implement our business strategy is subject to
numerous risks that you should be aware of before making an
investment decision. These risks are described more fully in the
section entitled “Risk Factors” in this prospectus. These risks
include, among others:
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Although we will be required to
raise additional funds in 2022, there is no assurance that such
funds can be raised on terms that we would find acceptable, on a
timely basis, or at all. |
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If we cannot obtain additional
funds when needed, we will not be able to implement our business
plan. |
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We have a history of losses, and we
expect losses to continue. |
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Our ability to sell our products is
controlled by government regulations, and we may not be able to
obtain any necessary clearances or approvals. |
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In foreign countries, including
European countries, we are subject to government regulation, which
could delay or prevent our ability to sell our products in those
jurisdictions. |
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In the United States, where we are
subject to regulation by the U.S. FDA, our product has not yet been
approved which could prevent us from selling our products
domestically. |
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Even if we obtain clearance or
approval to sell our products, we are subject to ongoing
requirements and inspections that could lead to the restriction,
suspension or revocation of our clearance. |
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We are currently delinquent on our
federal payroll and unemployment taxes. |
Listing on the Nasdaq Capital Market
Our common stock is currently quoted on the OTC Markets under the
symbol “GTHP”. In connection with this offering, we have applied to
list our common stock and Public Warrants offered in the offering
on the Nasdaq under the symbols “GTHP” and “GTHPW”, respectively.
If our listing application is approved, we expect to list our
common stock and the Public Warrants offered in the offering on
Nasdaq upon consummation of the offering, at which point our common
stock will cease to be traded on the OTC Markets. No assurance can
be given that our listing application will be approved. Nasdaq
listing requirements include, among other things, a stock price
threshold. As a result, in order to meet such requirement, on
December 20, 2021 we approved a 1-for-20 reverse stock split of our
common stock. There can be no assurance that our common stock and
Public Warrants will be listed on the Nasdaq. However, we will not
complete this offering if we are not so listed. We do not intend to
apply for listing of the pre-funded warrants on any national
securities exchange or trading system.
Corporate Information
We were incorporated in the state of Delaware in 1992, under the
Delaware General Corporation Law, or “DGCL”, under the name
“SpectRx, Inc.” and subsequently changed our name to Guided
Therapeutics, Inc. on February 22, 2008. At the same time, we
renamed our wholly owned subsidiary, InterScan, Inc. which
originally had been incorporated as “Guided Therapeutics, Inc.” Our
telephone number is (770) 242-8723. Our website address is
https://www.guidedinc.com/. The information contained in or
accessible from our website is not incorporated into this
prospectus, and you should not consider it part of this prospectus.
We have included our website address in this prospectus solely as
an inactive textual reference.
The Offering
Common stock offered by us
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890,000 shares, based on a public offering price of $10.00 per
share of common stock and related Public Warrant.
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Pre-funded warrants offered by us
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We
are also offering to certain purchasers whose purchase of common
stock in this offering would otherwise result in the purchaser,
together with its affiliates and certain related parties,
beneficially owning more than 4.99% (or, at the election of the
purchaser, 9.99%) of the outstanding shares of our common stock
immediately following the consummation of this offering, the
opportunity to purchase, if such purchasers so choose, up to
178,000 pre-funded warrants, in lieu of shares of common stock that
would otherwise result in any such purchaser’s beneficial ownership
exceeding 4.99% (or, at the election of the purchaser, 9.99%) of
the outstanding shares of our common stock. Each pre-funded warrant
will be exercisable for one share of common stock. The purchase
price of each pre-funded warrant and the accompanying Public
Warrant will equal the price at which the shares of common stock
and the accompanying Public Warrant are being sold to the public in
this offering, and the exercise price of each pre-funded warrant
will be $0.001 per share. The pre-funded warrants will be
exercisable immediately and may be exercised at any time until all
of the pre-funded warrants are exercised in full. This offering
also relates to the shares of common stock issuable upon exercise
of any pre-funded warrants sold in this offering. For each
pre-funded warrant we sell, the number of shares of common stock we
are offering will be decreased on a one-for-one basis. Because we
will issue one Public Warrant for each share of common stock and
for each pre-funded warrant to purchase one share of common stock
sold in this offering, the number of Public Warrants sold in this
offering will not change as a result of a change in the mix of the
shares of common stock and pre- funded warrants sold. For
additional information, see “Description of Securities—Pre-Funded
Warrants to be Issued as Part of this Offering” on page 73 of this
prospectus.
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Description of Public Warrants
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We
are offering Public Warrants to purchase an aggregate of 890,000
shares of common stock. Each share of common stock and each
pre-funded warrant to purchase one share of common stock is being
sold together with one Public Warrant to purchase one share of
common stock. Each Public Warrant will have an exercise price of
$12.40 per share, will be upon issuance exercisable and will expire
on the fifth anniversary of the original issuance date. The shares
of common stock and pre-funded warrants, and the accompanying
Public Warrants, as the case may be, can only be purchased together
in this offering but will be issued separately and will be
immediately separable upon issuance. This prospectus also relates
to the offering of the shares of common stock issuable upon
exercise of the Public Warrants. For additional information, see
“Description of Securities—Public Warrants to be Issued as Part of
this Offering” on page 70 of this prospectus.
|
|
|
|
Shares of common stock to be outstanding after this
offering
|
|
2,269,174 shares (or 2,402,674 shares if the underwriters exercise
their option to purchase additional shares in full).
|
|
|
|
Underwriters’ option to purchase additional
securities
|
|
We
have granted the underwriters a 45-day option to purchase up to
133,500 additional shares of common stock and/or Public Warrants at
the public offering price, less underwriting discounts and
commissions on the same terms as set forth in this prospectus.
|
Use of proceeds
|
|
We estimate that the proceeds to us from the sale of shares of our
common stock in this offering will be approximately $8,900,000, or
$10,235,000 if the underwriters exercise their option to purchase
additional shares in full, assuming an initial public offering
price of $10 per share and related Public Warrants as set forth on
the cover page of this prospectus, and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us. We intend to use the net proceeds of this
offering to fund completion of the US FDA clinical trial and
application for FDA approval for LuViva, sales and marketing, debt
repayment, and general corporate purposes. See “Use of
Proceeds.”
|
|
|
|
Proposed Nasdaq Capital Market symbols
|
|
We have applied to list our common stock and Public Warrants
offered pursuant to this prospectus on the Nasdaq under the symbols
“GTHP” and “GTHPW”, respectively. The successful listing of our
common stock and Public Warrants on Nasdaq is a condition of this
offering. However, there can be no assurance that Nasdaq will
approve our listing application.
|
|
|
|
No Listing of Pre-funded Warrants
|
|
We do not intend to apply for listing of the pre-funded warrants on
any national securities exchange or trading system. Without an
active trading market, the liquidity of the pre-funded warrants
will be limited.
|
|
|
|
Risk Factors
|
|
Investment in our securities involves substantial risks. You should
read this prospectus carefully, including the section entitled
“Risk Factors” and the financial statements and the related notes
to those statements included in this prospectus, before investing
in our common stock.
|
The number of shares of common stock to be outstanding after this
offering is based on an aggregate of 1,379,174 shares outstanding
as of June 5, 2022. The disclosure above does not include:
|
·
|
75,000 shares of common stock issuable upon exercise of outstanding
options as of March 31, 2022, at a weighted average exercise price
of $9.80 per share, of which 52,261 shares were vested as of such
date;
|
|
|
|
|
·
|
250,470 shares of common stock reserved for future issuance under
our stock option plan as of March 31, 2022, plus any future
increases in the number of shares of common stock reserved for
issuance under our stock option plan pursuant to evergreen
provisions;
|
|
|
|
|
·
|
shares of common stock that may be
issued upon the exercise of pre-funded warrants and Public Warrants
issued in this offering; and |
|
|
|
|
·
|
1,552,227 shares of common stock underlying warrants and
convertible debt at a weighted average exercise price of $6.24 per
share.
|
Except as otherwise indicated herein, all information in this
prospectus, including the number of shares that will be outstanding
after this offering, assumes no exercise by the underwriters of
their option to purchase additional securities.
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands)
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
Sales - devices and disposables
|
|
$ |
5 |
|
|
$ |
- |
|
Cost of goods sold
|
|
|
1 |
|
|
|
- |
|
Gross profit
|
|
|
4 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
21 |
|
|
|
16 |
|
Sales and marketing
|
|
|
40 |
|
|
|
36 |
|
General and administrative
|
|
|
386 |
|
|
|
771 |
|
Total operating expenses
|
|
|
447 |
|
|
|
823 |
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(443 |
) |
|
|
(823 |
) |
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(101 |
) |
|
|
(141 |
) |
Change in fair value of derivative liability
|
|
|
(6 |
) |
|
|
(88 |
) |
Gain from extinguishment of debt
|
|
|
41 |
|
|
|
87 |
|
Change in fair value of warrants
|
|
|
- |
|
|
|
448 |
|
Other expenses
|
|
|
2 |
|
|
|
- |
|
Total other income (expense)
|
|
|
(64 |
) |
|
|
306 |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(507 |
) |
|
|
(517 |
) |
Provision for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(507 |
) |
|
|
(517 |
) |
Preferred stock dividends
|
|
|
(548 |
) |
|
|
(55 |
) |
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
$ |
(1,055 |
) |
|
$ |
(572 |
) |
SUMMARY FINANCIAL DATA
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
|
|
Years Ended
|
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Sales - devices and
disposables |
|
$ |
81 |
|
|
$ |
102 |
|
Cost of goods sold (recovered) |
|
|
61 |
|
|
|
(41 |
) |
Gross profit
|
|
|
20 |
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Research and development
|
|
|
69 |
|
|
|
143 |
|
Sales and marketing
|
|
|
141 |
|
|
|
139 |
|
General and administrative
|
|
|
2,172 |
|
|
|
913 |
|
Total operating expenses
|
|
|
2,382 |
|
|
|
1,195 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(2,362 |
) |
|
|
(1,052 |
) |
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,150 |
) |
|
|
(1,056 |
) |
Change in fair value of derivative liability
|
|
|
(91 |
) |
|
|
(25 |
) |
Gain (loss) from extinguishment of debt
|
|
|
578 |
|
|
|
(296 |
) |
Change in fair value of warrants
|
|
|
448 |
|
|
|
1,879 |
|
Other income
|
|
|
507 |
|
|
|
271 |
|
Total other income
|
|
|
292 |
|
|
|
773 |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(2,070 |
) |
|
|
(279 |
) |
Provision for income taxes |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(2,070 |
) |
|
|
(279 |
) |
Preferred stock dividends |
|
|
(361 |
) |
|
|
(122 |
) |
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO
COMMON STOCKHOLDERS |
|
$ |
(2,431 |
) |
|
$ |
(401 |
) |
|
|
Year ended December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Balance Sheet
Data: |
|
|
|
|
|
|
Total current assets |
|
$ |
1,637 |
|
|
$ |
896 |
|
Total noncurrent assets |
|
|
403 |
|
|
|
454 |
|
Working capital |
|
|
(4,057 |
) |
|
|
(8,066 |
) |
Total assets |
|
|
2,040 |
|
|
|
1,350 |
|
Current liabilities |
|
|
5,694 |
|
|
|
8,962 |
|
Non current liabilities |
|
|
1,791 |
|
|
|
3,243 |
|
Total liabilities |
|
|
7,485 |
|
|
|
12,205 |
|
Accumulated deficit |
|
|
(142,387 |
) |
|
|
(139,956 |
) |
Total stockholders deficit |
|
$ |
(5,445 |
) |
|
$ |
(10,855 |
) |
RISK FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider each of the following risks, together
with all other information set forth in this prospectus, including
the consolidated financial statements and the related notes, before
making a decision to buy our securities. If any of the following
risks actually occurs, our business could be harmed. In that case,
the trading price of our common stock could decline, and you may
lose all or part of your investment.
Risks Related to Our Business and
Industry
Although we may be required to raise additional funds
in 2022, if the proceeds of this offering is not sufficient to
carry out our business, there is no assurance that such funds can
be raised on terms that we would find acceptable, on a timely
basis, or at all.
Additional debt or equity financing may be required for us to
continue as a going concern. We may seek to obtain additional funds
for the financing of our cervical cancer detection business through
additional debt or equity financings and/or new collaborative
arrangements. Management believes that additional financing, if
obtainable, will be sufficient to support planned operations only
for a limited period. Management has implemented operating actions
to reduce cash requirements. Any required additional funding may
not be available on terms attractive to us, on a timely basis, or
at all. If we cannot obtain additional funds or achieve
profitability, we may not be able to continue as a going
concern.
Because we must obtain additional funds through financing
transactions or through new collaborative arrangements in order to
grow the revenues of our cervical cancer detection product line,
there exists substantial doubt about our ability to continue as a
going concern. Therefore, it will be necessary to raise additional
funds. There can be no assurance that we will be able to
raise these additional funds. If we do not secure additional
funding when needed, we will be unable to conduct all of our
product development efforts as planned, which may cause us to alter
our business plan in relation to the development of our products.
Even if we obtain additional funding, we will need to achieve
profitability thereafter.
Our independent registered public accountants’ report on our
consolidated financial statements as of and for the year ended
December 31, 2021, indicated that there was substantial doubt about
our ability to continue as a going concern because we had suffered
recurring losses from operations and had an accumulated deficit of
$142.4 million at December 31, 2021. The accumulated deficit from
December 31, 2018 through March 31, 2022 is summarized as
follows:
Accumulated deficit, from inception to 12/31/2018
|
$
|
137.7 million
|
|
Net loss for fiscal year 2019, ended 12/31/2019
|
$
|
1.9 million
|
|
Accumulated deficit, from inception to 12/31/2019
|
$
|
139.6 million
|
|
Preferred dividends for fiscal year 2020
|
$
|
0.1 million
|
|
Net loss for the year ended 12/31/2020
|
$
|
0.3 million
|
|
Accumulated deficit, from inception to 12/31/2020
|
$
|
140.0 million
|
|
Preferred dividends for fiscal year 2021
|
$
|
0.4million
|
|
Net loss for the year ended 12/31/2021
|
$
|
2.0 million
|
|
Accumulated deficit, from inception to 12/31/2021
|
$
|
142.4 million
|
|
Preferred dividends for the quarter ended 3/31/2022
|
$
|
0.5 million
|
|
Net loss for the quarter ended 3/31/2022
|
$
|
0.5 million
|
|
Accumulated deficit, from inception to 3/31/2022
|
$
|
143.4 million
|
|
Our management has implemented reductions in operating expenditures
and reductions in some development activities. We have determined
to make cervical cancer detection the focus of our business. We are
managing the development of our other programs only when funds are
made available to us via grants or contracts with government
entities or strategic partners. However, there can be no assurance
that we will be able to successfully implement or continue these
plans.
If we cannot obtain additional funds when needed, we
will not be able to implement our business plan.
We require substantial additional capital to develop our products,
including completing product testing and clinical trials, obtaining
all required regulatory approvals and clearances, beginning and
scaling up manufacturing, and marketing our products. We have
historically financed our operations though the public and private
sale of debt and equity, funding from collaborative arrangements,
and grants. Any failure to achieve adequate funding in a timely
fashion would delay our development programs and could lead to
abandonment of our business plan. To the extent we cannot obtain
additional funding, our ability to continue to manufacture and sell
our current products, or develop and introduce new products to
market, will be limited. Further, financing our operations through
the public or private sale of debt or equity may involve
restrictive covenants or other provisions that could limit how we
conduct our business or finance our operations. Financing our
operations through collaborative arrangements generally means that
the obligations of the collaborative partner to fund our
expenditures are largely discretionary and depend on a number of
factors, including our ability to meet specified milestones in the
development and testing of the relevant product. We may not be able
to obtain an acceptable collaboration partner, and even if we do,
we may not be able to meet these milestones, or the collaborative
partner may not continue to fund our expenditures.
We have a history of losses, and we expect losses to
continue.
We have never been profitable and we have had operating losses
since our inception. We expect our operating losses to continue as
we continue to expend substantial resources to complete
commercialization of our products, obtain regulatory clearances or
approvals; build our marketing, sales, manufacturing and finance
capabilities, and conduct further research and development. The
further development and commercialization of our products will
require substantial development, regulatory, sales and marketing,
manufacturing and other expenditures. We have only generated
limited revenues from product sales. As of March 31, 2022 and
December 31, 2021, our accumulated deficit was approximately $143.4
million and $142.4 million, respectively.
We are currently delinquent with our federal and state
payroll and unemployment taxes.
Although we have been experiencing recurring losses, we are
obligated to file tax returns for compliance with IRS regulations
and that of applicable state jurisdictions. We have established
payment plans for the outstanding federal and state payroll and
unemployment taxes with IRS, the Department of Revenue for the
State of Georgia and Department of Labor for the State of Georgia.
As of the date of this prospectus, we are delinquent on federal
payroll taxes for first quarter of 2017, and federal unemployment
taxes for the year 2016. Per the terms of our payment plan we are
required to make monthly payments in the amount of $1,009 until the
balances are paid in full. We are delinquent on state payroll taxes
for first quarter of 2017 and fourth quarter of 2016. Per the terms
of our payment plan we are required to make monthly payments in the
amount of $210 until the balances are paid in full. We are
delinquent on our state unemployment taxes and per the terms of our
payment plan we are required to make a minimum monthly payment in
the amount of $2,629 until the balance is paid in full.
Our ability to sell our products is controlled by
government regulations, and we may not be able to obtain any
necessary clearances or approvals.
The design, manufacturing, labeling, distribution and marketing of
medical device products are subject to extensive and rigorous
government regulation in most of the markets in which we sell, or
plan to sell, our products, which can be expensive and uncertain
and can cause lengthy delays before we can begin selling our
products in those markets.
In foreign countries, including European countries, we
are subject to government regulation, which could delay or prevent
our ability to sell our products in those
jurisdictions.
In order for us to market our products in Europe and some other
international jurisdictions, we and our distributors and agents
must obtain required regulatory registrations or approvals. We must
also comply with extensive regulations regarding safety, efficacy
and quality in those jurisdictions. We may not be able to obtain
the required regulatory registrations or approvals, or we may be
required to incur significant costs in obtaining or maintaining any
regulatory registrations or approvals we receive. Delays in
obtaining any registrations or approvals required for marketing our
products, failure to receive these registrations or approvals, or
future loss of previously obtained registrations or approvals would
limit our ability to sell our products internationally. For
example, international regulatory bodies have adopted various
regulations governing product standards, packaging requirements,
labeling requirements, import restrictions, tariff regulations,
duties and tax requirements. These regulations vary from country to
country. In order to sell our products in Europe, in 2018 we had to
undergo an inspection and re-file for ISO 13485:2016 and the CE
Mark, which is an international symbol of quality and compliance
with applicable European medical device directives. Failure to
maintain ISO 13485:2016 certification or CE mark certification or
other international regulatory approvals would prevent us from
selling in some countries in the European Union.
As of March 31, 2022, our products have achieved and maintained
both ISO 13485:2016 certification and the CE Mark through our
contract manufacturer, Newmars Technologies.
For our products to be marketed and sold in the People’s Republic
of China, they must gain approval from the Chinese National Medical
Products Administration (NMPA), formerly known as the Chinese Food
and Drug Administration (Chinese FDA). We are working with our
Chinese partner, Shandong Yaohua Medical Instrument Corporation, to
achieve NMPA approval and as of December 31, 2021 had passed
compliance testing for device safety and has enrolled approximately
150 people in their clinical trial, which is expected to be
completed in 2022, although there can be no assurances that this
schedule will be met.
Our business is subject to the risks of international
operations.
Our business and financial results could be adversely affected due
to a variety of factors, including:
|
·
|
changes in a specific country or
region’s political and cultural climate or economic condition,
including change in governmental regime; |
|
·
|
unexpected or unfavorable changes
in foreign laws, regulatory requirements and related
interpretations; |
|
·
|
difficulty of effective enforcement
of contractual provisions in local jurisdictions; |
|
·
|
inadequate intellectual property
protection in foreign countries; |
|
·
|
trade protection measures, import
or export licensing requirements such as Export Administration
Regulations promulgated by the U.S. Department of Commerce and
fines, penalties or suspension or revocation of export
privileges; |
|
·
|
trade sanctions imposed by the
United States or other governments with jurisdictional authority
over our business operations; |
|
·
|
the effects of applicable and
potentially adverse foreign tax law changes; |
|
·
|
significant adverse changes in
foreign currency exchange rates; |
|
·
|
longer accounts receivable
cycles; |
|
·
|
managing a geographically dispersed
workforce; and |
|
·
|
compliance with the U.S. Foreign
Corrupt Practices Act, or FCPA, and the Office of Foreign Assets
Control regulations, particularly in emerging markets. |
In foreign countries, particularly in those with developing
economies, certain business practices may exist that are prohibited
by laws and regulations applicable to us, such as the U.S. Foreign
Corrupt Practices Act, the U.K. Bribery Act and other
anti-corruption laws. Although our policies and procedures require
compliance with these laws and are designed to facilitate
compliance with these laws, our employees, contractors and agents
may take actions in violation of applicable laws or our policies.
Any such violation, even if prohibited by our policies, could have
a material adverse effect on our business and reputation.
Our international businesses must comply with applicable laws such
as the U.S. Foreign Corrupt Practices Act. Failure to maintain
compliance with or adapt to changes in any of the aforementioned
requirements could result in fines, penalties or regulatory actions
that could have an adverse impact on our business, results of
operations and financial condition.
While we plan to pursue regulatory approval in Russia,
the ongoing conflict in Ukraine may delay filing and approval to
market in Russia. It is unclear how
long any delays may last due to the uncertainty of the situation
both in Ukraine and Russia..
The conflict in Ukraine, which has already had an impact on
financial markets, could result in additional repercussions in our
operating business, including delays in obtaining regulatory
approval to market our products in Russia. The future impact of the
conflict is highly uncertain and cannot be predicted, and we cannot
provide any assurance that the conflict will not have a material
adverse impact on our operations or future results or filings with
regulatory health authorities.
Russia’s invasion of Ukraine, and sanctions
brought by the United States and other countries against Russia,
have caused disruptions in many business sectors outside of the
medical sector and have resulted in significant market disruptions
and increased volatility in the price of certain commodities,
including oil and natural gas.
On February 24, 2022, Russia launched a large-scale invasion
of Ukraine. The extent and duration of the military action,
resulting sanctions and future market disruptions in the region are
impossible to predict, but could be significant and may have a
severe adverse effect on the region. Among other things, the
conflict has resulted in increased volatility in the markets for
certain securities and commodities, including oil and natural gas,
and other sectors.
The United States and other countries and certain international
organizations have imposed broad-ranging economic sanctions on
Russia and certain Russian individuals, banking entities and
corporations as a response to Russia’s invasion
of Ukraine. On March 8, 2022, the United States
announced that it would ban imports of oil, natural gas and coal
from Russia. The impact of this announcement on commodities and
futures prices is difficult to predict and depends on a number of
factors, including whether other countries act in the same manner,
but such impact could be significant.
Actual and threatened responses to Russia’s invasion, as well as a
rapid peaceful resolution to the conflict, may also impact the
markets for certain commodities, such as oil and natural gas, and
may have collateral impacts, including increased volatility, and
cause disruptions to availability of certain commodities, commodity
and futures prices and the supply chain globally. At this time, the
situation is rapidly evolving and may evolve in a way that could
have a negative impact on the fund in the future.
In the United States, our products would be subject to
regulation by the U.S. FDA, which could prevent us from selling our
products domestically.
In order for us to market our products in the United States, we
must obtain clearance or approval from the U.S. Food and Drug
Administration, or U.S. FDA. We cannot be sure that:
|
·
|
we, or any collaborative partner,
will make timely filings with the U.S. FDA; |
|
·
|
the U.S. FDA will act favorably or
quickly on these submissions; |
|
·
|
we will not be required to submit
additional information or perform additional clinical studies;
or |
|
·
|
we will not face other significant
difficulties and costs necessary to obtain U.S. FDA clearance or
approval. |
It can take several years from initial filing of a PMA application
and require the submission of extensive supporting data and
clinical information. The U.S. FDA may impose strict labeling or
other requirements as a condition of its clearance or approval, any
of which could limit our ability to market our products
domestically. Further, if we wish to modify a product after U.S.
FDA approval of a PMA application, including changes in indications
or other modifications that could affect safety and efficacy,
additional clearances or approvals will be required from the U.S.
FDA. Any request by the U.S. FDA for additional data, or any
requirement by the U.S. FDA that we conduct additional clinical
studies, could result in a significant delay in bringing our
products to market domestically and require substantial additional
research and other expenditures. Similarly, any labeling or other
conditions or restrictions imposed by the U.S. FDA could hinder our
ability to effectively market our products domestically. Further,
there may be new U.S. FDA policies or changes in U.S. FDA policies
that could be adverse to us.
Currently, we have not obtained clearance or approval from the U.S.
FDA, however we have agreed with the U.S. FDA on the clinical trial
protocol and are preparing to start the study of approximately 400
women in the third quarter of 2022 at up to three clinical sites
where the protocol is now under review for approval to allow the
start of the study.
Even if we obtain clearance or approval to sell our
products, we are subject to ongoing requirements and inspections
that could lead to the restriction, suspension or revocation of our
clearance.
We, as well as any potential collaborative partners, will be
required to adhere to applicable regulations in the markets in
which we operate and sell our products, regarding good
manufacturing practice, which include testing, control, and
documentation requirements. Ongoing compliance with good
manufacturing practice and other applicable regulatory requirements
will be strictly enforced applicable regulatory agencies. Failure
to comply with these regulatory requirements could result in, among
other things, warning letters, fines, injunctions, civil penalties,
recall or seizure of products, total or partial suspension of
production, failure to obtain premarket clearance or premarket
approval for devices, withdrawal of approvals previously obtained,
and criminal prosecution. The restriction, suspension or revocation
of regulatory approvals or any other failure to comply with
regulatory requirements would limit our ability to operate and
could increase our costs.
We depend on a limited number of distributors and any
reduction, delay or cancellation of an order from these
distributors or the loss of any of these distributors could cause
our revenue to decline.
Each year we have had one or a few distributors that have accounted
for substantially all of our limited revenues. As a result, the
termination of a purchase order with any one of these distributors
may result in the loss of substantially all of our revenues. We are
constantly working to develop new relationships with existing or
new distributors, but despite these efforts we may not be
successful at generating new orders to maintain similar revenues as
current purchase orders are filled. In addition, since a
significant portion of our revenues is derived from a relatively
few distributors, any financial difficulties experienced by any one
of these distributors, or any delay in receiving payments from any
one of these distributors, could have a material adverse effect on
our business, results of operations, financial condition and cash
flows.
To successfully market and sell our products
internationally, we must address many issues with which we have
limited experience.
All of our sales of LuViva to date have been to distributors
outside of the United States. We expect that substantially all of
our business will continue to come from sales in foreign markets,
through increased penetration in countries where we currently sell
LuViva, combined with expansion into new international markets.
However, international sales are subject to a number of risks,
including:
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difficulties in staffing and
managing international operations; |
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difficulties in penetrating markets
in which our competitors’ products may be more established; |
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reduced or no protection for
intellectual property rights in some countries; |
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export restrictions, trade
regulations and foreign tax laws; |
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fluctuating foreign currency
exchange rates; |
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foreign certification and
regulatory clearance or approval requirements; |
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difficulties in developing
effective marketing campaigns for unfamiliar, foreign
countries; |
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customs clearance and shipping
delays; |
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political and economic instability;
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preference for locally produced
products. |
If one or more of these risks were realized, it could require us to
dedicate significant resources to remedy the situation, and even if
we are able to find a solution, our revenues may still decline.
To market and sell LuViva internationally, we depend on
distributors and they may not be successful.
We currently depend almost exclusively on third-party distributors
to sell and service LuViva internationally and to train our
international distributors, and if these distributors terminate
their relationships with us or under-perform, we may be unable to
maintain or increase our level of international revenue. We will
also need to engage additional international distributors to grow
our business and expand the territories in which we sell LuViva.
Distributors may not commit the necessary resources to market, sell
and service LuViva to the level of our expectations. If current or
future distributors do not perform adequately, or if we are unable
to engage distributors in particular geographic areas, our revenue
from international operations will be adversely affected.
Our success largely depends on our ability to maintain
and protect the proprietary information on which we base our
products.
Our success depends in large part upon our ability to maintain and
protect the proprietary nature of our technology through the patent
process, as well as our ability to license from others patents and
patent applications necessary to develop our products. If any of
our patents are successfully challenged, invalidated or
circumvented, or our right or ability to manufacture our products
was to be limited, our ability to continue to manufacture and
market our products could be adversely affected. In addition to
patents, we rely on trade secrets and proprietary know-how, which
we seek to protect, in part, through confidentiality and
proprietary information agreements. The other parties to these
agreements may breach these provisions, and we may not have
adequate remedies for any breach. Additionally, our trade secrets
could otherwise become known to or be independently developed by
competitors.
As of March 31, 2022, we have been issued, or have rights to, 27
U.S. patents (including those under license). In addition, we have
filed for, or have rights to, one U.S. patents (including those
under license) that is still pending. There are additional
international patents and pending applications. One or more of the
patents we hold directly or license from third parties, including
those for our cervical cancer detection products, may be
successfully challenged, invalidated or circumvented, or we may
otherwise be unable to rely on these patents. These risks are also
present for the process we use or will use for manufacturing our
products. In addition, our competitors, many of whom have
substantial resources and have made substantial investments in
competing technologies, may apply for and obtain patents that
prevent, limit or interfere with our ability to make, use and sell
our products, either in the United States or in international
markets.
The medical device industry has been characterized by extensive
litigation regarding patents and other intellectual property
rights. In addition, the U.S. Patent and Trademark Office, or
USPTO, may institute interference proceedings. The defense and
prosecution of intellectual property suits, USPTO proceedings and
related legal and administrative proceedings are both costly and
time consuming. Moreover, we may need to litigate to enforce our
patents, to protect our trade secrets or know-how, or to determine
the enforceability, scope and validity of the proprietary rights of
others. Any litigation or interference proceedings involving us may
require us to incur substantial legal and other fees and expenses
and may require some of our employees to devote all or a
substantial portion of their time to the proceedings. An adverse
determination in the proceedings could subject us to significant
liabilities to third parties, require us to seek licenses from
third parties or prevent us from selling our products in some or
all markets. We may not be able to reach a satisfactory settlement
of any dispute by licensing necessary patents or other intellectual
property. Even if we reached a settlement, the settlement process
may be expensive and time consuming, and the terms of the
settlement may require us to pay substantial royalties. An adverse
determination in a judicial or administrative proceeding or the
failure to obtain a necessary license could prevent us from
manufacturing and selling our products.
We may not be able to generate sufficient sales
revenues to sustain our growth and strategy
plans.
Our cervical cancer diagnostic activities have been financed to
date through a combination of government grants, strategic partners
and direct investment. Growing revenues for this product is the
main focus of our business. In order to effectively market the
cervical cancer detection product, additional capital will be
needed.
Additional product lines involve the modification of the cervical
cancer detection technology for use in other cancers. These product
lines are only in the earliest stages of research and development
and are currently not projected to reach market for several years.
Our goal is to receive enough funding from government grants and
contracts, as well as payments from strategic partners, to fund
development of these product lines without diverting funds or other
necessary resources from the cervical cancer program.
Because our products, which use different technology or
apply technology in different ways than other medical devices, are
or will be new to the market, we may not be successful in launching
our products and our operations and growth would be adversely
affected.
Our products are based on new methods of cancer detection. If our
products do not achieve significant market acceptance, our sales
will be limited and our financial condition may suffer. Physicians
and individuals may not recommend or use our products unless they
determine that these products are an attractive alternative to
current tests that have a long history of safe and effective use.
To date, our products have been used by only a limited number of
people, and few independent studies regarding our products have
been published. The lack of independent studies limits the ability
of doctors or consumers to compare our products to conventional
products.
If we are unable to compete effectively in the highly
competitive medical device industry, our future growth and
operating results will suffer.
The medical device industry in general and the markets in which we
expect to offer products in particular, are intensely competitive.
Many of our competitors have substantially greater financial,
research, technical, manufacturing, marketing and distribution
resources than we do and have greater name recognition and
lengthier operating histories in the health care industry. We may
not be able to effectively compete against these and other
competitors. A number of competitors are currently marketing
traditional laboratory-based tests for cervical cancer screening
and diagnosis. These tests are widely accepted in the health care
industry and have a long history of accurate and effective use.
Further, if our products are not available at competitive prices,
health care administrators who are subject to increasing pressures
to reduce costs may not elect to purchase them. Also, a number of
companies have announced that they are developing, or have
introduced, products that permit non-invasive and less invasive
cancer detection. Accordingly, competition in this area is expected
to increase.
Furthermore, our competitors may succeed in developing, either
before or after the development and commercialization of our
products, devices and technologies that permit more efficient, less
expensive non-invasive and less invasive cancer detection. It is
also possible that one or more pharmaceutical or other health care
companies will develop therapeutic drugs, treatments or other
products that will substantially reduce the prevalence of cancers
or otherwise render our products obsolete.
We have limited manufacturing experience, which could
limit our growth.
We do not have manufacturing experience that would enable us to
make products in the volumes that would be necessary for us to
achieve significant commercial sales, and we rely upon our
suppliers. In addition, we may not be able to establish and
maintain reliable, efficient, full-scale manufacturing at
commercially reasonable costs in a timely fashion. Difficulties we
encounter in manufacturing scale-up, or our failure to implement
and maintain our manufacturing facilities in accordance with good
manufacturing practice regulations, international quality standards
or other regulatory requirements, could result in a delay or
termination of production. In the past, we have had substantial
difficulties in establishing and maintaining manufacturing for our
products and those difficulties impacted our ability to increase
sales. Companies often encounter difficulties in scaling up
production, including problems involving production yield, quality
control and assurance, and shortages of qualified personnel.
Since we rely on sole source suppliers for several of
the components used in our products, any failure of those suppliers
to perform would hurt our operations.
Several of the components used in our products or planned products,
are available from only one supplier, and substitutes for these
components could not be obtained easily or would require
substantial modifications to our products. Any significant problem
experienced by one of our sole source suppliers may result in a
delay or interruption in the supply of components to us until that
supplier cures the problem or an alternative source of the
component is located and qualified. Any delay or interruption would
likely lead to a delay or interruption in our manufacturing
operations. For our products that require premarket approval, the
inclusion of substitute components could require us to qualify the
new supplier with the appropriate government regulatory
authorities. Alternatively, for our products that qualify for
premarket notification, the substitute components must meet our
product specifications.
Because we operate in an industry with significant
product liability risk, and we have not specifically insured
against this risk, we may be subject to substantial claims against
our products.
The development, manufacture and sale of medical products entail
significant risks of product liability claims. We currently have no
product liability insurance coverage beyond that provided by our
general liability insurance. Accordingly, we may not be adequately
protected from any liabilities, including any adverse judgments or
settlements, we might incur in connection with the development,
clinical testing, manufacture and sale of our products. A
successful product liability claim or series of claims brought
against us that result in an adverse judgment against or settlement
by us in excess of any insurance coverage could seriously harm our
financial condition or reputation. In addition, product liability
insurance is expensive and may not be available to us on acceptable
terms, if at all.
The availability of third party reimbursement for our
products is uncertain, which may limit consumer use and the market
for our products.
In the United States and elsewhere, sales of medical products are
dependent, in part, on the ability of consumers of these products
to obtain reimbursement for all or a portion of their cost from
third-party payors, such as government and private insurance plans.
Any inability of patients, hospitals, physicians and other users of
our products to obtain sufficient reimbursement from third-party
payors for our products, or adverse changes in relevant
governmental policies or the policies of private third-party payors
regarding reimbursement for these products, could limit our ability
to sell our products on a competitive basis. We are unable to
predict what changes will be made in the reimbursement methods used
by third-party health care payors. Moreover, third-party payors are
increasingly challenging the prices charged for medical products
and services, and some health care providers are gradually adopting
a managed care system in which the providers contract to provide
comprehensive health care services for a fixed cost per person.
Patients, hospitals and physicians may not be able to justify the
use of our products by the attendant cost savings and clinical
benefits that we believe will be derived from the use of our
products, and therefore may not be able to obtain third-party
reimbursement.
Reimbursement and health care payment systems in international
markets vary significantly by country and include both
government-sponsored health care and private insurance. We may not
be able to obtain approvals for reimbursement from these
international third-party payors in a timely manner, if at all. Any
failure to receive international reimbursement approvals could have
an adverse effect on market acceptance of our products in the
international markets in which approvals are sought.
We have a substantial amount of indebtedness, which may
adversely affect our cash flow and our ability to operate our
business.
Our outstanding indebtedness, which includes all of the
liabilities, was $7.2 million at March 31,
2022.
The terms of our indebtedness could have negative consequences to
us, such as:
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we may be unable to obtain
additional financing to fund working capital, operating losses,
capital expenditures or acquisitions on terms acceptable to us, or
at all; |
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the amount of our interest expense
may increase if we are unable to make payments when due; |
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our assets might be subject to
foreclosure if we default on our secured debt; |
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our vendors or employees may, and
some have, instituted proceedings to collect on amounts owed
them; |
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we have to use a substantial
portion of our cash flows from operations to repay our
indebtedness, including ordinary course accounts payable and
accrued payroll liabilities, which reduces the amount of money we
have for future operations, working capital, inventory, expansion,
or general corporate or other business activities; and |
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we may be unable to refinance our
indebtedness on terms acceptable to us, or at all. |
Our ability to meet our expenses and debt obligations will depend
on our future performance, which will be affected by financial,
business, economic, regulatory and other factors. We will be unable
to control many of these factors, such as economic conditions. We
cannot be certain that our earnings will be sufficient to allow us
to pay the principal and interest on our debt and meet any other
obligations. If we do not have enough money to service our debt, we
may be required, but unable, to refinance all or part of our
existing debt, sell assets, borrow money or raise equity on terms
acceptable to us, if at all.
Our success depends on our ability to attract and
retain scientific, technical, managerial and finance
personnel.
Our ability to operate successfully and manage our future growth
depends in significant part upon the continued service of key
scientific, technical, managerial and finance personnel, as well as
our ability to attract and retain additional highly qualified
personnel in these fields. We may not be able to attract and retain
key employees when necessary, which would limit our operations and
growth. In addition, if we are able to successfully develop and
commercialize our products, we will need to hire additional
scientific, technical, marketing, managerial and finance personnel.
We face intense competition for qualified personnel in these areas,
many of whom are often subject to competing employment offers.
Certain provisions of our certificate of incorporation
that authorize the issuance of additional shares of preferred stock
may make it more difficult for a third party to effect a change in
control.
Our certificate of incorporation authorizes our board of directors
to issue up to 5.0 million shares of preferred stock of which
10,977 were outstanding as of March 31, 2022. Our undesignated
shares of preferred stock may be issued in one or more series, the
terms of which may be determined by the board without further
stockholder action. These terms may include, among other terms,
voting rights, including the right to vote as a series on
particular matters, preferences as to liquidation and dividends,
repurchase rights, conversion rights, redemption rights and sinking
fund provisions. The issuance of any preferred stock could diminish
the rights of holders of our common stock, and therefore could
reduce the value of our common stock. In addition, specific rights
granted to future holders of preferred stock could be used to
restrict our ability to merge with or sell assets to a third party.
The ability of our board to issue preferred stock could make it
more difficult, delay, discourage, prevent or make it more costly
to acquire or effect a change in control, which in turn could
prevent our stockholders from recognizing a gain in the event that
a favorable offer is extended and could materially and negatively
affect the market price of our common stock.
Risks Related to Our Securities
The market prices for our common stock are volatile and
will fluctuate.
The market price for our common stock may be volatile and subject
to wide fluctuations in response to numerous factors, many of which
are beyond our control, including the following: (i) actual or
anticipated fluctuations in our quarterly financial results; (ii)
recommendations by securities research analysts; (iii) changes in
the economic performance or market valuations of other issuers that
investors deem comparable to ours; (iv) addition or departure of
our executive officers or members of our Board and other key
personnel; (v) release or expiration of lock-up or other transfer
restrictions on outstanding common stock; (vi) sales or perceived
sales of additional common stock; (vii) liquidity of the common
stock; (viii) significant acquisitions or business combinations,
strategic partnerships, joint ventures or capital commitments by or
involving us or our competitors; and (ix) news reports relating to
trends, concerns, technological or competitive developments,
regulatory changes and other related issues in our industry or
target markets. Financial markets often experience significant
price and volume fluctuations that affect the market prices of
equity securities of public entities and that are, in many cases,
unrelated to the operating performance, underlying asset values or
prospects of such entities. Accordingly, the market price of our
common stock may decline even if our operating results, underlying
asset values or prospects have not changed. Additionally, these
factors, as well as other related factors, may cause decreases in
asset values that are deemed to be other than temporary, which may
result in impairment losses. As well, certain institutional
investors may base their investment decisions on consideration of
our environmental, governance and social practices and performance
against such institutions’ respective investment guidelines and
criteria, and failure to meet such criteria may result in limited
or no investment in our common stock by those institutions, which
could materially adversely affect the trading price of our common
stock. There can be no assurance that continuing fluctuations in
price and volume will not occur. If such increased levels of
volatility and market turmoil continue for a protracted period of
time, our operations could be materially adversely impacted and the
trading price of our common stock may be materially adversely
affected.
There is a limited market for our
securities.
Our common stock is listed on the OTC Markets. We have applied to
list our common stock on Nasdaq. The successful listing of our
common stock on the Nasdaq is a condition of this offering.
However, there can be no assurance that Nasdaq will approve our
listing application, or that an active and liquid market for the
common stock will develop or be maintained on the applicable stock
exchanges, and an investor may find it difficult to resell any of
our securities.
Raising additional capital may cause dilution to our
existing stockholders, restrict our operations or require us to
relinquish rights to our technologies.
We may seek additional capital through a combination of private and
public equity offerings, debt financings, strategic partnerships
and alliances and licensing arrangements. To the extent that we
raise additional capital through the sale of equity or convertible
debt securities, existing ownership interests will be diluted and
the terms of such financings may include liquidation or other
preferences that adversely affect the rights of existing
stockholders. Debt financings may be coupled with an equity
component, such as warrants to purchase shares, which could also
result in dilution of our existing stockholders’ ownership. The
incurrence of indebtedness would result in increased fixed payment
obligations and could also result in certain restrictive covenants,
such as limitations on our ability to incur additional debt,
limitations on our ability to acquire or license intellectual
property rights and other operating restrictions that could
adversely impact our ability to conduct our business and may result
in liens being placed on our assets and intellectual property. If
we were to default on such indebtedness, we could lose such assets
and intellectual property. If we raise additional funds through
strategic partnerships and alliances and licensing arrangements
with third parties, we may have to relinquish valuable rights to
our technologies or grant licenses on terms that are not favorable
to us.
Future offerings of debt or equity securities may rank
senior to common stock.
If we decide to issue debt or equity securities in the future
ranking senior to our common stock or otherwise incur additional
indebtedness, it is possible that these securities or indebtedness
will be governed by an indenture or other instrument containing
covenants restricting our operating flexibility and limiting our
ability to pay dividends to stockholders. Additionally, any
convertible or exchangeable securities that we issue in the future
may have rights, preferences and privileges, including with respect
to dividends, more favorable than those of common stock and may
result in dilution to stockholders. Because our decision to issue
debt or equity securities in any future offering or otherwise incur
indebtedness will depend on market conditions and other factors
beyond our control, we cannot predict or estimate the amount,
timing or nature of our future offerings or financings, any of
which could reduce the market price of our common stock and dilute
their value.
Common stockholders are subordinated to our
lenders.
In the event of bankruptcy, liquidation or reorganization, any
holders of our debt and our trade creditors will generally be
entitled to payment of their claims from our assets before any
assets are made available for distribution to us or our
stockholders. The common stock is effectively subordinated to our
debt and other obligations. As of March 31, 2022, we have $7.2
million in total liabilities and out of it $514,415 is related to
deferred revenue.
Future sales of common stock by officers and directors
may negatively impact the market price for our common
stock.
Subject to compliance with applicable securities laws, our
directors and officers and their affiliates may sell some or all of
their common stock in the future. No prediction can be made as to
the effect, if any, such future sales of common stock may have on
the market price of the common stock prevailing from time to time.
However, the future sale of a substantial number of common stock by
our directors and officers and their affiliates, or the perception
that such sales could occur, could adversely affect prevailing
market prices for our common stock.
We do not currently pay dividends on our common stock
and have no intention to pay dividends on our common stock for the
foreseeable future.
No dividends on our common stock have been paid by us to date. We
do not intend to declare or pay any cash dividends in the
foreseeable future. Payment of any future dividends will be at the
discretion of our Board, after taking into account a multitude of
factors appropriate in the circumstances, including our operating
results, financial condition and current and anticipated cash
needs. In addition, the terms of any future debt or credit facility
may preclude us from paying any dividends unless certain consents
are obtained and certain conditions are met.
We may not be able to maintain the listing of our
common stock on Nasdaq.
We must meet certain financial and liquidity criteria to maintain
the listing of our common stock on Nasdaq. If we fail to meet any
of Nasdaq’s continued listing standards, our common stock may be
delisted. These continued listing standards include specifically
enumerated criteria, such as:
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a $1.00 minimum closing bid
price; |
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stockholders’ equity of $2.5
million; |
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500,000 shares of publicly-held
common stock with a market value of at least $1 million; |
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300 round-lot stockholders;
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Compliance with Nasdaq’s corporate
governance requirements, as well as additional or more stringent
criteria that may be applied in the exercise of Nasdaq’s
discretionary authority. |
There can be no assurance that we will be able to maintain
compliance and remain in compliance in the future. In particular,
our share price may continue to decline for a number of reasons,
including many that are beyond our control.
In addition, our board may determine that the cost of maintaining
our listing on a national securities exchange outweighs the
benefits of such listing. A delisting of our common stock from
Nasdaq would materially impair our stockholders’ ability to buy and
sell our common stock and could have an adverse effect on the
market price of, and the efficiency of the trading market for, our
common stock. A delisting of our common stock would also
significantly impair our ability to raise capital.
We have broad discretion in the use of our cash and
cash equivalents, including the net proceeds we receive in this
offering, and may not use them effectively.
Our management has broad discretion to use our cash and cash
equivalents, including the net proceeds we receive in this
offering, to fund our operations and could spend these funds in
ways that do not improve our results of operations or enhance the
value of our common stock, and you will not have the opportunity as
part of your investment decision to assess whether the net proceeds
are being used appropriately. The failure by our management to
apply these funds effectively could result in financial losses that
could have a material adverse effect on our business, cause the
price of our common stock to decline. Pending their use to fund our
operations, we may invest our cash and cash equivalents, including
the net proceeds from this offering, in a manner that does not
produce income or that loses value.
Holders of the warrants offered hereby will have no
rights as common stockholders with respect to the shares our common
stock underlying the warrants until such holders exercise their
warrants and acquire our common stock, except as otherwise provided
in the warrants.
Until holders of the Public Warrants and the pre-funded warrants
acquire shares of our common stock upon exercise thereof, such
holders will have no rights with respect to the shares of our
common stock underlying such warrants, except to the extent that
holders of such warrants will have certain rights to participate in
distributions or dividends paid on our common stock as set forth in
the warrants. Upon exercise of the Public Warrants and the
pre-funded warrants, the holders will be entitled to exercise the
rights of a common stockholder only as to matters for which the
record date occurs after the exercise date.
If our shares of common stock become subject to the
penny stock rules, it would become more difficult to trade our
shares.
The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in penny stocks. Penny stocks are
generally equity securities with a price of less than $5.00, other
than securities registered on certain national securities exchanges
or authorized for quotation on certain automated quotation systems,
provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or
system. If we are unable to maintain the listing of our common
stock on Nasdaq or another national securities exchange and if the
price of our common stock is less than $5.00, our common stock will
be deemed a penny stock. The penny stock rules require a broker-
dealer, before a transaction in a penny stock not otherwise exempt
from those rules, to deliver a standardized risk disclosure
document containing specified information. In addition, the penny
stock rules require that before effecting any transaction in a
penny stock not otherwise exempt from those rules, a broker-dealer
must make a special written determination that the penny stock is a
suitable investment for the purchaser and receive (i) the
purchaser’s written acknowledgment of the receipt of a risk
disclosure statement; (ii) a written agreement to transactions
involving penny stocks; and (iii) a signed and dated copy of a
written suitability statement. These disclosure requirements may
have the effect of reducing the trading activity in the secondary
market for our common stock, and therefore stockholders may have
difficulty selling their shares.
In connection with the audit of our financial
statements as of and for the year ended
December 31, 2021, material
weaknesses in our internal control over financial reporting was
identified and we may identify additional material weaknesses in
the future.
In connection with the preparation and audits of our financial
statements as of and for the years ended December 31, 2021 and
2020, material weaknesses (as defined under the Exchange Act and by
the auditing standards of the U.S. Public Company Accounting
Oversight Board, or “PCAOB”), were identified in our internal
control over financial reporting. 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 our annual financial
statements will not be prevented or detected on a timely basis. The
material weaknesses identified arose from a lack of recourses to
properly research and account for complex transactions and lack of
oversight and approval by the Board of Directors and Audit
Committee, including formally documented approval of significant
transactions, including related party transactions.
In light of the identified material weaknesses, it is possible
that, had we performed a formal assessment of our internal control
over financial reporting or had our independent registered public
accounting firm performed an audit of our internal control over
financial reporting in accordance with PCAOB standards, additional
control deficiencies may have been identified.
We have begun taking measures, and plan to continue to take
measures, to remediate these material weaknesses. However, the
implementation of these measures may not fully address these
material weaknesses in our internal control over financial
reporting, and, if so, we would not be able to conclude that they
have been fully remedied. Our failure to correct these material
weaknesses or our failure to discover and address any other control
deficiencies could result in inaccuracies in our financial
statements and could also impair our ability to comply with
applicable financial reporting requirements and make related
regulatory filings on a timely basis. As a result, our business,
financial condition, results of operations and prospects, as well
as the trading price of our common stock, may be materially and
adversely affected.
We have incurred, and will continue to incur, increased
costs as a result of operating as a public company, and our
management has been required, and will continue to be required, to
devote substantial time to new compliance
initiatives.
As a public company, we have incurred and are continuing to incur
significant legal, accounting and other expenses. We are subject to
the reporting requirements of the Exchange Act and the rules
adopted, and to be adopted, by the SEC. Our management and other
personnel devote a substantial amount of time to these compliance
initiatives.
Moreover, these rules and regulations have substantially increased
our legal and financial compliance costs and made some activities
more time-consuming and costly. The increased costs have increased
our net loss. These rules and regulations may make it more
difficult and more expensive for us to maintain sufficient
director’s and officer’s liability insurance coverage. We cannot
predict or estimate the amount or timing of additional costs we may
continue to incur to respond to these requirements. The ongoing
impact of these requirements could also make it more difficult for
us to attract and retain qualified persons to serve on our Board,
our Board committees or as executive officers.
Anti-takeover provisions in our Amended and Restated
Certificate of Incorporation and By-laws may reduce the likelihood
of a potential change of control, or make it more difficult for our
stockholders to replace management.
Certain provisions of our Amended and Restated Certificate of
Incorporation and By-laws could have the effect of making it more
difficult for our stockholders to replace management at a time when
a substantial number of stockholders might favor a change in
management. These provisions include authorizing the board of
directors to fill vacant directorships or increase the size of its
board of directors.
Furthermore, our board of directors has the authority to issue up
to 5.0 million shares of preferred stock in one or more series and
to determine the rights and preferences of the shares of any such
series without stockholder approval. Any series of preferred stock
is likely to be senior to the common stock with respect to
dividends, liquidation rights and, possibly, voting rights. The
board’s ability to issue preferred stock may have the effect of
discouraging unsolicited acquisition proposals, thus adversely
affecting the market price of our common stock.
If securities or industry analysts publish inaccurate
or unfavorable research about our business, our share price and
trading volume may decline.
The trading market for our common stock depends in part on the
research and reports that securities or industry analysts publish
about us or our business. If one or more of the analysts who cover
us downgrade our shares or publish inaccurate or unfavorable
research about our business, our shares price may decline. If one
or more of these analysts cease coverage of our company or fail to
publish reports on us regularly, demand for our shares may
decrease, which may cause our shares price and trading volume to
decline.
Our Board approved a reverse stock split at a ratio of
1-for-20 on December 30, 2021 and there are risks associated with
effectuating the reverse stock split.
In order to qualify for an uplisting to Nasdaq, we plan to effect a
reverse stock split at a ratio of up to 1-for-20. All fractional
shares created by the reverse stock split were rounded up to the
nearest whole share. There are certain risks associated with the
reverse stock split, including the following:
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We will have additional authorized
shares of common stock that the board could issue in future without
stockholder approval, and such additional shares could be issued,
among other purposes, in financing transactions or to resist or
frustrate a third-party transaction that is favored by a majority
of the independent directors. This could have an anti-takeover
effect, in that additional shares could be issued, within the
limits imposed by applicable law, in one or more transactions that
could make a change in control or takeover of us more
difficult. |
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There can be no assurance that our
stockholders will approve the reverse stock split or the reverse
stock split will achieve the benefits that we hope it will achieve.
The total market capitalization of our common stock after the
reverse stock split may be lower than the total market
capitalization before the reverse stock split. |
The reverse stock split may decrease the liquidity of
the shares of our common stock.
The liquidity of our common stock may be affected adversely by the
reverse stock split given the reduced number of shares that were
outstanding immediately following the reverse stock split,
especially if the market price of our common stock does not
increase as a result of the reverse stock split. In addition, the
reverse stock split may have increased the number of stockholders
who own odd lots of our common stock, creating the potential for
such stockholders to experience an increase in the cost of selling
their shares and greater difficulty effecting such sales.
Following the reverse stock split, the resulting market
price of our common stock may not attract new investors, including
institutional investors, and may not satisfy the investing
requirements of those investors. Consequently, the trading
liquidity of our common stock may not improve.
Although we believe that a higher market price of our common stock
may help generate greater or broader investor interest, there can
be no assurance that the reverse stock split will result in a share
price that will attract new investors, including institutional
investors. In addition, there can be no assurance that the market
price of our common stock will satisfy the investing requirements
of those investors. As a result, the trading liquidity of our
common stock may not necessarily improve.
The number of shares of our common stock issuable upon
the conversion of our outstanding convertible debt and preferred
stock or exercise of outstanding warrants and options is
substantial.
As of March 31, 2022, our outstanding convertible debt was
convertible into an aggregate of 311,659 shares of our common
stock, and the outstanding shares of our Series C, Series C1,
Series C2, Series D, Series E, Series F, Series F-2 preferred stock
were convertible into an aggregate of 1,697,400 shares of common
stock. Also, as of that date we had warrants outstanding that were
exercisable for an aggregate of 1,269,266 shares, and outstanding
options to purchase 75,000 shares. The shares of common stock
issuable upon conversion or exercise of these securities would have
constituted approximately 75.0% of the total number of shares of
common stock then issued and outstanding.
Further, under the terms of our convertible debt and preferred
stock, as well as certain of our outstanding warrants, the
conversion price or exercise price, as the case may be, could be
adjusted downward, causing substantial dilution. See
“-Adjustments to the conversion price for our convertible debt
and preferred stock, and the exercise price for certain of our
warrants, will dilute the ownership interests of our existing
stockholders.”
Adjustments to the conversion price of some of our
convertible debt and preferred stock, and the exercise price for
certain of our warrants, will dilute the ownership interests of our
existing stockholders.
Under the terms of a portion of our convertible debt, the
conversion price fluctuates with the market price of our common
stock. Additionally, under the terms of our Series C preferred
stock, any dividends we choose to pay in shares of our common stock
will be calculated based on the then-current market price of our
common stock. Accordingly, if the market price of our common stock
decreases, the number of shares of our common stock issuable upon
conversion of the convertible debt or upon payment of dividends on
our outstanding Series C preferred stock will increase, and may
result in the issuance of a significant number of additional shares
of our common stock.
Under the terms of some of our preferred stock and certain of our
convertible notes and outstanding warrants, the conversion price or
exercise price will be lowered if we issue common stock at a per
share price below the then-conversion price or then-exercise price
for those securities. Reductions in the conversion price or
exercise price would result in the issuance of a significant number
of additional shares of our common stock upon conversion or
exercise, which would result in dilution in the value of the shares
of our outstanding common stock and the voting power represented
thereby.
Our need to raise additional capital in the near future
or to use our equity securities for payments could have a dilutive
effect on your investment.
In order to continue operations, we will need to raise additional
capital. We may attempt to raise capital through the public or
private sale of our common stock or securities convertible into or
exercisable for our common stock. In addition, from time to time we
have issued our common stock or warrants in lieu of cash payments.
If we sell additional shares of our common stock or other equity
securities, or issue such securities in respect of other claims or
indebtedness, such sales or issuances will further dilute the
percentage of our equity that you own. Depending upon the price per
share of securities that we sell or issue in the future, if any,
your interest in us could be further diluted by any adjustments to
the number of shares and the applicable exercise price required
pursuant to the terms of the agreements under which we previously
issued convertible securities.
The perceived risk of dilution may cause our stockholders to sell
their shares, which may cause a decline in the price of our common
stock. Moreover, the perceived risk of dilution and the resulting
downward pressure on our stock price could encourage investors to
engage in short sales of our common stock. By increasing the number
of shares offered for sale, material amounts of short selling could
further contribute to progressive price declines in our common
stock.
Risks Related to this Offering
Management will have broad discretion as to the use of
the net proceeds from this offering, and we may not use these
proceeds effectively.
We intend to use the net proceeds from this offering for working
capital and general corporate purposes. Our management will have
broad discretion in the application of the net proceeds from this
offering and could spend the proceeds in ways that do not improve
our results of operations or enhance the value of our common stock.
Accordingly, you will be relying on the judgment of our management
with regard to the use of these net proceeds, and you will not have
the opportunity, as part of your investment decision, to assess
whether the proceeds are being used appropriately. Our failure to
apply these funds effectively could have a material adverse effect
on our business, delay the development of our product candidates
and cause the price of our common stock to decline.
You will experience immediate and substantial dilution
in the net tangible book value per share of the common stock you
purchase.
Because the price per share of our common stock being offered is
substantially higher than the net tangible book value per share of
our common stock, you will suffer substantial dilution in the net
tangible book value of the common stock you purchase in this
offering. Based on a public offering price of $10.00 per share, if
you purchase shares of common stock in this offering, you will
suffer immediate and substantial dilution of approximately
$7.44 per share in the net tangible book value of the common
stock. See the section entitled “Dilution” in this prospectus for a
more detailed discussion of the dilution you will incur if you
purchase common stock in this offering.
In addition, we have a significant number of stock options,
warrants and convertible preferred stock outstanding. To the extent
that outstanding stock options, warrants have been or may be
exercised or other shares issued, you may experience further
dilution.
There is no public market for the pre-funded warrants
being offered by us in this offering.
There is no established public trading market for the pre-funded
warrants, and we do not expect a market to develop. In addition, we
do not intend to apply to list the pre-funded warrants on any
national securities exchange or other nationally recognized trading
system. Without an active market, the liquidity of the pre-funded
warrants will be limited.
Future sales of substantial amounts of our common stock
could adversely affect the market price of our common
stock.
We may choose to raise additional capital due to market conditions
or strategic considerations even if we believe we have sufficient
funds for our current or future operating plans. If additional
capital is raised through the sale of equity or convertible debt
securities, or perceptions that those sales could occur, the
issuance of these securities could result in further dilution to
investors purchasing our common stock in this offering or result in
downward pressure on the price of our common stock, and our ability
to raise capital in the future.
A large number of shares issued in this offering may be
sold in the market following this offering, which may depress the
market price of our common stock.
A large number of shares issued in this offering may be sold in the
market following this offering, which may depress the market price
of our common stock. Sales of a substantial number of shares of our
common stock in the public market following this offering could
cause the market price of our common stock to decline. If there are
more shares of our common stock offered for sale than buyers are
willing to purchase, then the market price of our common stock may
decline to a market price at which buyers are willing to purchase
the offered shares of our common stock and sellers remain willing
to sell the shares. All of the securities issued in the offering
will be freely tradable without restriction or further registration
under the Securities Act.
For all of the aforesaid reasons and others set forth in
this registration statement, an investment in our common stock,
warrants and any other securities that we may offer from time to
time involves a certain degree of risk. Any person considering an
investment in our common stock , warrants or any other of our
securities should be aware of these and other factors set forth in
this registration statement and should consult with his or her
legal, tax and financial advisors prior to making an investment in
our common stock, warrants or any other of our securities that may
be offered from time to time. Our common stock, warrants and any
other securities that we may offer from time to time should only be
purchased by persons who can afford to lose all of their
investment.
FORWARD-LOOKING
STATEMENTS
This prospectus contains a number of “forward-looking statements”.
Specifically, all statements other than statements of historical
facts included in this prospectus regarding our financial position,
business strategy and plans and objectives of management for future
operations are forward-looking statements. These forward-looking
statements are based on the beliefs of management at the time these
statements were made, as well as assumptions made by and
information currently available to management. When used in this
prospectus and the documents incorporated by reference herein, the
words “anticipate,” “believe,” “estimate,” “expect,” “may,” “will,”
“continue” and “intend,” and words or phrases of similar import, as
they relate to our financial position, business strategy and plans,
or objectives of management, are intended to identify
forward-looking statements. These statements reflect our current
view with respect to future events and are subject to risks,
uncertainties and assumptions related to various factors.
A variety of factors, some of which are outside our control, may
cause our operating results to fluctuate significantly. They
include:
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access to sufficient debt or equity
capital to meet our operating and financial needs; |
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the extent of dilution of the
holdings of our existing stockholders upon the issuance, conversion
or exercise of securities issued as part of our capital raising
efforts; |
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the extent to which certain debt
holders may call the notes to be paid; |
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the effectiveness and ultimate
market acceptance of our products and our ability to generate
sufficient sales revenues to sustain our growth and strategy
plans; |
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whether our products in development
will prove safe, feasible and effective; |
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whether and when we or any
potential strategic partners will obtain required regulatory
approvals in the markets in which we plan to operate; |
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our need to achieve manufacturing
scale-up in a timely manner, and our need to provide for the
efficient manufacturing of sufficient quantities of our
products; |
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the lack of immediate alternate
sources of supply for some critical components of our
products; |
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our ability to establish and
protect the proprietary information on which we base our products,
including our patent and intellectual property position; |
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the current outbreak of the
Coronavirus SARS-CoV-2, the pathogen responsible for COVID-19,
which has already had an impact on financial markets, could result
in additional repercussions in our operating business, including
but not limited to, the sourcing of materials for product
candidates, manufacture of supplies for preclinical and/or clinical
studies, delays in clinical operations, which may include the
availability or the continued availability of patients for trials
due to such things as quarantines, conduct of patient monitoring
and clinical trial data retrieval at investigational study
sites; |
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the future impact of the outbreak
is highly uncertain and cannot be predicted, and we cannot provide
any assurance that the outbreak will not have a material adverse
impact on our operations or future results or filings with
regulatory health authorities. The extent of the impact, if any, we
will depend on future developments, including actions taken to
contain the coronavirus; |
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the impact of the conflict between Russia and Ukraine on economic
conditions in general and on our business and operations;
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the need to fully develop the
marketing, distribution, customer service and technical support and
other functions critical to the success of our product lines; |
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the dependence on potential
strategic partners or outside investors for funding, development
assistance, clinical trials, distribution and marketing of some of
our products; and |
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other risks and uncertainties
described from time to time in our reports filed with the SEC. |
These forward-looking statements reflect our management’s beliefs
and views with respect to future events and are based on estimates
and assumptions as of the date of this prospectus and are subject
to risks and uncertainties. We discuss many of these risks in
greater detail under “Risk Factors.” Moreover, we operate in a very
competitive and rapidly changing environment. New risks emerge from
time to time. It is not possible for our management to predict all
risks, nor can we assess the impact of all factors on our business
or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in
any forward-looking statements we may make. Given these
uncertainties, you should not place undue reliance on these
forward-looking statements.
You should read this prospectus and the documents that we reference
in this prospectus and have filed as exhibits to the registration
statement, of which this prospectus is a part, completely and with
the understanding that our actual future results may be materially
different from what we expect. We qualify all of the
forward-looking statements in this prospectus by these cautionary
statements. Except as required by law, we undertake no obligation
to publicly update any forward-looking statements, whether as a
result of new information, future events or otherwise.
USE OF PROCEEDS
We estimate that we will receive proceeds of approximately $8.9
million (or approximately $10.8 million if the underwriters’ option
to purchase additional shares and/or warrants is exercised in full)
from the sale of the securities offered by us in this offering,
based on an initial offering price of $10.00 per share of common
stock (or pre-funded warrant) and related Public Warrants and after
deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us.
The principal purposes of this offering are to obtain additional
capital to support our operations. We intend to use the net
proceeds from this offering for the following purposes:
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Fund completion of the US FDA
clinical trial and application for FDA approval for LuViva. |
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Support international sales and
marketing partners for distribution of our products, especially
LuViva. |
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Build and train a U.S. sales force
once U.S. FDA approval for LuViva is achieved. |
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Pay off remaining debt, of approximately $887,000, as needed to
complete current agreements for debt reduction, including
forgiveness from consultants and legal firms.
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Order parts for manufacturing
LuViva and it disposable accessories. |
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Other expenses as deemed necessary
by the Company’s Board. |
DIVIDEND POLICY
We do not anticipate declaring or paying, in the foreseeable
future, any cash dividends on our common stock. We currently intend
to retain all available funds and any future earnings to support
our operations and finance the growth and development of our
business. Any future determination related to our dividend policy
will be made at the discretion of our Board and will depend upon,
among other factors, our results of operations, financial
condition, capital requirements, contractual restrictions, business
prospects and other factors our Board may deem relevant.
The Company pays dividends on its preferred stock.
Holders of the Series C preferred stock are entitled to quarterly
cumulative dividends at an annual rate of 12.0% until 42 months
after the original issuance date (the “Dividend End Date”), payable
in cash or, subject to certain conditions, the Company’s common
stock. In addition, upon conversion of the Series C preferred stock
prior to the Dividend End Date, the Company will also pay to the
converting holder a “make-whole payment” equal to the number of
unpaid dividends through the Dividend End Date on the converted
shares. At December 31, 2021 and 2020, the “make-whole payment” for
a converted share of Series C preferred stock would convert to 10
shares of the Company’s common stock. The Series C preferred stock
generally has no voting rights except as required by Delaware law.
Upon the Company’s liquidation or sale to or merger with another
corporation, each share will be entitled to a liquidation
preference of $1,000, plus any accrued but unpaid dividends. In
addition, the purchasers of the Series C preferred stock received,
on a pro rata basis, warrants exercisable to purchase an aggregate
of approximately 1 share of Company’s common stock. The warrants
contained anti-dilution adjustments in the event that the Company
issues shares of common stock, or securities exercisable or
convertible into shares of common stock, at prices below the
exercise price of such warrants. As a result of the anti-dilution
protection, the Company was required to account for the warrants as
a liability recorded at fair value each reporting period. The
warrants expired at the end of 2020.
Series C1 and Series C2 preferred stock do not pay dividends
(unless and to the extent declared on the common stock) or
at-the-market “make-whole payments” and, while it has the same
anti-dilution protections afforded the Series C preferred stock, it
does not automatically reset in connection with a reverse stock
split or conversion of our outstanding convertible debt.
The Series D Preferred Stock has cumulative dividends at the rate
per of 10% per annum, calculated on the basis of a 360-day year,
consisting of twelve 30 calendar day periods, payable quarterly on
January 15, April 15, July 15 and October 15, beginning on the
first such date after the original issue date and on each optional
redemption date in cash, or, following the approval of Canadian
Trading Market and at the Company’s option, in duly authorized,
validly issued, fully paid and non-assessable shares of common
stock, or a combination based on the dividend conversion rate which
is equal to the average of the 20 volume weighted average prices of
the Common Stock on the principal Trading Market immediately prior
to the dividend payment date.
As of March 31, 2022, the Company
issued an aggregate of 14,040 common stock shares for the payment
of Series D Preferred Stock dividends accrued. As of March 31,
2022, the Company had accrued Series D dividends of
$14,306.
The Series E Preferred Stock has
cumulative dividends at the rate per share of 8% per annum,
calculated on the basis of a 360-day year, consisting of twelve 30
calendar day periods, payable annually, beginning on the first such
date after the original issue date and on each optional redemption
date. in cash, or, following the approval of Canadian Trading
Market and at the Company’s option, in duly authorized, validly
issued, fully paid and non-assessable shares of common stock, or a
combination based on the dividend conversion rate which is equal to
the average of the 20 volume weighted average prices of the Common
Stock on the principal Trading Market immediately prior to the
dividend payment date. As of March 31, 2022, the Company issued an
aggregate of 15,018 common stock shares for the payment of Series E
Preferred Stock dividends accrued. As of March 31, 2022, the
Company had accrued Series E dividends of $71,099.
The Series F Preferred Stock has
cumulative dividends at the rate per share of 6% per annum,
calculated on the basis of a 360-day year, consisting of twelve 30
calendar day periods, payable annually, beginning on the first such
date after the original issue date and on each optional redemption
date. in cash, or, following the approval of Canadian Trading
Market and at the Company’s option, in duly authorized, validly
issued, fully paid and non-assessable shares of common stock, or a
combination based on the dividend conversion rate which is equal to
the average of the 20 volume weighted average prices of the Common
Stock on the principal Trading Market immediately prior to the
dividend payment date. In addition to the 6% annual dividend, the
Company was also required to pay a one-time, non-recurring,
dividend equal to 15% of the aggregate stated value of preferred
stock then held by the holder, in cash or common stock, as the
corporation was unable to successfully uplist to the NASDAQ Stock
Exchange by December 31, 2021; and was unable to file its clinical
data intended for FDA approval of its primary product, LuViva, by
December 31, 2021.
During the three months ended March
31, 2022, the Company issued 7,933 common stock shares for the
payment of annual Series F Preferred Stock dividends. Additionally,
During the three months ended March 31, 2022, the Company issued
12,770 common stock shares for the payment of the one-time,
non-recurring 15% dividend to the Series F Preferred shareholders.
As of March 31, 2022, the Company had accrued Series F dividends of
$1,998.
The Series F-2 Preferred Stock has
cumulative dividends at the rate per share of 6% per annum,
calculated on the basis of a 360-day year, consisting of twelve 30
calendar day periods, payable annually, beginning on the first such
date after the original issue date and on each optional redemption
date. in cash, or, following the approval of Canadian Trading
Market and at the Company’s option, in duly authorized, validly
issued, fully paid and non-assessable shares of common stock, or a
combination based on the dividend conversion rate which is equal to
the average of the 20 volume weighted average prices of the Common
Stock on the principal Trading Market immediately prior to the
dividend payment date. In addition to the 6% annual dividend, the
Company was also required to pay a one-time, non-recurring,
dividend equal to 15% of the aggregate stated value of preferred
stock then held by the holder, in cash or common stock, as the
corporation was unable to successfully uplist to the NASDAQ Stock
Exchange by December 31, 2021; and was unable to file its clinical
data intended for FDA approval of its primary product, LuViva, by
December 31, 2021.
During the three months ended March
31, 2022, the Company issued 4,777 common stock shares for the
payment of annual Series F-2 Preferred Stock dividends.
Additionally, during the three months ended March 31, 2022, the
Company issued 18,425 common stock shares for the payment of the
one-time, non-recurring 15% dividend to the Series F-2 Preferred
shareholders. As of March 31, 2022, the Company had accrued Series
F-2 dividends of $91,592.
The Series G Preferred Stock
preferred stock carries 8% annual dividend, cumulative and payable
solely upon redemption, liquidation or conversion. Upon the
occurrence of an Event of Default (, the Dividend Rate shall
automatically increase to twenty two percent (22%).
On June 4, 2021, the Company paid
$2,952 and $4,992 for the Series G Preferred Stock dividends
accrued, respectively. As of March 31, 2022, the Series G Preferred
Stock was fully redeemed, leaving a null balance.
CAPITALIZATION
The following table sets forth our cash and cash equivalents as
well as capitalization as of March 31, 2022:
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on an actual basis; and |
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on an as adjusted basis to give effect to the sale of 890,000
securities offered hereby at the combined offering price of $10 per
share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us. The
offering price may not be the final price of the Offering and will
be adjusted based on the actual initial public offering price and
other terms of our initial public offering determined at
pricing.
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You should read this table together with “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”
included elsewhere in this prospectus, and our financial statements
and related notes thereto.
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Pro forma
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as adjusted
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March 31, 2022
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Adjustments
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March 31, 2022
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CURRENT ASSETS:
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Cash and cash equivalents
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$ |
725 |
(a) |
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7,150 |
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7,875 |
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Accounts receivable, net of allowance for doubtful accounts of $126
at March 31, 2022
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39 |
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- |
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39 |
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Inventory, net of reserves of $785 at December 31, 2021
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570 |
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- |
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570 |
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Other current assets
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453 |
(b) |
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(339 |
) |
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114 |
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Total current assets
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1,787 |
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6,811 |
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8,598 |
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NONCURRENT ASSETS:
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Property and equipment, net
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28 |
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- |
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28 |
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Operating lease asset-right, net of amortization
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355 |
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- |
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355 |
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Other assets
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17 |
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- |
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17 |
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Total noncurrent assets
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400 |
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- |
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400 |
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TOTAL ASSETS
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2,187 |
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|
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6,811 |
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|
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8,998 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT
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CURRENT LIABILITIES:
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|
|
Accounts payable
|
|
$ |
2,476 |
(c) |
|
|
(2,072 |
) |
|
|
404 |
|
Accounts payable, related parties
|
|
|
80 |
(q) |
|
|
(30 |
) |
|
|
50 |
|
Accrued liabilities
|
|
|
1,228 |
(d) |
|
|
(655 |
) |
|
|
573 |
|
Deferred revenue
|
|
|
514 |
|
|
|
- |
|
|
|
514 |
|
Current portion of lease liability
|
|
|
70 |
|
|
|
- |
|
|
|
70 |
|
Current portion of long-term debt
|
|
|
67 |
(e) |
|
|
(62 |
) |
|
|
5 |
|
Current portion of long-term debt, related parties
|
|
|
27 |
|
|
|
- |
|
|
|
27 |
|
Short-term notes payable
|
|
|
12 |
|
|
|
- |
|
|
|
12 |
|
Short-term notes payable, related parties
|
|
|
31 |
(q) |
|
|
(31 |
) |
|
|
- |
|
Convertible notes payable in default
|
|
|
161 |
(f) |
|
|
(161 |
) |
|
|
- |
|
Short-term convertible notes payable
|
|
|
745 |
(f) |
|
|
(745 |
) |
|
|
- |
|
Derivative liability
|
|
|
38 |
(g) |
|
|
(38 |
) |
|
|
- |
|
Total current liabilities
|
|
|
5,449 |
|
|
|
(3,794 |
) |
|
|
1,655 |
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term lease liabilities
|
|
|
307 |
|
|
|
- |
|
|
|
307 |
|
Long-term debt
|
|
|
-
|
(h) |
|
|
1,127 |
|
|
|
1,127 |
|
Long-term convertible debt
|
|
|
852 |
(i) |
|
|
(852 |
) |
|
|
- |
|
Long-term debt-related parties
|
|
|
568 |
(j) |
|
|
(147 |
) |
|
|
421 |
|
Total long-term liabilities
|
|
|
1,727 |
|
|
|
128 |
|
|
|
1,855 |
|
TOTAL LIABILITIES
|
|
|
7,176 |
|
|
|
(3,666 |
) |
|
|
3,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS & CONTINGENCIES (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C convertible preferred stock, $.001 par value; 9.0 shares
authorized, 0.3 shares issued and outstanding as of March 31, 2022.
Liquidation preference of $286 at March 31, 2022.
|
|
|
105 |
|
|
|
- |
|
|
|
105 |
|
Series C1 convertible preferred stock, $.001 par value; 20.3 shares
authorized, 1.0 shares issued and outstanding as of March 31, 2022.
Liquidation preference of $1,049 at March 31, 2022.
|
|
|
170 |
|
|
|
- |
|
|
|
170 |
|
Series C2 convertible preferred stock, $.001 par value; 5,000
shares authorized, 3.3 shares issued and outstanding as of March
31, 2022. Liquidation preference of $3,263 at March 31, 2022.
|
|
|
531 |
|
|
|
- |
|
|
|
531 |
|
Series D convertible preferred stock, $.001 par value; 6.0 shares
authorized, 0.8 shares issued and outstanding as of March 31, 2022.
Liquidation preference of $763 at March 31, 2022.
|
|
|
276 |
|
|
|
- |
|
|
|
276 |
|
Series E convertible preferred stock, $.001 par value; 5.0 shares
authorized, 1.0 shares issued and outstanding as of March 31, 2022.
Liquidation preference of $968 at March 31, 2022.
|
|
|
914 |
(k) |
|
|
(914 |
) |
|
|
- |
|
Series F convertible preferred stock, $.001 par value; 1.5 shares
authorized, 1.4 shares issued and outstanding as of March 31, 2022.
Liquidation preference of $1,411 at March 31, 2022.
|
|
|
1,174 |
(l) |
|
|
(1,174 |
) |
|
|
- |
|
Series F-2 convertible preferred stock, $.001 par value; 5.0 shares
authorized, 3.2 shares issued and outstanding as of March 31, 2022.
Liquidation preference of $3,237 at March 31, 2022.
|
|
|
2,963 |
(m) |
|
|
(2,963 |
) |
|
|
- |
|
Series G convertible preferred stock, $.001 par value; 1,000 shares
authorized, nil shares issued and outstanding as of March 31, 2022.
Liquidation preference of nil at March 31, 2022.
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Common stock, $.001 par value; 500,000 shares authorized, 1,116
shares issued and outstanding as of March 31, 2022.
|
|
|
3,410 |
(n) |
|
|
2 |
|
|
|
3,412 |
|
Additional paid-in capital
|
|
|
129,042 |
(o) |
|
|
14,510 |
|
|
|
143,552 |
|
Treasury stock, at cost
|
|
|
(132 |
) |
|
|
- |
|
|
|
(132 |
) |
Accumulated deficit
|
|
|
(143,442 |
)(p) |
|
|
1,016 |
|
|
|
(142,426 |
) |
TOTAL STOCKHOLDERS’ DEFICIT
|
|
|
(4,989 |
) |
|
|
10,477 |
|
|
|
5,488 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
2,187 |
|
|
|
6,811 |
|
|
|
8,998 |
|
Pro-forma as adjusted does not give effect to the impact of Public
or Pre-Funded Warrants.
(a)
|
Assumes $8,900,000 in new cash from the NASDAQ uplist, less legal
expenses and commissions related to closing of approximately
$200,000 and $541,400, respectively, additional accounting costs of
$100,000 and consulting fees of $21,897 to Donohoe Advisory
Associates (b) for net funding of $8,036,703. The Company will use
the proceeds to make payments of approximately $887,299 on its
contractual obligations with various vendors and debt holders,
including $325,000 to Jones Day (c), $65,299 per the July 8, 2020
exchange agreement (c), $147,000 to a former executive (g), and
$350,000 to GPB Holdings, LLC in connection with the December 21,
2021 warrant exchange agreement. The warrants exchanged per the
December 21, 2021 exchange agreement were not considered in the
proforma adjustments above.
|
|
|
(b)
|
Reflects recognition of $285,261 of deferred legal fees (after
forgiveness of $104,879) and $54,174 of offering-related costs
related to the uplist.
|
|
|
(c)
|
Per exchange agreement dated January 6, 2020, we assume a reduction
of Accounts Payable balance with a $325,000 payment to Jones Day
and issuance of a long term note payable in the amount of $444,768
followed by a forgiveness of approximately $975,000 (p).
Additionally, we assume a reduction of $304,924 of outstanding
legal fees and payment of $21,897 to Donohoe Advisory
Associates.
|
|
|
(d)
|
Per exchange agreement dated July 9, 2020, $62,052 of accrued
executive compensation and $3,247 of accrued interest will be
forgiven upon our payment of $62,052 on an unsecured note payable
owed to a former employee. Furthermore; per exchange agreement with
one of the former executives, dated March 22, 2021, the Company
will make a payment of $146,775, including accrued interest of
$375, on amounts owed to a former executive and will record debt
forgiveness of $253,429 for amounts owed to former executive,
included in the aforementioned exchange agreement; per the exchange
agreement dated June 22, 2022, $29,776 of related-party payables,
$31,285 of short-term related-party debt (q) and $8,939 of accrued
expenses owed to executives will be converted into 7,000 shares of
common stock. Additionally, we will issue common stock in lieu of
Series D preferred stock dividends and will exchange the Series E,
Series F and Series F-2 preferred stock dividends into common stock
as part of the new financing. Total accrued dividends converted or
settled with common stock will result in the decrease of
approximately $178,995 in accrued liabilities. We also assume a
decrease of $28,250 related to accrued interest on 10% Senior
Unsecured Convertible Debenture. In accordance with the February 1,
2022 Auctus Fund, LLC exchange agreement, interest of $120,877 will
be exchanged for a combination of shares of common stock, warrants
and prefunded warrants, as amended.
|
|
|
(e)
|
Per exchange agreement dated July 9, 2020, we will make a payment
of $62,052 on an unsecured note payable owed to a former
employee.
|
|
|
(f)
|
Assumes conversion of $350,000 of prepayment penalty payable to
Auctus Fund, LLC, per exchange agreement dated June 2, 2021 and
subsequently amended on February 2, 2022 and June 1, 2022, into
35,000 shares of common stock. Assumes exchange of $161,184 note
financed on April, 2, 2020 and $400,000 note dated May 28, 2020,
less expensing of unamortized debt issuances costs of $5,211 into a
$682,061 long-term note payable due thirteen (13) months after the
close of the offering (h).
|
|
|
(g)
|
Reflects removal of a derivative liability valued at $39,129,
related to conversion option associated with a $400,000 note that
will be exchanged for a long-term note (h).
|
|
|
(h)
|
Per the exchange agreement dated January 6, 2020, we will issue a
long-term note payable to Jones Day in the amount $444,768. Assumes
exchange of $161,184 note financed on April, 2, 2020 and $400,000
note dated May 28, 2020, less expensing of unamortized debt
issuances costs of $5,211 into a $682,061 long-term note payable
due thirteen (13) months after the close of the offering.
|
|
|
(i)
|
Assumes conversion of $1,130,000 less the expensing of the debt
issuance costs of $61,920 and reversal of $215,854 of unamortized
debt discount associated with warrants related to 10% Senior
Unsecured Convertible Debenture into 115,173 shares of
common stock. The purchasers
are contractually obligated to participate in the NASDAQ uplist and
convert the outstanding balance into shares of common stock.
|
|
|
(j)
|
Per exchange agreement with one of the former executives, dated
March 22, 2021, the Company will make a payment of $146,775 on long
term note payable.
|
|
|
(k)
|
Conversion of 968 Series E Preferred Shares, stated value $1,000
into 193,600 common shares, par value $0.001. The transaction will
decrease Series E Preferred Stock balance and increase additional
paid in capital by $913,806.
|
|
|
(l)
|
Conversion of 1,411 Series F Preferred Shares, stated value $1,000
into 282,200 common shares, par value $0.001. The transaction will
decrease Series F Preferred Stock balance and increase additional
paid in capital by $1,173,718.
|
|
|
(m)
|
Conversion of 3,237 Series F-2 Preferred Shares, stated value
$1,000 into 647,400 common shares, par value $0.001. The
transaction will decrease Series F-2 Preferred Stock balance and
increase additional paid in capital by $2,961,353.
|
|
|
(n)
|
Assumes an issuance of 890,000 new common shares at $10.00 per
share, par value $0.001 from the NASDAQ uplist investment of
$8,900,000. Additional increases from conversions related to the
following: payables and accrued expenses owed to executives (q),
10% Senior Unsecured Convertible Debenture (i), Series E Preferred
Stock (k), Series F Preferred Stock (l), and Series F-2 Preferred
Stock (m), and the settlement of accrued preferred stock dividends
(d).
|
|
|
(o)
|
Assumes an issuance of 890,000 new common shares at $10.00 per
share, par value $0.001, from the NASDAQ uplist investment of
$8,900,000; issuances of an aggregate of 13,811 of common shares
for the settlement of dividends payable on preferred stock totaling
$178,995; issuance of an aggregate of 1,123,200 common shares for
the conversion of Series E, Series F and Series F-2 preferred
shares totaling $5.62 million; conversion of $1,130,000, plus
accrued interest of $28,250, less unamortized debt discount
related to warrants of $215,853, on 10% Senior Unsecured
Convertible Debenture into 115,175 common shares (i), and issuance
of 7,000 common shares for the conversion of $29,776 of
related-party payables, $31,285 of short-term related-party debt
and $8,939 of accrued expenses owed to executives (q). The warrants
exchanged per the February 1, 2022 and June 1, 2022 Auctus Fund,
LLC exchange agreements were not considered in the proforma
adjustments above.
|
|
|
(p)
|
The decrease in the Company's accumulated deficit will be a result
of income statement transactions related to the debt forgiveness
from Jones Day of $975,000 (b), $62,052 from the July 9, 2020
exchange agreement (c), $253,429 from March 22, 2021 exchange
agreement, and $104,879 of accounts payable forgiven based on an
agreement signed with a vendor on June 6, 2022, and reversal of a
$38,129 derivative liability associated with Auctus Fund, LLC
debt. This will be offset by the $350,000 payment made in
accordance with the December 21, 2021 warrant exchange agreement
with GPB Holdings, LLC (a), debt issuance costs of $5,211 on Auctus
Fund, LLC debt (d) and debt issuance costs of $61,920 on 10% Senior
Unsecured Convertible Debenture (f).
|
|
|
(q)
|
Per the exchange agreement dated June 22, 2022, $29,776 of
related-party payables, $31,285 of short-term related-party debt
and $8,939 of accrued expenses owed to executives will be converted
into 7,000 shares of common stock.
|
DILUTION
Investors purchasing shares of common stock in this offering will
experience immediate and substantial dilution in the as adjusted
net tangible book value of their shares of common stock. Dilution
in as adjusted net tangible book value represents the difference
between the public offering price per share and the as adjusted net
tangible book value per share of Common Stock immediately after the
offering.
The historical net tangible book value of our common stock as of
March 31, 2022 was $(5,344,000) or $(4.79) per share post-split.
Historical net tangible book value per share of common stock
represents our total tangible assets (total assets less intangible
assets) less total liabilities divided by the number of shares of
common stock outstanding as of that date.
After giving effect to the sale of 890,000 shares of common stock
and related Public Warrants in this offering at the offering price
of $10 per share and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable
by us, our net tangible book value as of March 31, 2022 would have
been $5,133,000, or $2.56 per share. The offering price may not be
the final price of the Offering and will be adjusted based on the
actual initial public offering price and other terms of our initial
public offering determined at pricing. This amount represents an
immediate increase in net tangible book value of $7.35 per share to
our existing stockholders and an immediate dilution in net tangible
book value of approximately $7.44 per share to new investors
purchasing our common stock in this offering. We determine dilution
by subtracting the net tangible book value per share after the
offering from the amount of cash that a new investor paid for a
share of common stock.
The following table illustrates this dilution on a per share
basis:
Offering price per share of common stock and associated Public
Warrant(1)
|
|
$ |
10.00 |
|
Historical net tangible book value per share as of March 31,
2022
|
|
$ |
(4.79 |
) |
Increase in net tangible book value per share attributable to
Investors
|
|
$ |
7.35 |
|
Net tangible book value per share after the offering
|
|
$ |
2.56 |
|
Dilution per share to new investors
|
|
$ |
7.44 |
|
|
(1)
|
The offering price may not be the final price of the Offering and
will be adjusted based on the actual initial public offering price
and other terms of our initial public offering determined at
pricing.
|
Each $1.00 increase or decrease in the combined public offering
price of $10 per share and related Public Warrant would increase or
decrease our net tangible book value after this offering by
approximately $0.40 or ($0.43) per share, and increase or decrease
the dilution per share to new investors by approximately $0.60 or
($0.57) per share, assuming that the number of shares offered by
us, as set forth on the cover page of this prospectus, remains the
same and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by us. We may
also increase or decrease the number of shares we are offering. An
increase or decrease of 100,000 securities in the number of
securities offered by us would increase or decrease our net
tangible book value after this offering by approximately $0.31 or
($0.37) per share, and increase or decrease the dilution per share
to new investors by approximately ($0.31) or $0.37 per share,
assuming that the public offering price remains the same, and after
deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us. The information
discussed above is illustrative only and will be adjusted based on
the actual public offering price and other terms of this offering
determined at pricing.
If the underwriters exercise their option to purchase additional
shares in full, the net tangible book value per share after giving
effect to the offering would be $2.97 per share. This represents an
immediate increase in pro forma net tangible book value of $0.41
per share to existing stockholders and an immediate dilution in net
tangible book value of $(0.41) per share to new investors
purchasing our common stock in this offering.
Management’s Discussion and Analysis of financial condition and
results of operations presented below does not give effect to the
Reverse Stock Split.
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the
“Selected Financial Data” and our financial statements and related
notes thereto included elsewhere in this prospectus. In addition to
historical information, this discussion contains forward-looking
statements that involve risks, uncertainties and assumptions that
could cause actual results to differ materially from management’s
expectations. Factors that could cause such differences are
discussed in the sections entitled “Forward-Looking Statements” and
“Risk Factors.” We are not undertaking any obligation to update any
forward-looking statements or other statements we may make in the
following discussion or elsewhere in this document even though
these statements may be affected by events or circumstances
occurring after the forward-looking statements or other statements
were made. Therefore, no reader of this document should rely on
these statements being current as of any time other than the time
at which this document is declared effective by the SEC.
Overview
We are a medical technology company focused on developing
innovative medical devices that have the potential to improve
healthcare. Our primary focus is the sales and marketing of our
LuViva® Advanced Cervical Scan non-invasive cervical cancer
detection device. The underlying technology of LuViva primarily
relates to the use of biophotonics for the non-invasive detection
of cancers. LuViva is designed to identify cervical cancers and
precancers painlessly, non-invasively and at the point of care by
scanning the cervix with light, then analyzing the reflected and
fluorescent light.
LuViva is designed to provide a less invasive and painless
alternative to conventional tests for cervical cancer screening and
detection. Additionally, LuViva is designed to improve patient
well-being not only because it eliminates pain, but also because it
is convenient to use and provides rapid results at the point of
care. We focus on two primary applications for LuViva: first, as a
cancer screening tool in the developing world, where infrastructure
to support traditional cancer-screening methods is limited or
non-existent, and second, as a triage following traditional
screening in the developed world, where a high number of false
positive results cause a high rate of unnecessary and ultimately
costly follow-up tests.
We are a Delaware corporation, originally incorporated in 1992
under the name “SpectRx, Inc.,” and, on February 22, 2008, changed
our name to Guided Therapeutics, Inc. At the same time, we renamed
our wholly owned subsidiary, InterScan, which originally had been
incorporated as “Guided Therapeutics.”
Since our inception, we have raised capital through the public and
private sale of debt and equity, funding from collaborative
arrangements, and grants.
Our prospects must be considered in light of the substantial risks,
expenses and difficulties encountered by entrants into the medical
device industry. This industry is characterized by an increasing
number of participants, intense competition and a high failure
rate. We have experienced operating losses since our inception and,
as of March 31, 2022, we have an accumulated deficit of
approximately $143.4 million. To date, we have engaged primarily in
research and development efforts and the early stages of marketing
our products. We do not have significant experience in
manufacturing, marketing or selling our products. We may not be
successful in growing sales for our products. Moreover, required
regulatory clearances or approvals may not be obtained in a timely
manner, or at all. Our products may not ever gain market acceptance
and we may not ever generate significant revenues or achieve
profitability. The development and commercialization of our
products requires substantial development, regulatory, sales and
marketing, manufacturing and other expenditures. We expect our
operating losses to continue for the foreseeable future as we
continue to expend substantial resources to complete
commercialization of our products, obtain regulatory clearances or
approvals, build our marketing, sales, manufacturing and finance
capabilities, and conduct further research and development.
Our product revenues to date have been limited. In 2021, the
majority of our revenues were from the sale of LuViva devices and
disposables. We expect that the majority of our revenue in 2022
will be derived from revenue from the sale of LuViva devices and
disposables.
Current Demand for LuViva
Based on written agreements and ongoing discussions with our
distributors, we currently hold and expect to generate additional
purchase orders for approximately $1.0 to $1.5 million in LuViva
devices and disposables in 2022 and expect those purchase orders to
result in actual sales of $0.5 to $1.0 million in 2022 representing
what we view as current demand for our products. We cannot be
assured that we will generate all or any of these additional
purchase orders, or that existing orders will not be canceled by
the distributors or that parts to build product will be available
to meet demand, such that existing orders will result in actual
sales. Because we have a short history of sales of our products, we
cannot confidently predict future sales of our products beyond this
time frame and cannot be assured of any particular amount of sales.
Accordingly, we have not identified any particular trends with
regard to sales of our products. In order to increase demand for
LuViva, the Company in 2022 is focused on three primary markets:
the United States, China and Europe. In addition, as of November
10, 2021, the Company had filed its initial application for listing
on the Nasdaq stock exchange, been assigned a reviewer for its
application and received an official review letter from Nasdaq. The
goal is to uplist to Nasdaq during 2022, although there can be no
assurance that this will happen.
In the United States, the Company is actively pursuing FDA approval
by initiating a clinical trial protocol involving approximately 400
study participants. The protocol was drafted with input from FDA
and three prestigious clinical centers that are expected to
participate in enrolling the 400 women at multiple sites within
their hospital systems. Clinical trial agreements have been drafted
and agreed upon, the budget at one institution has been agreed upon
and is under negotiation at the other institution. The third
institution is reviewing the protocol and budget. The LuViva
devices have been prepared and have passed bench testing in order
to begin the study. All requested materials have been submitted for
review by the respective hospital institutional review boards
(IRBs). Once the IRB’s have approved the study, enrollment may
begin, which is expected prior to the end of 2022 and will last
approximately eight to nine months; however there can be no
assurances that the study will be completed by the end of 2022.
In China, the Chinese NMPA (National Medical Products Approval)
study has begun at four clinical sites. According to enrollment
tracking reports sent to us by our Chinese partner SMI on March 11,
2022, testing of 150 patients has been completed in the
ongoing clinical trial for Chinese National Medical Products
Administration (NMPA) approval. The trial is expected to be
completed in the second quarter of this year and submitted for
approval shortly thereafter, although there can be no assurance
that the study will be completed within this time frame.
In Europe, the Company attended a meeting in Bucharest, Romania on
November 3-4, 2021, hosted by our central Eastern and Russian
distribution partner. The LuViva system was demonstrated for
doctors at a local clinic and the head Ob-Gyn physician’s hospital
has accepted the LuViva device into service and is expected to
order additional Cervical Guides to test patients as part of her
practice.
Critical Accounting Policies
Our material accounting policies, which we believe are the most
critical to investors understanding of our financial results and
condition, are discussed below. Because we are still early in our
enterprise development, the number of these policies requiring
explanation is limited. As we begin to generate increased revenue
from different sources, we expect that the number of applicable
policies and complexity of the judgments required will
increase.
Revenue Recognition: ASC 606, Revenue from
Contracts with Customers establishes a single and comprehensive
framework which sets out how much revenue is to be recognized, and
when. The core principle is that a vendor should recognize revenue
to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the vendor
expects to be entitled in exchange for those goods or services.
Revenue will now be recognized by a vendor when control over the
goods or services is transferred to the customer. In contrast,
Revenue based revenue recognition around an analysis of the
transfer of risks and rewards; this now forms one of a number of
criteria that are assessed in determining whether control has been
transferred. The application of the core principle in ASC 606 is
carried out in five steps:
Step 1 - Identify the contract with a customer: a contract is
defined as an agreement (including oral and implied), between two
or more parties that creates enforceable rights and obligations and
sets out the criteria for each of those rights and obligations. The
contract needs to have commercial substance and it is probable that
the entity will collect the consideration to which it will be
entitled.
Step 2 - Identify the performance obligations in the contract: a
performance obligation in a contract is a promise (including
implicit) to transfer a good or service to the customer. Each
performance obligation should be capable of being distinct and is
separately identifiable in the contract.
Step 3 - Determine the transaction price: transaction price is the
amount of consideration that the entity can be entitled to, in
exchange for transferring the promised goods and services to a
customer, excluding amounts collected on behalf of third
parties.
Step 4 - Allocate the transaction price to the performance
obligations in the contract: for a contract that has more than one
performance obligation, the entity will allocate the transaction
price to each performance obligation separately, in exchange for
satisfying each performance obligation. The acceptable methods of
allocating the transaction price include adjusted market assessment
approach, expected cost plus a margin approach, and the residual
approach in limited circumstances. Discounts given should be
allocated proportionately to all performance obligations unless
certain criteria are met and reallocation of changes in standalone
selling prices after inception is not permitted.
Step 5 - Recognize revenue as and when the entity satisfies a
performance obligation: the entity should recognize revenue at a
point in time, except if it meets any of the three criteria, which
will require recognition of revenue over time: the entity’s
performance creates or enhances an asset controlled by the
customer, the customer simultaneously receives and consumes the
benefit of the entity’s performance as the entity performs, and the
entity does not create an asset that has an alternative use to the
entity and the entity has the right to be paid for performance to
date.
Valuation of Deferred Taxes: We account for income
taxes in accordance with the liability method. Under the liability
method, we recognize deferred assets and liabilities based upon
anticipated future tax consequences attributable to differences
between financial statement carrying amounts of assets and
liabilities and their respective tax bases. We establish a
valuation allowance to the extent that it is more likely than not
that deferred tax assets will not be utilized against future
taxable income.
Valuation of Equity Instruments Granted to Employee,
Service Providers and Investors: On the date of issuance,
the instruments are recorded at their fair value as determined
using either the Black-Scholes valuation model or Monte Carlo
Simulation model.
Allowance for Accounts Receivable: The Company
reviews all outstanding accounts receivable for collectability on a
quarterly basis. An allowance for doubtful accounts is recorded for
any amounts deemed uncollectable. The allowance is adjusted based
on our assessment of the ability of our distributors to make
required payments and our review of the financial condition of our
distributors.
Inventory Valuation: All inventories are stated at
lower of cost or net realizable value, with cost determined
substantially on a “first-in, first-out” basis. Selling, general,
and administrative expenses are not inventoried, but are charged to
expense when incurred.
Results of Operations
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2022 AND
2021
Research and Development Expenses:
Research and development expenses were $21,000 during the three
months ended March 31, 2022, compared to $16,000 during the three
months ended March 31, 2021, an increase of $5,000 or 31%. The
increase was primarily due to higher research and development
clinical costs and payroll-related expenses.
Sales and Marketing Expenses: Sales and
marketing expenses were $40,000 during the three months ended March
31, 2022, compared to $36,000 during the three months ended March
31, 2021, an increase of $4,000 or 11%. The increase was primarily
due to higher travel and payroll-related expenses.
General and Administrative Expense:
General and administrative expenses were $386,000 for the three
months ended March 31, 2022, compared to $771,000 during the three
months ended March 31, 2021, a decrease of $385,000 or 50%. The
decrease was primarily due to a prior-year charge of $398,000
recorded during the three months ended March 31, 2021 for warrants
issued to Mr. Blumberg for consulting services.
Interest
Expense: Interest expense
during the three months ended March 31, 2022 was $101,000, compared
to $141,000 during the three months ended March 31, 2021, a
decrease of $40,000, or 28%. The decrease was due a decrease in
debt, resulting in lower interest recognized for outstanding notes
payable and convertible debt during the three months ended March
31, 2022 versus the same period in the prior year.
Loss Due to Change in Fair Value of Derivative
Liability: Loss due to change in fair value of the
derivative liability during the three months ended March 31, 2022
was $6,000, compared to an $88,000 loss recorded during the three
months ended March 31, 2021. The decrease was primarily due to
changes to our stock price during each of the three-month periods,
which impacted the fair value of the derivative liability.
Gain from extinguishment of debt: Gain
from extinguishment of debt during the three months ended March 31,
2022 was $41,000, compared to a gain from extinguishment of debt of
$87,000 during the three months ended March 31, 2021, a decrease of
$46,000, or 53%. The decrease was due to a lower amount of debt
forgiven.
Change in Fair Value of Warrants: Change
in fair value of warrants during the three months ended March 31,
2022 was zero, compared to a $448,000 gain recorded during the
three months ended March 31, 2021. The decrease was primarily due
to (i) a change in the terms of the warrants during 2021, which
resulted in reclassification of the warrant instruments from
liabilities to equity and (ii) expiration of the warrants
previously outstanding.
Preferred Stock Dividends: Expense
related to preferred stock dividends during the three months ended
March 31, 2022 was $548,000, compared to $55,000 of expense
recorded during the three months ended March 31, 2021. The increase
was primarily due to payment of a one-time, non-recurring 15%
dividends to the Series F and Series F-2 Preferred shareholders, as
required by the Series F and Series F-2 Certificate of Designations
in the event the Company did not uplist to the NASDAQ stock
exchange or file its clinical data intended for FDA approval of
LuViva by December 31, 2021.
Net Loss: Net loss attributable to common
stockholders was $1,055,000 for the three months ended March 31,
2022, compared to net loss of $572,000 for the three months ended
March 31, 2021. The reasons for the fluctuation are outlined
above.
There was no income tax benefit recorded for the three months ended
March 31, 2022 and 2021, due to recurring net operating losses. A
full valuation allowance has been recorded related the deferred tax
assets generated from the net operating losses.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 2021 AND
2020
Sales Revenue, Cost of Sales and Gross Profit from Devices
and Disposables: Revenues from the sale of LuViva devices
for the year ended December 31, 2021 were $81,000, compared to
$102,000 for the year ended December 31, 2020, a decrease of
$21,000 or 21%. Cost of goods sold was $61,000 during the year
ended December 31, 2021, compared to cost of goods recovered of
$41,000 during the year ended December 31, 2020. Cost of goods
recovered in 2020 was the result of the buy-back of parts from one
customer that were then sold, resulting in a revaluation of the
inventory reserve. Cost of goods sold increased during the year
ended December 31, 2021 due to inventory write-offs of slow-moving
inventory. This resulted in gross profit of $20,000 on the sales of
devices and disposals for the year ended December 31, 2021,
compared to gross profit of $143,000 for the same period in
2020.
Research and Development Expenses: Research and
development expenses for the year ended December 31, 2021 decreased
to $69,000 from $143,000 during the same period in 2020. The
decrease of $74,000 or 52% was primarily due to a reduction in
research and development clinical costs and payroll expenses.
Sales and Marketing Expenses: Sales and marketing
expenses for the year ended December 31, 2021 remained consistent
with the year ended December 31, 2020.
General and Administrative Expense: General and
administrative expenses for the year ended December 31, 2021
increased to approximately $2,172,000 compared to $913,000 during
the same period in 2020. The increase of approximately $1,259,000,
or 138%, was primarily due to a charge of $556,000 for warrants
issued to Mr. Blumberg for consulting services and consulting
expenses of $228,000 for warrants issued to finders in the capital
raises. Additionally, during the year ended December 31, 2020, the
Company reversed $292,000 of a reserve taken for a deposit made for
inventory parts for its devices, which lowered general and
administrative expenses in the prior period. The remaining increase
in current period general and administrative expenses was due to
minimal increases in rent expense, payroll-related expenses, and
miscellaneous other expenses.
Other Income: Other income during the year ended
December 31, 2021 was $507,000, compared to $271,000 during the
same period in 2020. The increase of $236,000, or 87%, was
primarily due to the write-off of a $350,000 subscription
receivable liability during 2021. The increase was offset by
additional income recorded for recovery of employment expenses and
aged payables with had exceeded their statute of limitations on
collectability during 2020.
Interest Expense: Interest expense for the year
ended December 31, 2021 increased to approximately $1,150,000,
compared to $1,056,000 during the same period in 2020. The increase
of approximately $94,000, or 9%, was primarily due to a $350,000
prepayment penalty incurred on short-term convertible notes
payable, offset by lower interest incurred for outstanding notes
payable and convertible debt during the year ended December 31,
2021.
Gain (Loss) from extinguishment of debt: During
the year ended December 31, 2021, the Company recognized a gain on
extinguishment of debt of $578,000, compared to a loss on
extinguishment of debt of $296,000 during the same period in 2020.
The gain from debt extinguished in 2021 was primarily due to
forgiveness of debt principal and accrued interest totaling
$578,000 during 2021. The loss of $296,000 recognized in the prior
period was related to debt eliminated from debt exchange
agreements.
Change in Fair Value of Warrants: The gain
recorded due to change in fair value of warrants was $448,000
during the year ended December 31, 2021, compared to $1,879,000
during the same period in 2020. The decrease of $1,431,000, or 76%,
was primarily due to an exchange agreement signed with GPB Debt
Holdings II LLC (“GPB”), which resulted changes to the terms of the
warrants and reclassification of the warrants from liabilities to
equity.
Change in Fair Value of Derivative
Liability: Loss from the change in the fair value of
the derivative liability was $91,000 during the year ended December
31, 2021, compared to $25,000 during the same period in 2020. The
increase in the loss of $66,000, or 264%, was due to changes in the
fair value of the associated derivative liability and
extinguishment due to a $700,000 payoff of the associated loan.
Net Loss: Net loss attributable to
common stockholders was $2,431,000 during the year ended December
31, 2021, compared to $401,000 during the same period in the prior
year. The increase in net loss of $2,030,000 or 506% was due to the
reasons described above.
There was no income tax benefit recorded for the years ended
December 31, 2021 or 2020, due to recurring net operating
losses.
Liquidity And Capital Resources
Since our inception, we have raised capital through the public and
private sale of debt and equity, funding from collaborative
arrangements, and grants. As of March 31, 2022, we had cash of
approximately $725,000 and negative working capital of
$3,662,000.
Our major cash flows for the three months ended March 31, 2022
consisted of cash used by operating activities of $179,000, cash
used for investing activities of $14,000, and net cash provided by
financing activities of $275,000, which primarily represented the
proceeds received from warrant exercises.
Capital Resources For 2021
During 2021, the Company received $1,130,000 of cash from the sale
of 10% debenture unit investments and incurred transactional fees
of $86,400. The Company issued the finders 413,600 warrants for the
Company’s common stock shares. The investors received a total of
1,130,000 warrants for common stock shares. The debentures are
convertible into 2,260,000 of the Company’s common stock
shares.
During 2021, the Company received $2,114,000 of cash from the sale
of equity securities and incurred transactional fees of $139,000.
The Company also issued the finders 98,000 of the Company’s common
stock shares and 643,700 warrants for the Company’s common stock
shares. The investors received a total of 1,436 and 3,237 shares of
Series F and Series F-2 preferred stock, respectively. Each share
of Series F or Series F-2 preferred stock is convertible into 4,000
shares of the Company’s common stock, at the election of the
investor.
During 2021, the Company finalized an investment by Power Up
Lending Group Ltd (“Power Up”). Power Up invested $132,000 (of
which the Company received $125,000 net of costs) for 153,000
shares of Series G preferred stock. As of December 31, 2021, all
Series G preferred shares were redeemed.
During 2021, the Company entered into an exchange agreement with
Richard Fowler. As of December 31, 2020, the Company owed Mr.
Fowler $546,214 ($412,624 in deferred salary and $133,590 in
accrued interest). Mr. Fowler exchanged $50,000 of the amount owed
of $546,214 for 50 shares of Series F-2 Preferred Shares
(convertible into 200,000 shares of common stock) and a $150,000
unsecured note. The note accrues interest at the rate of 6.0%
(18.0% in the event of default) beginning on March 1, 2022 and is
payable in monthly installments of $3,600 for four years, with the
first payment being due on March 15, 2022. The effective interest
rate of the note is 6.18%. Mr. Fowler forgave $86,554 and may
forgive up to $259,661 of debt if the Company complies with the
repayment plan described above.
Capital Resources For 2020
During 2020, we received equity investments in the amount of
$1,735,500. These investors received a total of 1,735.5 shares of
Series E preferred stock (if the Investor elects to convert their
Series E preferred stock, each share of Series E preferred stock
converts into 4,000 shares of our common stock).
During January and April 2020, we received equity investments in
the amount of $128,000. These investors received a total of 256,000
shares of common stock and 256,000 warrants issued to purchase
shares of common stock at a strike price of $0.25, 256,000 warrants
to purchase shares of common stock at a strike price of $0.75 and
128 shares of Series D preferred stock (if the Investor elects to
convert their Series D preferred stock, each share of Series D
preferred stock converts into 3,000 shares of our common stock
shares). Of the amount invested $38,000 was from related
parties.
On January 6, 2020, we entered into an exchange agreement with
Jones Day. Upon making a payment of $175,000, which had not yet
occurred, we will exchange $1,744,768 of debt outstanding for:
$175,000, an unsecured promissory note in the amount of $550,000;
due 13 months form the date of issuance, that may be called at any
time prior to maturity upon a payment of $150,000; and an unsecured
promissory note in the principal amount of $444,768, bearing an
annualized interest rate of 6.0% and due in four equal annual
installments beginning on the second anniversary of the date of
issuance.
On January 8, 2020, we exchanged $2,064,366 in debt for several
equity instruments (noted below) that were determined to have a
total fair value of $2,065,548, resulting in a loss on
extinguishment of debt of $1,183 which is recorded in other income
(expense) on the accompanying consolidated statements of
operations. We also issued 6,957,013 warrants to purchase shares of
common stock; with exercise prices of $0.25, $0.75 and $0.20.
On June 3, 2020, we exchanged $328,422 in debt from Auctus,
(summarized in footnote 10: Convertible Notes), for
500,000 shares of common stock and 700,000 warrants to purchase
shares of common stock. The fair value of the shares of common
stock was $250,000 (based on a $0.50 fair value for our stock) and
of the warrants to purchase shares of common stock was $196,818
(based on a $0.281 black scholes fair valuation). This resulted in
a net loss on extinguishment of debt of $118,396 ($446,818 fair
value less the $328,422 of exchanged debt).
On June 30, 2020, we exchanged $125,000 in debt (during June 2020,
$125,000 in payables had been converted into short-term debt) from
Mr. James Clavijo, for 500,000 shares of common stock and 250,000
warrants to purchase shares of common stock. The fair value of the
shares of common stock was $250,000 (based on a $0.50 fair value
for our stock) and of the warrants to purchase shares of common
stock was $99,963 (based on a $0.40 black scholes fair valuation).
This resulted in a net loss on extinguishment of debt of $224,963
($349,963 fair value less the $125,000 of exchanged debt). After
the exchange transaction a balance was due Mr. Clavijo of $10,213
which was paid.
On July 9, 2020, we entered into an exchange agreement with Mr.
Bill Wells (one of its former employees). In lieu of agreeing to
dismiss approximately half of what is owed or
$220,000, Mr. Wells will receive the following: (i) cash payments
of $20,000 within 60 days of the signing of the agreement; cash
payments over time in the amount of $90,000 in the form of an
unsecured note to be executed within 30 days of a new financing(s)
totaling at least $3.0 million. The note shall bear interest of
6.0% and mature over 18 months; (iii) 66,000 common share stock
options that vest at a rate of 3,667 per month and have a $0.49
exercise price (if two consecutive payments in (ii) are not made
the stock options will be canceled and a cash payment will be
required; and (iv) the total amount of forgiveness by creditor of
approximately $110,000 shall be prorated according to amount
paid.
The following table summarizes the debt exchanges:
|
|
Total Debt
and Accrued
Interest
|
|
|
Total
Debt
|
|
|
Total
Accrued
Interest
|
|
|
Common
Stock
Shares
|
|
|
Warrants
(Exercise
$0.25)
|
|
|
Warrants
(Exercise
$0.75)
|
|
|
Warrants
(Exercise
$0.20)
|
|
|
Warrants
(Exercise
$0.15)
|
|
|
Warrants
(Exercise
$0.50)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aquarius
|
|
$ |
145,544 |
|
|
$ |
107,500 |
|
|
$ |
38,044 |
|
|
|
291,088 |
|
|
|
145,544 |
|
|
|
145,544 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
K2
Medical (Shenghuo) (3)
|
|
|
803,653 |
|
|
|
771,927 |
|
|
|
31,726 |
|
|
|
1,905,270 |
|
|
|
704,334 |
|
|
|
704,334 |
|
|
|
496,602 |
|
|
|
- |
|
|
|
- |
|
Mr. Blumberg
|
|
|
305,320 |
|
|
|
292,290 |
|
|
|
13,030 |
|
|
|
1,167,630 |
|
|
|
119,656 |
|
|
|
119,656 |
|
|
|
928,318 |
|
|
|
- |
|
|
|
- |
|
Mr. Case
|
|
|
179,291 |
|
|
|
150,000 |
|
|
|
29,291 |
|
|
|
896,456 |
|
|
|
- |
|
|
|
- |
|
|
|
896,456 |
|
|
|
- |
|
|
|
- |
|
Mr. Grimm
|
|
|
51,110 |
|
|
|
50,000 |
|
|
|
1,110 |
|
|
|
255,548 |
|
|
|
- |
|
|
|
- |
|
|
|
255,548 |
|
|
|
- |
|
|
|
- |
|
Mr. Gould
|
|
|
111,227 |
|
|
|
100,000 |
|
|
|
11,227 |
|
|
|
556,136 |
|
|
|
- |
|
|
|
- |
|
|
|
556,136 |
|
|
|
- |
|
|
|
- |
|
Mr. Mamula
|
|
|
15,577 |
|
|
|
15,000 |
|
|
|
577 |
|
|
|
77,885 |
|
|
|
- |
|
|
|
- |
|
|
|
77,885 |
|
|
|
- |
|
|
|
- |
|
Dr. Imhoff2
|
|
|
400,417 |
|
|
|
363,480 |
|
|
|
36,937 |
|
|
|
1,699,255 |
|
|
|
100,944 |
|
|
|
100,944 |
|
|
|
1,497,367 |
|
|
|
- |
|
|
|
- |
|
Ms. Rosenstock (1)
|
|
|
50,000 |
|
|
|
50,000 |
|
|
|
- |
|
|
|
100,000 |
|
|
|
50,000 |
|
|
|
50,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Mr. James (2)
|
|
|
2,286 |
|
|
|
2,000 |
|
|
|
286 |
|
|
|
7,745 |
|
|
|
1,227 |
|
|
|
1,227 |
|
|
|
5,291 |
|
|
|
- |
|
|
|
- |
|
Auctus
|
|
|
328,422 |
|
|
|
249,119 |
|
|
|
79,303 |
|
|
|
500,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
700,000 |
|
|
|
- |
|
Mr. Clavijo
|
|
|
125,000 |
|
|
|
125,000 |
|
|
|
- |
|
|
|
500,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
Mr. Wells (4)
|
|
|
220,000 |
|
|
|
220,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total
|
|
|
2,737,847 |
|
|
|
2,496,316 |
|
|
|
241,531 |
|
|
|
7,957,013 |
|
|
|
1,121,705 |
|
|
|
1,121,705 |
|
|
|
4,713,603 |
|
|
|
700,000 |
|
|
|
250,000 |
|
1.
|
Ms. Rosenstock also forgave $28,986 in debt.
|
2.
|
Mr. Imhoff and Mr. James are members of the board of directors and
therefore related parties.
|
3.
|
Our COO and director, Mark Faupel, is a shareholder of Shenghuo,
and another current director, Richard Blumberg, also is a managing
member of Shenghuo.
|
4.
|
Mr. Wells will also receive 66,000 common share stock options; the
details of which are explained above.
|
On January 16, 2020, we entered into an exchange agreement with
GPB. Under the terms of this exchange agreement, we will exchange
$3,360,811 of debt outstanding as of December 12, 2019 for the
following: (1) a cash payment of $1,500,000, (2) 7,185,000 warrants
to purchase common stock, previously outstanding, would be
exchanged for new warrants to purchase shares of common stock at a
strike price of $0.20 and (3) a certain number of shares of
preferred stock s for the remaining balance outstanding upon the
final exchange date. On January 8, 2021, we made the final payment
of $750,000 out of the total $1,500,000 as required by this
exchange agreement with GPB. On June 30, 2021, we issued 2,236
shares of series F-2 preferred stock in accordance with the terms
of the agreement.
On March 31, 2020, we entered into a securities purchase agreement
with Auctus Fund, LLC for the issuance and sale to Auctus of
$112,750 in aggregate principal amount of a 12% convertible
promissory note. On March 31, 2020, we issued the note to Auctus
and issued 250,000 five-year common stock warrants at an exercise
price of $0.16. On April 3, 2020, we received net proceeds of
$100,000. The note matured on January 26, 2021 and accrues interest
at a rate of 12% per year. As December 31, 2021, the note is in
default and accrues default interest of 24% per year.
On May 4, 2020, we received a loan from the Small Business
Administration (SBA) pursuant to the Paycheck Protection Program
(PPP) as part of the Coronavirus Aid, Relief, and Economic Security
Act (CARES Act) in the amount of $50,184. We were notified that the
application for loan forgiveness was approved in the amount of
$23,742 in principal and $234 in interest. We are planning on
appealing the amount forgiven.
On May 20, 2020, we received a $70,000 loan from Mr. Blumberg,
which was paid off in June 2020.
On May 22, 2020, we entered into an exchange agreement with Auctus.
Based on this agreement we exchanged three outstanding notes, in
the amounts of $150,000, $89,250, and $65,000 for a total amount
$304,250 of debt outstanding, as well as any accrued interest and
default penalty, for: $160,000 in cash payments (payable in monthly
payments of $20,000), converted a portion of the notes pursuant to
original terms of the notes into 500,000 restricted shares of
common stock (shares were issued on June 3, 2020); and 700,000
warrants issued to purchase shares of common stock with an exercise
price of $0.15. The fair value of the shares of common stock was
$250,000 (based on a $0.50 fair value for our stock) and of the
warrants to purchase shares of common stock was $196,818 (based on
a $0.281 black scholes fair valuation). This resulted in a net loss
on extinguishment of debt of $118,396 ($446,818 fair value less the
$328,422 of exchanged debt). The notes were no longer outstanding
as of December 31, 2021.
On May 27, 2020, we received the second tranche in the amount of
$400,000, from the December 17, 2019, securities purchase agreement
and convertible note with Auctus. The net amount paid to us was
$313,000 This second tranche is part of the convertible note issued
to Auctus for a total of $2.4 million of which $700,000 has already
been provided by Auctus. The note matures on May 27, 2022 and
accrues interest at a rate of ten percent (10% per annum). This
note is subject to the exchange agreement dated February 1, 2022
discussed below.
Auctus Exchange
On June 2, 2021, we entered into an initial exchange agreement
Auctus. On February 1, 2022, we entered into a second exchange
agreement with Auctus. Pursuant to this second agreement, Auctus
agreed to exchange an aggregate of $668,290 of outstanding notes
(the "Notes"), including accrued interest, and the associated
warrants issued in connection with the Notes (which warrants, for
the purpose of the exchange, are valued at, in the aggregate,
$1,681,707) into unregistered units of our common stock, warrants
and prefunded warrants otherwise in the form and ratios issued in
this offering. The exchange price will be on a $1 for $1 basis such
that Auctus will receive $2,349,997 of units consisting of common
stock, warrants and prefunded warrants. The units being issued in
the exchange with Auctus are not registered on this Registration
Statement and are being issued pursuant to Section 4(a)(2) under
the Securities Act of 1933, as amended. Additionally, the units and
the common stock underlying the units will be subject to a lock up
agreement with the underwriters until the earlier of 120 days after
this offering and the date that the daily volume weighted average
price of the common stock exceeds 200% of the public offering price
for at least five consecutive trading days. Further, the
termination date of the June 2, 2021 agreement was extended to
April 15, 2022. The $350,000 related to default penalties will be
exchanged into $350,000 of securities offered in the Nasdaq uplist
offering. On April 14, 2022, we entered into an agreement with
Auctus that extended the April 15, 2022 deadline to May 15, 2022.
On June 1, 2022, we entered into a third exchange agreement with
Auctus. As of the date of the agreement, Auctus was owed $692,114
of Notes and accrued interest. Pursuant to this third agreement, as long as we
complete the Nasdaq Offering prior to July 15, 2022, the total
amount owed to Auctus will be payable in cash 13 months subsequent
to the consummation of the Offering.
GPB Warrant Exchange Agreement
On December 21, 2021, we entered into a warrant exchange agreement
with GPB Holdings LLC. Pursuant to this agreement, upon an equity
financing of net proceeds of at least $4.0 million, GPB will
exchange 7,185,000 pre-split warrants at an exercise price of
$0.20, with no anti-dilution provisions and no cashless exercise
provision, for a cash payment of $350,000 and new warrants
under the same terms as warrants granted in the aforementioned
financing. The warrants will vest six months from the closing date
of the equity financing. The investor agreed to restrict its
holding of Company’s common stock to less than 4.99% of the total
number of the Company’s outstanding common shares at any one point
in time.
Other Warrant Exchange Agreements
During the year ended December 31, 2021, the Company entered into
various agreements with holders of the Company’s $0.20 strike price
warrants, pursuant to which each holder separately agreed to
exchange 4,713,603 common stock warrants with a strike price of
$0.20 for 4,477,923 common stock warrants with a strike price of
$0.16 and a contractual term of 15 days. The Company received
approximately $365,492 from the holders for the exercises of the
warrants.
Contingencies
Based on the current outbreak of the Coronavirus SARS-CoV-2, the
pathogen responsible for COVID-19, which has already had an impact
on financial markets, there could be additional repercussions in
our operating business, including but not limited to, the sourcing
of materials for product candidates, manufacture of supplies for
preclinical and/or clinical studies, delays in clinical operations,
which may include the availability or the continued availability of
patients for trials due to such things as quarantines,
conduct of patient monitoring and clinical trial data
retrieval at investigational study sites.
The future impact of the outbreak is highly uncertain and cannot be
predicted, and we cannot provide any assurance that the outbreak
will not have a material adverse impact on our operations or future
results or filings with regulatory health authorities. The extent
of the impact, if any, we will depend on future developments,
including actions taken to contain the coronavirus.
The conflict in Ukraine, which has already had an impact on
financial markets, could result in additional repercussions in our
operating business, including delays in obtaining regulatory
approval to market our products in Russia. The future impact of the
conflict is highly uncertain and cannot be predicted, and we cannot
provide any assurance that the conflict will not have a material
adverse impact on our operations or future results or filings with
regulatory health authorities.
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements, no special
purpose entities, and no activities that include
non-exchange-traded contracts accounted for at fair value.
BUSINESS
Overview
We are a medical technology company focused on developing
innovative medical devices that have the potential to improve
healthcare. Our primary focus is the sales and marketing of our
LuViva® Advanced Cervical Scan non-invasive cervical cancer
detection device. The underlying technology of LuViva primarily
relates to the use of biophotonics for the non-invasive detection
of cancers. LuViva is designed to identify cervical cancers and
precancers painlessly, non-invasively and at the point of care by
scanning the cervix with light, then analyzing the reflected and
fluorescent light.
LuViva is designed to provide a less invasive and painless
alternative to conventional tests for cervical cancer screening and
detection. Additionally, LuViva is designed to improve patient
well-being not only because it eliminates pain, but also because it
is convenient to use and provides rapid results at the point of
care. We focus on two primary applications for LuViva: first, as a
cancer screening tool in the developing world, where infrastructure
to support traditional cancer-screening methods is limited or
non-existent, and second, as a triage following traditional
screening in the developed world, where a high number of false
positive results cause a high rate of unnecessary and ultimately
costly follow-up tests.
Screening for cervical cancer represents one of the most
significant demands on the practice of diagnostic medicine. As
cervical cancer is linked to a sexually transmitted disease -the
human papillomavirus (HPV)-every woman essentially becomes “at
risk” for cervical cancer simply after becoming sexually active. In
the developing world, there are approximately 2.0 billion women
aged 15 and older who are potentially eligible for screening with
LuViva. Guidelines for screening intervals vary across the world,
but U.S. guidelines call for screening every three years.
Traditionally, the Pap smear screening test, or Pap test, is the
primary cervical cancer screening methodology in the developed
world. However, in developing countries, cancer screening using Pap
tests is expensive and requires infrastructure and skill not
currently existing, and not likely to be developed in the near
future, in these countries.
We believe LuViva is the answer to the developing world’s cervical
cancer screening needs. Screening for cervical cancer in the
developing world often requires working directly with foreign
governments or non-governmental agencies (NGOs). By partnering with
governments or NGOs, we can provide immediate access to cervical
cancer detection to large segments of a nation’s population as part
of national or regional governmental healthcare programs,
eliminating the need to develop expensive and resource-intensive
infrastructures.
In the developed world, we believe LuViva offers a more accurate
and ultimately cost-effective triage medical device, to be used
once a traditional Pap test or HPV test indicates the possibility
of cervical cancer. Due to the high number of false positive
results from Pap tests, traditional follow-on tests entail
increased medical treatment costs. We believe these costs can be
minimized by utilizing LuViva as a triage to determine whether and
to what degree follow-on tests are warranted.
We believe our non-invasive cervical cancer detection technology
can be applied to the early detection of other cancers as well. For
example, we have developed prototypes and conducted limited
clinical studies using our biophotonic technology for the detection
of esophageal cancer. The Company believes that skin cancer
detection also is a promising target for our technology, but
currently we are focused primarily on the large-scale
commercialization of LuViva.
Cancer
Cancer is a group of many related diseases. All forms of cancer
involve the out-of-control growth and spread of abnormal cells.
Normal cells grow, divide, and die in an orderly fashion. Cancer
cells, however, continue to grow and divide and can spread to other
parts of the body. As reported in 2015, in the United States, one
in every two women and one in every three men will develop cancer
in their lifetimes. According to the American Cancer Society, the
sooner a cancer is found and treatment begins, the better a
patient’s chances are of being cured. We began investigating the
applications of our biophotonic technology to cancer detection
before 1997, when we initiated a preliminary market analysis. We
concluded that our biophotonic technology had applications for the
detection of a variety of cancers through the exposure of tissue to
light. We selected detection of cervical cancer and skin cancer
from a list of the ten most promising applications to pursue
initially, and ultimately focused primarily on our LuViva cervical
cancer detection device.
Cervical cancer is a cancer that begins in the lining of the cervix
(which is located in the lower part of the uterus). Cervical cancer
forms over time and may spread to other parts of the body if left
untreated. There is generally a gradual change from a normal cervix
to a cervix with precancerous cells to cervical cancer. For some
women, precancerous changes may go away without any treatment.
While the majority of precancerous changes in the cervix do not
advance to cancer, if precancers are treated, the risk that they
will become cancers can be greatly reduced.
The Developing World
According to the most recent data published by the WHO, cervical
cancer is the fourth most frequent cancer in women worldwide, with
an estimated 570,000 new cases in 2018, an increase of 40,000 cases
from 2012. For women living in less developed regions, however,
cervical cancer is the second most common cancer, and 9 out of 10
women who die from cervical cancer reside in low- and middle-income
countries. In 2018, GLOBOCAN, the international cancer tracking
agency, estimated that approximately 311,000 women died from
cervical cancer, with 85% of these deaths occurring in low- and
middle-income countries.
As noted by the WHO, in developed countries, programs are in place
that enable women to get screened, making most pre-cancerous
lesions identifiable at stages when they can easily be treated.
Early treatment prevents up to 80% of cervical cancers in these
countries. In developing countries, however, limited access to
effective screening means that the disease is often not identified
until it is further advanced and symptoms develop. In addition,
prospects for treatment of such late-stage disease may be poor,
resulting in a higher rate of death from cervical cancer in these
countries.
We believe that the greatest need and market opportunity for LuViva
lies in screening for cervical cancer in developing countries where
the infrastructure for traditional screening may be limited or
non-existent.
In addition to private care markets, we are actively working with
distributors in the following countries to implement
government-sponsored screening programs: Turkey, Indonesia and
several countries in Eastern Europe. The number of screening
candidates in those countries is approximately 155 million.
The Developed World
The Pap test, which involves a sample of cervical tissue being
placed on a slide and observed in a laboratory, is currently the
most common form of cervical cancer screening. Since the
introduction of screening and diagnostic methods, the number of
cervical cancer deaths in the developed world has declined
dramatically, due mainly to the increased use of the Pap test.
However, the Pap test has a wide variation in sensitivity, which is
the ability to detect the disease, and specificity, which is the
ability to exclude false positives. A study by Duke University for
the U.S. Agency for Health Care Policy and Research published in
1999 showed Pap test performance ranging from a 22%-95% sensitivity
and 78%-10% specificity, although new technologies improving the
sensitivity and specificity of the Pap test have recently been
introduced and are finding acceptance in the marketplace. About 60
million Pap tests are given annually in the United States, and
combined with a pelvic exam as the standard of care, has an average
price of approximately $380 per exam.
After a Pap test returns a positive result for cervical cancer,
accepted protocol calls for a visual examination of the cervix
using a colposcope, usually followed by a biopsy, or tissue
sampling, at one or more locations on the cervix. This method looks
for visual changes attributable to cancer. There are about two
million colposcope examinations annually in the United States and
Europe. According to industry reports by MD Save and Costhelper
Health, leading online medical service providers, the average cost
of a colposcopy examination with biopsy in the United States is
currently $943.
Given this landscape, we believe that there is a material need and
market opportunity for LuViva as a triage device in the developed
world where LuViva represents a more cost- effective method of
verifying a positive Pap test than the alternatives.
The LuViva Advanced Cervical Scan
LuViva is designed to identify cervical cancers and precancers
painlessly, non-invasively and at the point of care by scanning the
cervix with light, then analyzing the light reflected from the
cervix. The information presented by the light would be used to
indicate the likelihood of cervical cancer or precancers. Our
product, in addition to detecting the structural changes attributed
to cervical cancer, is also designed to detect the biochemical
changes that precede the development of visual lesions. In this
way, cervical cancer may be detected earlier in its development,
which should increase the chances of effective treatment. In
addition to the device itself, operation of LuViva requires
employment of our single-use, disposable calibration and alignment
cervical guide.
To date, thousands of women in multiple international clinical
settings have been tested with LuViva. As a result, more than 25
papers and presentations have been published regarding LuViva in a
clinical setting, including at the International Federation of
Gynecology and Obstetrics Congress in London in 2015 and at the
Indonesian National Obstetrics and Gynecology (POGI) Meeting in
Solo in 2016.
Internationally, we contract with country-specific or regional
distributors. We believe that the international market will be
significantly larger than the U.S. market due to the international
demand for cervical cancer screening. We have executed formal
distribution agreements covering over 40 countries, some of which
have since expired. We still have active contracts in place for
countries including China and Southeast Asia (including Indonesia),
Eastern Europe and Russia. In 2022, we intend to focus on other
large markets such as those in the European Union, India, and
certain Latin American countries, such as Mexico.
We have previously obtained regulatory approval to sell LuViva in
Europe under our Edition 3 CE Mark. Additionally, LuViva has also
previously obtained marketing approval from Health Canada, COFEPRIS
in Mexico, Ministry of Health in Kenya, which have all expired.
Presently, we have marketing approval from India and the Singapore
Health Sciences Authority. In addition, in 2018, we were approved
for sales and marketing in India. We currently are seeking
regulatory approval to market LuViva in the United States but have
not yet received approval from the U.S. Food and Drug
Administration (FDA). As of December 31, 2021, we have sold 144
LuViva devices and approximately 76,980 single-use-disposable
cervical guides to international distributors.
We believe our non-invasive cervical cancer detection technology
can be applied to the early detection of other cancers as well.
From 2008 to early 2013, we worked with Konica Minolta to explore
the feasibility of adapting our microporation and biophotonic
cancer detection technology to other areas of medicine and to
determine potential markets for these products in anticipation of a
development agreement. In February 2013, we replaced our existing
agreements with Konica Minolta with a new agreement, pursuant to
which, subject to the payment of a nominal license fee due upon FDA
approval, Konica Minolta has granted us a five-year, world-wide,
non-transferable and non-exclusive right and license to manufacture
and to develop a non-invasive esophageal cancer detection product
from Konica Minolta and based on our biophotonic technology
platform. The license permitted us to use certain related
intellectual property of Konica Minolta. In return for the license,
we agreed to pay Konica Minolta a royalty for each licensed product
we sell that includes their intellectual property. To date, we have
not achieved any sales of products that include the intellectual
property of Konica Minolta. As we develop LuViva as a commercial
product, we will continue to seek new collaborative partners
focused especially on marketing and sales.
Our Strengths
Currently, we are the only commercial stage company with a
biophotonic technology that potentially addresses a large primary
screening market and a potential R&D pipeline that could
improve the early detection of numerous cancers that afflict men
and women. Key strengths include:
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The engineering and production
risks have been largely addressed as we have sold over 100 working
systems worldwide. |
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Regulatory approvals have been
granted covering over 40 countries. |
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We have legitimate pathways for
securing marketing approvals in the two largest medical markets -
the US and China, within a 2-3 year period. |
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The clinical results of our
technology have been published in leading peer-reviewed journals by
world-famous, thought leading physicians. |
Our Business Strategy
Our near term goals are to accomplish the following over the next
two years by pursuing the following strategies:
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Seek US FDA approval by completing
a clinical trial. |
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Contingent upon FDA approval,
discuss opportunities to partner with a larger U.S. based company
for distribution in the U.S. At the same time, we intend to build a
small dedicated sales force based near major metropolitan centers
and focused on generating sales at large centralized Ob-Gyn
practices. |
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Seek Chinese FDA approval working
with our existing partner in China, Shandong Medical
Instrumentation Co. Ltd. |
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Pursue regulatory approval in
Russia and work with our partner in Eastern Europe, Newmars
Technology, Inc. to generate sales in Europe. |
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Continue to selectively support
sales through our distributors in large countries such as
Indonesia. |
While we plan to pursue regulatory approval in Russia, the ongoing
conflict in Ukraine may delay filing and approval to market LuViva
in Russia. It does not affect any existing contracts with our
distribution partner for Eastern Europe and Russia as they are focused more on
countries less affected by the conflict in Ukraine.
Manufacturing, Sales Marketing and
Distribution
We manufacture LuViva at our Norcross, Georgia facility and our
contract manufacturer, Newmars Technology, Inc, located near
Budapest, Hungary. Most of the operational components of LuViva are
custom made for us by third-party manufacturers. We adhere to ISO
13485:2003 quality standards in our manufacturing processes. Our
single-use cervical guides are manufactured by a vendor that
specializes in injection molding of plastic medical products. On
January 22, 2017, we entered into a license agreement with SMI, as
amended on March 28, 2017, pursuant to which we granted SMI an
exclusive global license to manufacture the LuViva device and
related disposables (subject to a carve-out for manufacture in
Turkey). On December 18, 2018, we entered into a co-development
agreement with NTI, whereby NTI will perform final assembly of the
LuViva device for its contracted distribution countries in Eastern
Europe and Russia at its ISO 13485 facility in Hungary. This
additional carve out has been agreed to by SMI. On August 12, 2021
the Company entered into a second amendment with SMI pursuant to
which the Company has continued to grant SMI exclusive
distribution, sales and manufacturing rights of the LuViva for
China, Taiwan, Hong Kong and Macau.
We rely on distributors to sell our products. Distributors can be
country exclusive or cover multiple countries in a region. We
manage these distributors, provide them marketing materials and
train them to demonstrate and operate LuViva. We seek distributors
that have experience in gynecology and in introducing new
technology into their assigned territories. Currently, we rely on
SMI in distributing our products in the People's Republic of China,
Macau, Hong Kong and Taiwan; we rely on NTI in distributing our
products in Eastern Europe and Russia.
We have only limited experience in the production planning, quality
system management, facility development, and production scaling
that will be needed to bring production to increased sustained
commercial levels. We will likely need to develop additional
expertise in order to successfully manufacture, market, and
distribute any future products.
Patents
We have pursued a course of developing and acquiring patents and
patent rights and licensing technology. Our success depends in
large part on our ability to establish and maintain the proprietary
nature of our technology through the patent process and to license
from other’s patents and patent applications necessary to develop
our products. As of March 31, 2022, we have 41 granted U.S. and
foreign patents, collectively, relating to our biophotonic cancer
detection technology that were developed in-house and are owned by
the Company. 10 patents are still currently active and 31 have
since expired. Currently, we do not own third party patents nor do
we make any outside payments for patents.
Patents can be extended up to an additional five (5) years.
However, patent term extension under the Hatch-Waxman Act does not
occur automatically and the patent owner must file an application
with the USPTO requesting term extension within 60 days of
obtaining FDA marketing approval.
Patent No.
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Title
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Country
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Grant Date
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Expiration Date
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6,792,982
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Vacuum Source For Harvesting Substances
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US
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9/21/2004
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7/23/2023
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7,174,927
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Vacuum Source For Harvesting Substances
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US
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2/13/2007
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9/3/2024
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7,301,629
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Apparatus and Method for Determining Tissue Characteristics
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US
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11/27/2007
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7/3/2023
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7,335,166
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System And Methods For Fluid Extractions And Monitoring
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US
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2/26/2008
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5/22/2023
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8,644,912
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Method and Apparatus For Determining Tissue Characteristics
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US
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2/4/2014
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8/22/2031
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8,781,560
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Method and Apparatus For Rapid Detection and Diagnosis of Tissue
Abnormalities
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US
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7/15/2014
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9/09/2031
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9,561,003
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Method and Apparatus For Rapid Detection and Diagnosis of Tissue
Abnormalities
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US
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2/7/2017
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3/5/2034
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D714453
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Mobile Cart and Hand Held Unit for Diagnostics of Measurement
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US
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9/30/2014
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9/30/2028
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D724199
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Medical Diagnostic Stand Off Tube
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US
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3/10/2015
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3/10/2029
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D746475
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Mobile Cart and Hand Held Unit for Diagnostics or Measurement
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US
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12/29/2015
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12/29/2029
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The Company has applied for two additional US patents, although
there is no assurance that these patents will be granted. The
Company’s strategy is to continue improving its products and filing
new patents to protect those improvements.
In the United States, additional years of patent protection may be
added (on a case-by-case basis) beyond the standard patent terms
under the 1984 Drug Price Competition and Patent Term Restoration
Act, also known as the Hatch-Waxman Act. The Hatch-Waxman act
includes Section 156, which provides for the extension of the term
of a granted patent (PTE) under certain circumstances. The intent
behind Section 156 is to extend patent life to compensate patent
holders for patent term lost while developing their product and
awaiting FDA approval. The Company’s patents qualify under Section
156 because LuViva has not yet been commercialized in the United
States and it is being regulated by FDA as a Class III Medical
Device.
Research, Development and Engineering
We have been engaged primarily in the research, development and
testing of our LuViva non-invasive cervical cancer detection
product and our core biophotonic technology. Since 2013, we have
incurred approximately $8.1 million in research and development
expenses, net of about $927,000 reimbursed through collaborative
arrangements and government grants. Research and development costs
were approximately $0.1 million in the years ended December 31,
2021 and 2020 and were not material during the three months ended
March 31, 2022.
Since 2013, we have focused our research and development and our
engineering resources almost exclusively on development of our
biophotonic technology, with only limited support of other programs
funded through government contracts or third-party funding. Because
our research and clinical development programs for other cancers
are at a very early stage, substantial additional research and
development and clinical trials will be necessary before we can
produce commercial prototypes of other cancer detection
products.
Several of the components used in LuViva currently are available
from only one supplier, and substitutes for these components could
not be obtained easily or would require substantial modifications
to our products.
Competition
The medical device industry in general and the markets for cervical
cancer detection in particular, are intensely competitive. If
successful in our product development, we will compete with other
providers of cervical cancer detection and prevention products.
Current cervical cancer screening and diagnostic tests, primarily
the Pap test, HPV test, and colposcopy, are well established and
pervasive. Improvements and new technologies for cervical cancer
detection and prevention, such as Thin-Prep from Hologic and HPV
testing from Qiagen, have led to other new competitors. In
addition, there are other companies attempting to develop products
using forms of biophotonic technologies in cervical cancer
detection, such as Spectrascience, which has a very limited U.S.
FDA approval to market its device for detection of cervical
cancers, but has not yet entered the market. The approval limits
use of the Spectrascience device only after a colposcopy, as an
adjunct. In addition to the Spectrascience device, there are other
technologies that are seeking to enter the market as adjuncts to
colposcopy, including devices from Dysis and Zedco. While these
technologies are not direct competitors to LuViva, modifications to
them or other new technologies will require us to develop devices
that are more accurate, easier to use or less costly to administer
so that our products have a competitive advantage.
In April 2014, the U.S. FDA approved the use of the Roche cobas HPV
test as a primary screener for cervical cancer. Using a sample of
cervical cells, the cobas HPV test detects DNA from 14 high-risk
HPV types. The test specifically identifies HPV 16 and HPV 18,
while concurrently detecting 12 other types of high-risk HPVs. This
could make HPV testing a competitor to the Pap test. However, due
to its lower specificity, we believe that screening with HPV will
increase the number of false positive results if widely
adopted.
In June 2006, the U.S. FDA approved the HPV vaccine Gardasil from
drug maker Merck. Gardasil is a prophylactic HPV vaccine, meaning
that it is designed to prevent the initial establishment of HPV
infections. For maximum efficacy, it is recommended that girls
receive the vaccine prior to becoming sexually active. Since
Gardasil will not block infection with all of the HPV types that
can cause cervical cancer, the vaccine should not be considered a
substitute for routine Pap tests. On October 16, 2009,
GlaxoSmithKline PLC was granted approval in the United States for a
similar preventive HPV vaccine, known as Cervarix. Due to the
limited availability and lack of 100% protection against all
potentially cancer-causing strains of HPV, we believe that the
vaccines will have a limited impact on the cervical cancer
screening and diagnostic market for many years.
Government Regulation
The medical devices that we manufacture are subject to regulation
by numerous regulatory bodies, including the Chinese FDA (recently
renamed the Chinese National Medical Product Administration (NMPA),
the U.S. FDA, and comparable international regulatory agencies.
These agencies require manufacturers of medical devices to comply
with applicable laws and regulations governing the development,
testing, manufacturing, labeling, marketing and distribution of
medical devices. Devices are generally subject to varying levels of
regulatory control, the most comprehensive of which requires that a
clinical evaluation program be conducted before a device receives
approval for commercial distribution.
In the European Union, medical devices are required to comply with
the Medical Devices Directive and obtain CE Mark certification in
order to market medical devices. The CE Mark certification, granted
following approval from an independent “Notified Body,” is an
international symbol of adherence to quality assurance standards
and compliance with applicable European Medical Devices Directives.
From 2017 through 2019, we were unable to pay the annual
registration fees to maintain our ISO 13485:2003 certification and
our CE Mark. On December 21, 2018 we executed an agreement with
Newmars, described above, for final assembly of LuViva at their ISO
13485:2016 accredited facility. This allowed LuViva to be granted
to CE Mark through the facility at Newmars, which was achieved in
2021, and both the ISO and CE Mark accreditations for LuViva are
currently active. Thus, LuViva can be marketed in the European
Union and other countries that honor the CE Mark.
China has a regulatory regime similar to that of the European
Union, but due to interaction with the U.S. regulatory regime, the
CFDA also shares some similarities with its U.S. counterpart.
Devices are classified by the CFDA’s Center for Medical Device
Evaluation (CMDE) into three categories based on medical risk, with
the level of regulatory oversight determined by degree of risk and
invasiveness. CMDE’s device classifications and definitions are as
follows:
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Class I device: The safety and
effectiveness of the device can be ensured through routine
administration. |
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Class II device: Further control is
required to ensure the safety and effectiveness of the device. |
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Class III device: The device is
implanted into the human body; used for life support or sustenance;
or poses potential risk to the human body, and thus must be
strictly controlled in respect to safety and effectiveness. |
Based on the above definitions and several discussions with
regulatory consultants and potential partners, we believe that
LuViva is most likely to be classified as a Class II device,
however, this is not certain and the CFDA may determine that LuViva
requires a Class III registration. Class III registrations are
granted by the national CFDA office while Class I and II
registrations occur at the provincial level. Typically,
registration granted at the provincial level allows a medical
device to be marketed in all of China’s provinces.
While Class I devices usually do not require clinical trial data
from Chinese patients and Class III devices almost always do, Class
II medical devices sometimes do and sometimes do not require
Chinese clinical trials, and this determination may depend on the
claim for the device and quality of clinical trials conducted
outside of China. If clinical trials conducted in China are
required, they usually are less burdensome for Class II devices
than Class III devices.
CFDA labs also conduct electrical, mechanical and electromagnetic
emission safety testing for medical devices similar to those
required for the CE Mark. As is the case with the
U.S. FDA, manufacturers in China undergo periodic inspections and
must comply with international quality standards such as ISO 13485
for medical devices. As part of our agreement with SMI, SMI will
underwrite the cost of securing approval of LuViva with the CFDA.
As of the date of this Prospectus, SMI has informed us in writing
that LuViva has passed electrical, mechanical and electromagnetic
emission safety testing for medical devices, which allows clinical
trials to commence.
In the United States, permission to distribute a new device
generally can be met in one of two ways. The first process requires
that a pre-market notification (510(k) Submission) be made to the
U.S. FDA to demonstrate that the device is as safe and effective
as, or substantially equivalent to, a legally marketed device that
is not subject to premarket approval (PMA). A legally marketed
device is a device that (1) was legally marketed prior to May 28,
1976, (2) has been reclassified from Class III to Class II or I, or
(3) has been found to be substantially equivalent to another
legally marketed device following a 510(k) Submission. The legally
marketed device to which equivalence is drawn is known as the
“predicate” device. Applicants must submit descriptive data and,
when necessary, performance data to establish that the device is
substantially equivalent to a predicate device. In some instances,
data from human clinical studies must also be submitted in support
of a 510(k) Submission. If so, these data must be collected in a
manner that conforms with specific requirements in accordance with
federal regulations. The U.S. FDA must issue an order finding
substantial equivalence before commercial distribution can occur.
Changes to existing devices covered by a 510(k) Submission which do
not significantly affect safety or effectiveness can generally be
made by us without additional 510(k) Submissions.
The second process requires that an application for premarket
approval (PMA) be made to the U.S. FDA to demonstrate that the
device is safe and effective for its intended use as manufactured.
This approval process applies to most Class III devices, including
LuViva. In this case, two steps of U.S. FDA approval are generally
required before marketing in the United States can begin. First,
investigational device exemption (IDE) regulations must be complied
with in connection with any human clinical investigation of the
device in the United States. Second, the U.S. FDA must review the
PMA application, which contains, among other things, clinical
information acquired under the IDE. The U.S. FDA will approve the
PMA application if it finds that there is a reasonable assurance
that the device is safe and effective for its intended purpose.
We completed enrollment in our U.S. FDA pivotal trial of LuViva in
2008 and, after the U.S. FDA requested two-years of follow-up data
for patients enrolled in the study, the
U.S. FDA accepted our completed PMA application on November 18,
2010, effective September 23, 2010, for substantive review. On
March 7, 2011, we announced that the U.S. FDA had inspected two
clinical trial sites and audited our clinical trial data base
systems as part of its review process and raised no formal
compliance issues. On January 20, 2012, we announced our intent to
seek an independent panel review of our PMA application after
receiving a “not-approvable” letter from the U.S. FDA. On November
14, 2012 we filed an amended PMA with the U.S. FDA. On September 6,
2013, we received a letter from the U.S. FDA with additional
questions and met with the U.S. FDA on May 8, 2014 to discuss our
response. On July 25, 2014, we announced that we had responded to
the U.S. FDA’s most recent questions.
We received a “not-approvable” letter from the U.S. FDA on May 15,
2015. We had a follow up meeting with the U.S. FDA to discuss a
path forward on November 30, 2015, at which we agreed to submit a
detailed clinical protocol for U.S. FDA review so that additional
studies can be completed. We held a follow up teleconference with
FDA on January 28, 2020 and filed a pre-submission document to the
Agency on February 17, 2020 that summarized the clinical protocol
to be submitted for FDA review. We agreed with the FDA on the study
protocol during the second quarter of 2021 and are recruiting
clinical sites for the study. These studies may not be completed in
2022, although we intend to pursue FDA approval and start studies
in 2022 once funds are available. We remain committed to obtaining
U.S. FDA approval, but at the same time we are focused on
international sales growth, where we believe the commercial
opportunities are larger and the clinical need is more
significant.
The process of obtaining clearance to market products is costly and
time-consuming in virtually all of the major markets in which we
sell, or expect to sell, our products and may delay the marketing
and sale of our products. Countries around the world have recently
adopted more stringent regulatory requirements, which are expected
to add to the delays and uncertainties associated with new product
releases, as well as the clinical and regulatory costs of
supporting those releases. No assurance can be given that our
products will be approved on a timely basis in any particular
jurisdiction, if at all. In addition, regulations regarding the
development, manufacture and sale of medical devices are subject to
future change. We cannot predict what impact, if any, those changes
might have on our business. Failure to comply with regulatory
requirements could have a material adverse effect on our business,
financial condition and results of operations.
Noncompliance with applicable requirements can result in import
detentions, fines, civil penalties, injunctions, suspensions or
losses of regulatory approvals or clearances, recall or seizure of
products, operating restrictions, denial of export applications,
governmental prohibitions on entering into supply contracts, and
criminal prosecution. Failure to obtain regulatory approvals or the
restriction, suspension or revocation of regulatory approvals or
clearances, as well as any other failure to comply with regulatory
requirements, would have a material adverse effect on our business,
financial condition and results of operations.
Regulatory approvals and clearances, if granted, may include
significant labeling limitations and limitations on the indicated
uses for which the product may be marketed. In addition, to obtain
regulatory approvals and clearances, the U.S. FDA and some foreign
regulatory authorities impose numerous other requirements with
which medical device manufacturers must comply. U.S. FDA
enforcement policy strictly prohibits the marketing of approved
medical devices for unapproved uses. Any products we manufacture or
distribute under U.S. FDA clearances or approvals are subject to
pervasive and continuing regulation by the U.S. FDA. The U.S. FDA
also requires us to provide it with information on death and
serious injuries alleged to have been associated with the use of
our products, as well as any malfunctions that would likely cause
or contribute to death or serious injury.
The U.S. FDA requires us to register as a medical device
manufacturer and list our products. We are also subject to
inspections by the U.S. FDA and state agencies acting under
contract with the U.S. FDA to confirm compliance with good
manufacturing practice. These regulations require that we
manufacture our products and maintain documents in a prescribed
manner with respect to manufacturing, testing, quality assurance
and quality control activities. The U.S. FDA also has promulgated
final regulatory changes to these regulations that require, among
other things, design controls and maintenance of service records.
These changes will increase the cost of complying with good
manufacturing practice requirements.
Distributors of medical devices may also be required to comply with
other foreign regulatory agencies, and we or our distributors
currently have marketing approval for LuViva from Health Canada,
COFEPRIS in Mexico, the Ministry of Health in Kenya, and the
Singapore Health Sciences Authority. The time required to obtain
these foreign approvals to market our products may be longer or
shorter than that required in China or the United States, and
requirements for those approvals may differ from those required by
the CFDA or the U.S. FDA.
We are also subject to a variety of other controls that affect our
business. Labeling and promotional activities are subject to
scrutiny by the U.S. FDA and, in some instances, by the U.S.
Federal Trade Commission. The U.S. FDA actively enforces
regulations prohibiting marketing of products for unapproved users.
We are also subject, as are our products, to a variety of state and
local laws and regulations in those states and localities where our
products are or will be marketed. Any applicable state or local
regulations may hinder our ability to market our products in those
regions. Manufacturers are also subject to numerous federal, state
and local laws relating to matters such as safe working conditions,
manufacturing practices, environmental protection, fire hazard
control and disposal of hazardous or potentially hazardous
substances. We may be required to incur significant costs to comply
with these laws and regulations now or in the future. These laws or
regulations may have a material adverse effect on our ability to do
business.
Although our marketing and distribution partners around the world
assist in the regulatory approval process, ultimately, we are be
responsible for obtaining and maintaining regulatory approvals for
our products. The inability or failure to comply with the varying
regulations or the imposition of new regulations would materially
adversely affect our business, financial condition and results of
operations.
REGULATORY
OVERVIEW
The development of innovative new drugs and medical devices is a
time-consuming, expensive, and risky process. Despite these
challenges, the pharmaceutical and medical device industries have
been remarkably successful in developing a broad range of important
new medicines and devices. It is also a heavily regulated industry.
Drugs and medical devices are evaluated for safety, efficacy, and
manufacturing quality as a condition of market access, and
promotional messages must adhere to approved product
characteristics. Drug and medical device prices also are regulated
in most countries with national health insurance systems.
Regulation of market access and promotion derives from uncertainty
about drug and medical device safety and efficacy. These product
characteristics can only be determined from accumulated experience
over large numbers of patients in carefully designed trials or
observational studies. The 1962 and 1976 (for medical device)
Amendments to the United States Food and Drug Agency Act extended
the powers of the FDA to review safety, efficacy, manufacturing
quality and promotion. Subsequent studies concluded that the safety
and efficacy requirements added to the intrinsically high cost of
research and development, led to launch delay of new drugs and
favored large over small firms.
However, more recently the biotechnology revolution has transformed
the nature of drug discovery and the structure of the industry.
Increasingly, new drugs originate in small firms, which often
license out their products to more experienced firms for later
stage drug development, regulatory review, and commercialization.
In any given year, the biotechnology industry may comprise a couple
of thousand firms, but the identities of these firms change as new
start-ups are formed and established firms grow, merge, or are
acquired by other established companies.
Government Regulation and Product Approval
United States Government Regulation
Government authorities in the United States, at the federal, state
and local level, and in other countries extensively regulate, among
other things, the research, development, testing, manufacture,
packaging, storage, recordkeeping, labeling, advertising,
promotion, distribution, marketing, import and export of the
medical devices such as those we are developing. The processes for
obtaining regulatory approvals in the United States and in foreign
countries, along with subsequent compliance with applicable
statutes and regulations, require the expenditure of substantial
time and financial resources.
In the United States, the FDA regulates drugs and medical devices
under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its
implementing regulations. The process of obtaining regulatory
approvals and the subsequent compliance with appropriate federal,
state, local and foreign statutes and regulations requires the
expenditure of substantial time and financial resources. Failure to
comply with the applicable United States requirements at any time
during the product development process, approval process or after
approval, may subject an applicant to a variety of administrative
or judicial sanctions, such as the FDA’s refusal to approve pending
new drug applications, or NDAs, withdrawal of an approval,
imposition of a clinical hold, issuance of warning or untitled
letters, product recalls, product seizures, total or partial
suspension of production or distribution, injunctions, fines,
refusals of government contracts, restitution, disgorgement or
civil or criminal penalties.
European Union Regulation
In the European Union, medical devices are required to comply with
the Medical Devices Directive and obtain CE Mark certification in
order to market medical devices. The CE Mark certification, granted
following approval from an independent “Notified Body,” is an
international symbol of adherence to quality assurance standards
and compliance with applicable European Medical Devices Directives.
From 2017 through 2019, we were unable to pay the annual
registration fees to maintain our ISO 13485:2003 certification and
our CE Mark. Once our financing is completed, we will make the
required payments and reobtain both certifications. In addition,
our December 21, 2018 agreement with NTI, described above, will
allow final assembly at their ISO 13485:2016 accredited facility.
Once all inspections have been passed for LuViva, this will allow
an alternative path for obtaining the CE Mark.
MANAGEMENT
The following table provides information regarding our executive
officers and directors as of the date hereof:
Gene S. Cartwright, Ph.D.
|
67
|
Chief Executive Officer, President, Acting Chief Financial Officer
and Director
|
Mark Faupel, Ph.D.
|
66
|
Chief Operating Officer and Director
|
Richard P. Blumberg
|
65
|
Director
|
Michael C. James
|
63
|
Chairman and Director
|
John E. Imhoff, M.D.
|
72
|
Director
|
Except as set forth below, all of the executive officers have been
associated with us in their present or other capacities for more
than the past five years. Officers are elected annually by the
board of directors and serve at the discretion of the board. There
are no family relationships among any of our executive officers and
directors.
The following is a biographical summary of the experience of our
executive officers, other senior management and directors. There
are no family relationships among any of our executive officers,
other senior management or directors.
Gene S. Cartwright, Ph.D - President, Chief Executive
Officer, President, Acting Chief Financial Officer and
Director
Gene S. Cartwright, Ph.D. joined us in January 2014 as the
President, Chief Executive Officer and Acting Chief Financial
Officer. He was elected as a director on January 11, 2014. His most
recent position was with Omnyx, LLC, a Joint Venture between GE
Healthcare and the University of Pittsburgh Medical Center, where,
as CEO for over four years he founded and managed the successful
development of products for the field of Digital Pathology. Prior
to his work with Omnyx, LLC, he was President of Molecular
Diagnostics for GE Healthcare. Prior to GE, Dr. Cartwright was
Divisional Vice President/General Manager for Abbott Diagnostics’
Molecular Diagnostics business. In his 24-year career at Abbott, he
also served as Divisional Vice President for U.S. Marketing for
five years. He received a Master of Management degree from
Northwestern’s Kellogg School of Management and also holds a Ph.D.
in chemistry from Stanford University and an AB from Dartmouth
College.
Dr. Cartwright brings over 30 years of experience working in the
IVD diagnostics industry. He has great experience in the
diagnostics market both in the development and introduction of new
diagnostics technologies, as well as extensive successful
commercial experience with global businesses. With his background
and experience, Dr. Cartwright, as President and Chief Executive
Officer, as well as Acting Chief Financial Officer, works with and
advises the board as to how we can successfully market and build
LuViva international sales.
Mark Faupel, Ph.D., - Chief Operating Officer and
Director
Mark Faupel, Ph.D., rejoined us as Chief Operating Officer
and director on December 8, 2016. He previously served on our board
of directors through 2013 and has more than 30 years of experience
in developing non-invasive alternatives to surgical biopsies and
blood tests, especially in the area of cancer screening and
diagnostics. Dr. Faupel was one of our co- founders and also served
as our Chief Executive Officer from May 2007 through 2013. Prior
thereto was our Chief Technical Officer from April 2001 to May
2007. Dr. Faupel has served as a National Institutes of Health
reviewer, is the inventor on 32 U.S. patents and has authored
numerous scientific publications and presentations, appearing in
such peer-reviewed journals as The Lancet. Dr. Faupel earned his
Ph.D. in neuroanatomy and physiology from the University of
Georgia. Dr. Faupel is also a stockholder of Shenghuo Medical, LLC.
See Item 13, Certain Relationships and Related Transactions and
Director Independence.
Richard P. Blumberg - Director
Richard P. Blumberg was appointed to the Board of
Directors on November 10, 2016 and resigned on March 27, 2019, but
was reappointed on September 1, 2020. Mr. Blumberg has been a
long-time investor in the Company. Since 1978, Mr. Blumberg has
been a Principal at Webster, Mrak & Blumberg, a medical-legal
and class action labor litigation firm. He is also currently a
Managing Member of K2 Medical, LLC formerly known as Shenghuo
Medical, LLC (“Shenghuo”), a company with licensing rights in
several Asian countries for the Company’s LuViva Advanced Cervical
Scan, and is a Managing Member of Elysian Medical, LLC, a company
with world-wide rights for certain breast cancer detection
technology. He served from 2004 to 2007 as Chief Executive Officer
of Energy Logics, a wind power company that developed projects in
Alberta, Canada and Montana. Mr. Blumberg holds a B.S. in
Electrical Engineering and Computer Science from the University of
Illinois and received a J. D. from Stanford University. He also
brings extensive experience as a venture capitalist specializing in
high-tech and life science companies.
Michael C. James - Chairman and Director
Michael C. James has served as a member of our Board of
Directors since March 2007 and as Chairman of the Board since
October 2013. Mr. James is also the Managing Partner of Kuekenhof
Capital Management, LLC, a private investment management company,
Chief Executive Officer and the Chief Financial Officer of
Inergetics, Inc., a nutraceutical supplements company and formerly
was the Chief Financial Officer of Terra Tech Corporation, which is
a hydroponic and agricultural company. He also holds the position
of Managing Director of Kuekenhof Equity Fund, L.P. and Kuekenhof
Partners, L.P. Mr. James currently sits on the Board of Directors
of Inergetics; Inc. Mr. James was Chief Executive Officer of
Nestor, Inc. from January 2009 to September 2009 and served on
their Board of Directors from July 2006 to June 2009. He was
employed by Moore Capital Management, Inc., a private investment
management company from 1995 to 1999 and held position of Partner.
He was employed by Buffalo Partners, L.P., a private investment
management company from 1991 to 1994 and held the position of Chief
Financial and Administrative Officer. He began his career in 1980
as a staff accountant with Eisner LLP. Mr. James received a B.S.
degree in Accounting from Farleigh Dickinson University in
1980.
Mr. James has experience both in the areas of company finance and
accounting, which is invaluable to us during financial audits and
offerings. Mr. James has extensive experience in the management of
both small and large companies and his entrepreneurial background
is relevant as we develop as a company.
John E. Imhoff, M.D. - Director
John E. Imhoff, M.D. has served as a member of our Board
of Directors since April 2006. Dr. Imhoff is an ophthalmic surgeon
who specializes in cataract and refractive surgery. He is one of
our principal stockholders and invests in many other private and
public companies. He has a B.S. in Industrial Engineering from
Oklahoma State University, an M.D. from the University of Oklahoma
and completed his ophthalmic residency at the Dean A. McGee Eye
Institute. He has worked as an ophthalmic surgeon and owner of
Southeast Eye Center since 1983.
Dr. Imhoff has experience in clinical trials and in other technical
aspects of a medical device company. His background in industrial
engineering is especially helpful to us, especially as Dr. Imhoff
can combine this knowledge with clinical applications. His
experience in the investment community is invaluable to a public
company often undertaking capital raising efforts.
EXECUTIVE
COMPENSATION
Summary Compensation Table
The following table lists specified compensation we paid or accrued
during each of the fiscal years ended December 31, 2021 and 2020 to
the Chief Executive Officer and our two other most highly
compensated executive officers, collectively referred to as the
“named executive officers,” in 2021:
Name and Principal Position
|
|
Year
|
|
Salary ($) (3)
|
|
|
Bonus ($)
|
|
|
Option Awards ($) (1)
|
|
|
Other ($) (4)
|
|
|
Total ($)
|
|
Gene S. Cartwright, Ph.D. - President,
|
|
2021
|
|
|
12,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12,000 |
|
CEO, Acting CFO and Director (2)
|
|
2020
|
|
|
12,000 |
|
|
|
- |
|
|
|
193,200 |
|
|
|
- |
|
|
|
205,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Faupel, Ph.D. - COO
|
|
2021
|
|
|
12,000 |
|
|
|
- |
|
|
|
- |
|
|
|
29,370 |
|
|
|
41,370 |
|
and Director (2)
|
|
2020
|
|
|
12,000 |
|
|
|
- |
|
|
|
193,200 |
|
|
|
14,000 |
|
|
|
219,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Fowler - Senior Vice President of Engineering (2) (6)
|
|
2021
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,497 |
|
|
|
7,497 |
|
|
|
2020
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
21,000 |
|
|
|
21,000 |
|
___________
(1) Option awards figure includes the value of Common Stock option
awards at grant date as calculated under FASB ASC
718.
(2) All amounts reported as accrued. Dr. Cartwright, Dr. Faupel,
and Mr. Fowler have elected not to get paid a salary, due to our
cash position.
(3) Dr. Cartwright and Dr. Faupel accrued $1,000 per month as
compensation; the amounts have not been paid.
(4) Other expenses are related to the Company health insurance
plan
(6) During 2021, Mr. Fowler was no longer an executive of the
Company. Mr. Fowler provided consulting services to the Company
during 2021.
Outstanding Equity Awards to Officers at December 31,
2021
|
|
Number of Securities Underlying Vested Options
|
|
|
Number of Securities Underlying Unvested
Options
|
|
|
Weighted-Average Exercise Price ($)
|
|
|
Weighted-Average Expiration Date
|
|
Name and Principal Position
|
|
|
|
|
|
|
|
|
|
|
|
|
Gene S. Cartwright, Ph.D. - President, CEO, Acting CFO and
Director
|
|
|
236,364 |
|
|
|
163,636 |
|
|
|
0.49 |
|
|
07/12/30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Faupel, Ph.D. - COO and Director
|
|
|
236,364 |
|
|
|
163,636 |
|
|
|
0.49 |
|
|
07/12/30
|
|
Outstanding Equity Awards to Directors at December 31,
2021
|
|
Number of Securities Underlying Vested Options
|
|
|
Number of Securities Underlying Unvested
Options
|
|
|
Weighted-Average Exercise Price ($)
|
|
|
Weighted-Average Expiration Date
|
|
Name and Principal Position
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael C. James, Chairman and Director
|
|
|
50,000 |
|
|
|
- |
|
|
|
0.49 |
|
|
07/12/30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John E. Imhoff, M.D., Director
|
|
|
50,000 |
|
|
|
- |
|
|
|
0.49 |
|
|
07/12/30
|
|
Stock Options
Our 1995 Stock Plan (the “Plan”) has expired pursuant to its terms,
so zero shares remained available for issuance at December 31, 2019
and 2018. The Plan allowed for the issuance of incentive stock
options, nonqualified stock options, and stock purchase rights. The
exercise price of options was determined by the our board of
directors, but incentive stock options were granted at an exercise
price equal to the fair market value of our common stock as of the
grant date. Options historically granted have generally become
exercisable over four years and expire ten years from the date of
grant. As of December 31, 2021, and 2020, there were no stock
options outstanding and exercisable.
The 1:800 reverse stock split of all of our issued and outstanding
common stock was implemented on March 29, 2019. As a result of the
reverse stock split, every 800 shares of issued and outstanding
common stock were converted into 1 share of common stock. This
resulted in the number of stock options outstanding to be zero.
2018 Stock Option Plan
Overview: Our stockholders approved and
adopted the Guided Therapeutics, Inc. 2018 Stock Option Plan (the
“Plan”) and the material terms thereunder at the annual meeting of
our stockholders in 2018. A total of 325,470 shares of common stock
are reserved for issuance under the Plan.
Administration: Our Board or a committee
of at least two people as our Board may appoint (the “Committee”)
administer the Plan. The Committee has the authority to determine
the terms and conditions of any agreements evidencing any awards
granted under the Plan and to adopt, alter and repeal rules,
guidelines and practices relating to the Plan. The Committee has
full discretion to administer and interpret the Plan and to adopt
such rules, regulations and procedures as it deems necessary or
advisable and to determine, among other things, the time or times
at which the awards may be exercised and whether and under what
circumstances an award may be exercised.
Eligibility: Employees, directors,
officers, advisors or consultants of our company or our affiliates
are eligible to participate in the Plan. The Committee has the sole
and complete authority to determine who will be granted an award
under the Plan, however, it may delegate such authority to one or
more officers of the Company under the circumstances set forth in
the Plan.
Number of Shares Authorized: The Plan
provides for an aggregate of 325,470 shares of common stock to be
available for awards. If an award is forfeited or if any option
terminates, expires or lapses without being exercised, the shares
of our common stock subject to such award will again be made
available for future grant. Shares that are used to pay the
exercise price of an option or that are withheld to satisfy the
plan participant’s tax withholding obligation will not be available
for re-grant under the Plan. If there is any change in our
corporate capitalization, the Committee in its sole discretion may
make substitutions or adjustments to the number of shares reserved
for issuance under the Plan, the number of shares covered by awards
then outstanding under the Plan, the limitations on awards under
the Plan, the exercise price of outstanding options and such other
equitable substitution or adjustments as it may determine
appropriate.
Term: The Plan has a term of ten years
and no further awards may be granted under the Plan after that
date.
Awards Available for Grant: The Committee
may grant awards of Non-Qualified Stock Options, Incentive
(qualified) Stock Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Stock Bonus Awards or any
combination of the foregoing; provided, that the Committee may not
grant to any one person in any one calendar year Awards (i) for
more than 500,000 shares of common stock in the aggregate or (ii)
payable in cash in an amount to exceed $25,000 in the
aggregate.
The new Stock Plan (the “Plan”) allows for the issuance of
incentive stock options, nonqualified stock options, and stock
purchase rights. The exercise price of options was determined by
the Company’s board of directors, but incentive stock options were
granted at an exercise price equal to the fair market value of the
Company’s common stock as of the grant date. Options historically
granted have generally become exercisable over four years and
expire ten years from the date of grant. The Plan provides for
stock options to be granted up to 10% of the outstanding shares of
common stock shares. During the years ended December 31, 2021 and
2020, the Company granted 1,250 and 90,000 stock options to
employees and consultants, respectively. The fair value of options
issued during the years ended December 31, 2021 and 2020 was
estimated using the Black-Scholes option-pricing model and the
following assumptions:
|
·
|
a dividend yield of 0%; |
|
·
|
an expected life of 10 years; |
|
·
|
volatility of 153.1%; and |
|
·
|
risk-free interest rate of
0.98%. |
The fair value of each option grant made during 2021 and 2020 was
estimated on the date of each grant using the Black-Scholes option
pricing model and recognized as stock-based compensation ratably
over the option vesting periods, which approximates the service
period. There were no additional options granted during the three
months ended March 31, 2022.
Risk Oversight
Our board as a whole has responsibility for risk oversight, with
reviews of certain areas being conducted by the relevant board
committees that report on their deliberations to the full board, as
further described below. Given the small size of the board, the
board feels that this structure for risk oversight is appropriate
(except for those risks that require risk oversight by independent
directors only). The audit committee is specifically charged with
discussing risk management (primarily financial and internal
control risk), and receives regular reports from management and
independent auditors on risks related to, among others, our
financial controls and reporting. The compensation committee
reviews risks related to compensation and makes recommendations to
the board with respect to whether the Company’s compensation
policies are properly aligned to discourage inappropriate
risk-taking, and is regularly advised by management. In addition,
the Company’s management regularly communicates with the board to
discuss important risks for their review and oversight, including
regulatory risk, and risks stemming from periodic litigation or
other legal matters in which we are involved.
CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS
Our Board recognizes that related person transactions present a
heightened risk of conflicts of interest. The audit committee has
the authority to review and approve all related party transactions
involving our directors or executive officers.
Under the policy, when management becomes aware of a related person
transaction, management reports the transaction to the audit
committee and requests approval or ratification of the transaction.
Generally, the audit committee will approve only related party
transactions that are on terms comparable to those that could be
obtained in arm’s length dealings with an unrelated third person.
The audit committee will report to the full board all related
person transactions presented to it. Based on the definition of
independence of Nasdaq, the board has determined that Mr. James and
Dr. Imhoff are independent directors.
Long-Term Debt - Related Parties.
On July 14, 2018, the Company entered into an exchange agreement
with Dr. Faupel, whereby Dr. Faupel agreed to exchange outstanding
amounts due to him for loans, interest, bonus, salary and vacation
pay in the amount of $660,895 for a $207,111 promissory note dated
September 4, 2018. On July 20, 2018, the Company entered into an
exchange agreement with Dr. Cartwright, whereby Dr. Cartwright
agreed to exchange outstanding amounts due to him for loans,
interest, bonus, salary and vacation pay in the amount of
$1,621,499 for a $319,000 promissory note dated September 4, 2018
that incurs interest at a rate of 6% per annum.
On July 24, 2019, Dr. Faupel and Mr. Cartwright agreed to an
addendum to the debt restructuring exchange agreement and to modify
the terms of the original exchange agreement. Under this
modification Dr. Faupel and Mr. Cartwright agreed to extend the
note to be due in full on the third anniversary of that
agreement.
On February 19, 2021, the Company entered into new promissory notes
replacing the original notes from September 4, 2018, with Mark
Faupel and Gene Cartwright. For Dr. Cartwright the principal amount
on the new note was $267,085, matures on February 18, 2023, and
will accrue interest at a rate of 6.0%. For Dr. Faupel the
principal amount on the new note was $153,178, matures on February
18, 2023, and will accrue interest at a rate of 6.0%. The
modifications extended the maturity date on both of the notes.
On February 19, 2021, the Company exchanged $100,000 and $85,000 of
long-term debt for Dr. Cartwright and Dr. Faupel in exchange for
100 and 85 shares of Series F-2 Preferred Stock, respectively.
The table below summarizes the details of the exchange agreement
(in thousands):
For Dr. Faupel:
|
|
|
|
|
|
|
|
Salary
|
|
$ |
134 |
|
Bonus
|
|
|
20 |
|
Vacation
|
|
|
95 |
|
Interest on compensation
|
|
|
67 |
|
Loans to Company
|
|
|
196 |
|
Interest on loans
|
|
|
149 |
|
Total outstanding prior to exchange
|
|
|
661 |
|
|
|
|
|
|
Amount forgiven in prior years
|
|
|
(454 |
) |
Amount exchanged for Series F-2 Preferred Stock
|
|
|
(85 |
) |
Total interest accrued through December 31, 2021
|
|
|
39 |
|
Balance outstanding at December 31, 2021
|
|
$ |
161 |
|
|
|
|
|
|
Interest accrued through March 31, 2022
|
|
|
2 |
|
Balance outstanding at March 31, 2022
|
|
$ |
163 |
|
For Dr.Cartwright
|
|
|
|
|
|
|
|
Salary
|
|
$ |
337 |
|
Bonus
|
|
|
675 |
|
Loans to Company
|
|
|
528 |
|
Interest on loans
|
|
|
81 |
|
Total outstanding prior to exchange
|
|
|
1,621 |
|
|
|
|
|
|
Amount forgiven in prior years
|
|
|
(1,302 |
) |
Amount exchanged for Series F-2 Preferred Stock
|
|
|
(100 |
) |
Total interest accrued through December 31, 2021
|
|
|
62 |
|
Balance outstanding at December 31, 2021
|
|
$ |
281 |
|
|
|
|
|
|
Interest accrued through March 31, 2022
|
|
|
4 |
|
Balance outstanding at March 31, 2022
|
|
$ |
285 |
|
Consulting Agreement - Richard Blumberg
On March 10, 2021, the Company entered into a consulting agreement
with Richard Blumberg. As a result of the consulting agreement Mr.
Blumberg provided $350,000, which was recorded as a subscription
receivable, to the Company in exchange for the following: (1) on
September 26, 2021, 45,000 3-year warrants with an exercise price
of $6.00 and 20,000 common stock shares; (2) on March 26, 2022,
45,000 3-year warrants with an exercise price of $8.00 and 20,000
common stock shares; (3) on September 26, 2022, 45,000 3-year
warrants with an exercise price of $10.00 and 20,000 common stock
shares; and (4) on March 26, 2023, 45,000 3-year warrants with an
exercise price of $12.00 and 20,000 common stock shares.
During the year ended December 31, 2021, the consulting agreement
was amended to clarify that $350,000 is not intended to be debt and
will not be required to be repaid in cash. Additionally, issuance
of the warrants is now predicated on the Company receiving funding
receipts of $1,000,000, whether from a financing, series of
financing, or gross sales. The amended agreement clarified that the
warrants issued to Mr. Blumberg are compensation for services,
which involve obtaining financing. The Company will recognize
expense for the services equal to the fair value of the warrants
issued to Mr. Blumberg as the services are provided, which will
coincide with the successful execution of a financing agreement
over $1,000,000. The Company concluded that as of September
30,2021, there was no longer a liability due to Mr. Blumberg of
$350,000. The liability was written off in the third quarter of
2021 and a gain of $350,000 was recognized in non-operating
income.
PRINCIPAL
STOCKHOLDERS
The following table lists information regarding the beneficial
ownership of our equity securities as of June 17, 2022 by (1) each
person whom we know to beneficially own more than 5% of the
outstanding shares of our common stock, (2) each director, (3) each
officer named in the summary compensation table below, and (4) all
directors and executive officers as a group. Unless otherwise
indicated, the address of each officer and director is 5835
Peachtree Corners East, Suite B, Norcross, Georgia 30092.
|
|
Common Stock
Beneficially Owned (2)
|
|
|
Common Stock Directly Held
|
|
|
Series C Preferred Stock (3)
|
|
Name and Address of Beneficial Owner (1)
|
|
Number of Shares
|
|
|
Percentage
|
|
|
Number of Shares
|
|
|
Percentage
|
|
|
Number of Shares
|
|
|
Percentage
|
|
Blumberg, Richard P. (10) |
|
|
81,320 |
|
|
|
5.78 |
% |
|
|
51,754 |
|
|
|
3.75 |
% |
|
|
- |
|
|
|
- |
|
Cartwright, Gene (11) |
|
|
67,101 |
|
|
|
4.67 |
% |
|
|
7,601 |
|
|
|
0.55 |
% |
|
|
- |
|
|
|
- |
|
Case, Flynn (12) |
|
|
87,404 |
|
|
|
6.34 |
% |
|
|
87,404 |
|
|
|
6.34 |
% |
|
|
- |
|
|
|
- |
|
Faupel, Mark (13) |
|
|
88,597 |
|
|
|
6.06 |
% |
|
|
5,971 |
|
|
|
0.43 |
% |
|
|
- |
|
|
|
- |
|
Fieldhouse Pro Funds (14) |
|
|
121,412 |
|
|
|
8.70 |
% |
|
|
105,971 |
|
|
|
7.69 |
% |
|
|
- |
|
|
|
- |
|
Imhoff, John E. (15) |
|
|
551,929 |
|
|
|
31.76 |
% |
|
|
192,259 |
|
|
|
13.95 |
% |
|
|
- |
|
|
|
- |
|
James, Michael C. (16) |
|
|
3,262 |
|
|
|
0.24 |
% |
|
|
639 |
|
|
|
0.05 |
% |
|
|
- |
|
|
|
- |
|
K2 Medical (17) |
|
|
96,286 |
|
|
|
6.65 |
% |
|
|
25,852 |
|
|
|
1.88 |
% |
|
|
- |
|
|
|
- |
|
Maloof, Dolores (18) |
|
|
85,092 |
|
|
|
5.84 |
% |
|
|
6,367 |
|
|
|
0.46 |
% |
|
|
- |
|
|
|
- |
|
Narbut, Laurence (19) |
|
|
82,903 |
|
|
|
5.84 |
% |
|
|
42,903 |
|
|
|
3.11 |
% |
|
|
- |
|
|
|
- |
|
Rosalind Master Fund (20) |
|
|
142,975 |
|
|
|
9.83 |
% |
|
|
67,975 |
|
|
|
4.92 |
% |
|
|
- |
|
|
|
- |
|
Wells Plus 6ix Multi Strategy
(21) |
|
|
106,153 |
|
|
|
7.42 |
% |
|
|
59,830 |
|
|
|
4.33 |
% |
|
|
- |
|
|
|
- |
|
All directors and executive
officers as a group (5 persons) (22) |
|
|
792,208 |
|
|
|
36.50 |
% |
|
|
258,224 |
|
|
|
18.73 |
% |
|
|
- |
|
|
|
- |
|
|
|
Series C1 Preferred Stock (4)
|
|
|
Series C2 Preferred Stock (5)
|
|
|
|
Number of Shares
|
|
|
Percentage
|
|
|
Number of Shares
|
|
|
Percentage
|
|
Name and Address of Beneficial Owner (1) |
|
|
|
|
Blumberg, Richard P. (10) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cartwright, Gene (11) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Case, Flynn (12) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Faupel, Mark (13) |
|
|
- |
|
|
|
- |
|
|
|
299.25 |
|
|
|
9.17 |
% |
Fieldhouse Pro Funds (14) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Imhoff, John E. (15) |
|
|
- |
|
|
|
- |
|
|
|
2,400.75 |
|
|
|
73.59 |
% |
James, Michael C. (16) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
K2 Medical (17) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Maloof, Dolores (18) |
|
|
- |
|
|
|
- |
|
|
|
562.25 |
|
|
|
17.24 |
% |
Narbut, Laurence (19) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Rosalind Master Fund (20) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Wells Plus 6ix Multi Strategy
(21) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
All directors and executive
officers as a group (5 persons) (22) |
|
|
- |
|
|
|
- |
|
|
|
2,700.00 |
|
|
|
82.76 |
% |
|
|
Series D Preferred Stock (6)
|
|
|
Series E Preferred Stock (7)
|
|
Name and Address of Beneficial Owner (1) |
|
Number of Shares
|
|
|
Percentage
|
|
|
Number of Shares
|
|
|
Percentage
|
|
Blumberg, Richard P. (10) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cartwright, Gene (11) |
|
|
50.00 |
|
|
|
11.42 |
% |
|
|
- |
|
|
|
- |
|
Case, Flynn (12) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Faupel, Mark (13) |
|
|
38.00 |
|
|
|
8.68 |
% |
|
|
- |
|
|
|
- |
|
Fieldhouse Pro Funds (14) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Imhoff, John E. (15) |
|
|
300.00 |
|
|
|
68.49 |
% |
|
|
- |
|
|
|
- |
|
James, Michael C. (16) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
K2 Medical (17) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Maloof, Dolores (18) |
|
|
50.00 |
|
|
|
11.42 |
% |
|
|
- |
|
|
|
- |
|
Narbut, Laurence (19) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Rosalind Master Fund (20) |
|
|
- |
|
|
|
- |
|
|
|
250.00 |
|
|
|
28.15 |
% |
Wells Plus 6ix Multi Strategy
(21) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
All directors and executive
officers as a group (5 persons) (22) |
|
|
388.00 |
|
|
|
88.58 |
% |
|
|
- |
|
|
|
- |
|
|
|
Series F Preferred Stock (8)
|
|
|
Series F-2 Preferred Stock (9)
|
|
Name and Address of Beneficial Owner (1) |
|
Number of Shares
|
|
|
Percentage
|
|
|
Number of Shares
|
|
|
Percentage
|
|
Blumberg, Richard P. (10) |
|
|
- |
|
|
|
- |
|
|
|
88.00 |
|
|
|
3.18 |
% |
Cartwright, Gene (11) |
|
|
- |
|
|
|
- |
|
|
|
110.00 |
|
|
|
3.97 |
% |
Case, Flynn (12) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Faupel, Mark (13) |
|
|
- |
|
|
|
- |
|
|
|
97.00 |
|
|
|
3.50 |
% |
Fieldhouse Pro Funds (14) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Imhoff, John E. (15) |
|
|
10.00 |
|
|
|
0.93 |
% |
|
|
- |
|
|
|
- |
|
James, Michael C. (16) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
K2 Medical (17) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Maloof, Dolores (18) |
|
|
25.00 |
|
|
|
2.33 |
% |
|
|
- |
|
|
|
- |
|
Narbut, Laurence (19) |
|
|
200.00 |
|
|
|
18.67 |
% |
|
|
- |
|
|
|
- |
|
Rosalind Master Fund (20) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Wells Plus 6ix Multi Strategy
(21) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
All directors and executive
officers as a group (5 persons) (22) |
|
|
10.00 |
|
|
|
0.93 |
% |
|
|
295.00 |
|
|
|
10.65 |
% |
(1)
|
Except as otherwise indicated in the footnotes to this table and
pursuant to applicable community property laws, the persons named
in the table have sole voting and investment power with respect to
all shares of common stock.
|
(2)
|
Percentage ownership is based on 1,379,174 shares of common stock
outstanding as of June 17, 2022. Beneficial ownership is determined
in accordance with the rules of the SEC, based on factors that
include voting and investment power with respect to shares. Shares
of common stock subject to convertible securities convertible or
exercisable within 60 days after the record date, are deemed
outstanding for purposes of computing the percentage ownership of
the person holding those securities but are not deemed outstanding
for purposes of computing the percentage ownership of any other
person. Note that certain of our outstanding securities, including
certain warrants and the shares of Series C1 preferred stock held
by the persons listed in this table, have anti-dilution ratchet or
price-protection provisions that, when triggered, will increase the
number of shares of common stock underlying such securities.
Subject to customary exceptions, these provisions are triggered
anytime we issue shares of common stock to third parties at a price
lower than the then-current conversion price or exercise price of
the subject securities. As a result, the beneficial ownership
reported in this table is only as of the date presented, and the
beneficial ownership amounts of the persons in this table may
increase on a future date, even though such persons have not
actually acquired any additional shares of common stock.
|
(3)
|
As
of June 17, 2022, there were 286 shares of Series C preferred stock
outstanding, and each such share was convertible into approximately
100 shares of common stock.
|
(4)
|
As
of June 17, 2022, there were 1,049.25 shares of Series C1 preferred
stock outstanding, and each such share was convertible into
approximately 100 shares of common stock.
|
(5)
|
As
of June 17, 2022, there were 3,262.25 shares of Series C2 preferred
stock outstanding, and each such share was convertible into
approximately 100 shares of common stock.
|
(6)
|
As
of June 17, 2022, there were 438 shares of Series D preferred stock
outstanding, and each such share was convertible into approximately
150 shares of common stock.
|
(7)
|
As
of June 17, 2022, there were 888 shares of Series E preferred stock
outstanding, and each such share was convertible into approximately
100 shares of common stock.
|
(8)
|
As
of June 17, 2022, there were 1,071 shares of Series F preferred
stock outstanding, and each such share was convertible into
approximately 200 shares of common stock.
|
(9)
|
As
of June 17, 2022, there were 2,771 shares of Series F-2 preferred
stock outstanding, and each such share was convertible into
approximately 200 shares of common stock.
|
(10)
|
Shares of common stock consists of 51,754 shares of common stock
directly held, 11,966 shares issuable upon exercise of warrants,
and 17,600 shares issuable upon conversion of 88 shares of Series
F-2 preferred stock.
|
(11)
|
Shares of common stock consist of 7,601 shares of common stock
directly held, 10,000 shares issuable upon exercise of warrants,
22,000 shares issuable upon conversion of 110 shares of Series F-2
preferred stock, 7,500 shares issuable upon conversion of 50 shares
of Series D preferred stock and 20,000 shares issuable upon
exercise of stock options. Dr. Cartwright is the CEO and is on the
Board of Directors.
|
(12)
|
Shares of common stock consists of 87,404 shares of common stock
directly held.
|
(13)
|
Shares of common stock consist of 5,971 shares of common stock
directly held, 7,600 shares issuable upon exercise of warrants,
20,000 shares issuable upon exercise of stock options, 19,400
shares issuable upon conversion of 97 shares of Series F-2
preferred stock, 5,700 shares issuable upon conversion of 38 shares
of Series D preferred stock and 29,925 shares issuable upon
conversion of 299.25 shares of Series C2 preferred stock. Dr.
Faupel is the COO and is on the Board of Directors.
|
(14)
|
Shares of common stock consist of 105,971 shares of common stock
directly held, 5,000 shares issuable upon exercise of warrants and
10,441 shares issuable upon conversion of the 10% debenture.
|
(15)
|
Shares of common stock consist of 192,259 shares of common stock
directly held, 70,094 shares issuable upon exercise of warrants,
2,500 shares issuable upon exercise of stock options, 2,000 shares
issuable upon conversion of 10 shares of Series F preferred stock,
45,000 shares issuable upon conversion of 300 shares of Series D
preferred stock and 240,075 shares issuable upon conversion of
2,400.75 shares of Series C2 preferred stock. Dr. Imhoff is on the
Board of Directors.
|
(16)
|
Shares of common stock consist of 639 shares of common stock
directly held, 123 shares issuable upon exercise of warrants and
2,500 shares issuable upon exercise of stock options. Mr. James is
on the Board of Directors.
|
(17)
|
Shares of common stock consists of 25,852 shares of common stock
directly held and 70,433 shares issuable upon exercise of
warrants.
|
(18)
|
Shares of common stock consists of 6,367 shares of common stock
directly held, 10,000 shares issuable upon exercise of warrants,
56,225 shares issuable upon conversion of 562.25 shares of Series
C2 preferred stock, and 7,500 shares issuable upon conversion of 50
shares of Series D preferred stock and 5,000 shares issuable upon
conversion of 25 shares of Series F preferred stock.
|
(19)
|
Shares of common stock consists of 42,903 shares of common stock
directly held and 40,000 shares issuable upon conversion of 200
shares of Series F preferred stock.
|
(20)
|
Shares of common stock consists of 67,975 shares of common stock
directly held, 25,000 shares issuable upon exercise of warrants and
50,000 shares issuable upon conversion of 250 shares of Series F-2
preferred stock.
|
(21)
|
Shares of common stock consists of 59,830 shares of common stock
directly held, 15,000 shares issuable upon exercise of warrants and
31,032 shares issuable upon conversion of the 10% debenture.
|
(22)
|
Shares of common stock consists of 258,224 shares of common stock
directly held, 99,783 shares issuable upon exercise of warrants,
45,001 shares issuable upon exercise of stock options, 2,000 shares
issuable upon conversion of 10 shares of Series F preferred stock,
59,000 shares issuable upon conversion of 295 shares of Series F-2
preferred stock, 58,200 shares issuable upon conversion of 388
shares of Series D preferred stock and 270,000 shares issuable upon
conversion of 2,700 shares of Series C2 preferred stock.
|
DESCRIPTION OF
SECURITIES
General
Our Certificate of Incorporation authorizes the issuance of up to
500,000,000 shares of common stock, par value $0.001 per share, and
5,000,000 shares of preferred stock, par value $0.001 per share. As
of the date of this prospectus, we had 1,379,174 shares of
common stock issued and outstanding, 286 shares of Series C
preferred stock issued and outstanding, 1,049.25 shares of Series
C1 preferred stock issued and outstanding, 3,262.25 shares of
Series C2 preferred stock issued and outstanding, 438 shares of
Series D preferred stock issued and outstanding, 888 shares of
Series E preferred stock issued and outstanding, 1,071 shares of
Series F preferred stock issued and outstanding, and 2,771 shares
of Series F-2 preferred stock issued and outstanding.
On December 30, 2021, the Board approved a 1-for-20 reverse stock
split (the “Reverse Stock Split”), and we filed a Certificate of
Amendment to the Amended and Restated Certificate of Incorporation
with the Secretary of State of the State of Delaware to effect the
Reverse Stock Split. As a result, the total number of shares of
common stock held by each stockholder was automatically changed and
reclassified into a smaller number of shares such that each 20
shares of common stock were reclassified into one share of common
stock. No fractional shares were issued in connection with the
Reverse Stock Split. In lieu of any fractional shares, we issued
one whole share of the post-Reverse Stock Split common stock to
stockholders who otherwise would have received a fractional share
as a result of the Reverse Stock Split. On November 18, 2021, we
submitted an Issuer Company Related Action Notification regarding
the Reverse Stock Split to FINRA. FINRA approved it on May 9, 2022
and the Reverse Stock Split will be effective on the approximate
date of the Nasdaq uplisting and financing, expected to be on or
near June 30, 2022.
Common Stock
Holders of our common stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. An election of directors by our
stockholders is determined by a plurality of the votes cast by the
stockholders entitled to vote on the election. Other matters are
decided by the affirmative vote of our stockholders having a
majority in voting power of the votes cast by the stockholders
present or represented and voting on such matter. Holders of common
stock are entitled to receive proportionately any dividends as may
be declared by our board of directors, subject to any preferential
dividend rights of outstanding preferred stock.
In the event of our liquidation or dissolution, the holders of
common stock are entitled to receive proportionately all assets
available for distribution to stockholders after the payment of all
debts and other liabilities and subject to the prior rights of any
outstanding preferred stock. Holders of common stock have no
preemptive, subscription, redemption or conversion rights. The
rights, preferences and privileges of holders of common stock are
subject to and may be adversely affected by the rights of the
holders of shares of any series of preferred stock that we may
designate and issue in the future.
Preferred Stock
Our Certificate of Incorporation authorizes the issuance of
5,000,000 shares of blank check preferred stock with such
designations, rights and preferences as may be determined from time
to time by our board of directors. As of the date of this
prospectus, there are 2,771 shares of Series F-2, 1,071 shares of
Series F, 888 shares of Series E, 438 shares of Series D, 286
shares of Series C, 1,049.25 shares of Series C1 and 3,262.25
shares of Series C2 preferred stock issued and outstanding.
Accordingly, our board of directors is empowered, without
stockholder approval, to issue preferred stock with dividend,
liquidation, redemption, voting or other rights which could
adversely affect the voting power or other rights of the holders of
common stock. We may issue some or all of the preferred stock to
effect a business transaction. In addition, the preferred stock
could be utilized as a method of discouraging, delaying or
preventing a change in control of us.
Series C Convertible Preferred Stock
Pursuant to the Series C certificate of designations, shares of
Series C preferred stock are convertible into common stock by their
holder at any time and may be mandatorily convertible upon the
achievement of specified average trading prices for our common
stock, subject to customary adjustments, including for any accrued
but unpaid dividends and pursuant to certain anti-dilution
provisions, as set forth in the Series C certificate of
designations. The conversion price will automatically adjust
downward to 80% of the then-current market price of our common
stock 15 trading days after any reverse stock split of our common
stock, and 5 trading days after any conversions of our outstanding
convertible debt.
Holders of the Series C preferred stock are entitled to quarterly
cumulative dividends at an annual rate of 12.0% until 42 months
after the original issuance date (the “Dividend End Date”), payable
in cash or, subject to certain conditions, our common stock. In
addition, upon conversion of the Series C preferred stock prior to
the Dividend End Date, we will also pay to the converting holder a
“make-whole payment” equal to the number of unpaid dividends
through the Dividend End Date on the converted shares. The Series C
preferred stock generally has no voting rights except as required
by Delaware law. Upon our liquidation or sale to or merger with
another corporation, each share will be entitled to a liquidation
preference of $1,000, plus any accrued but unpaid dividends. In
addition, the purchasers of the Series C preferred stock received,
on a pro rata basis, warrants exercisable to purchase an aggregate
of approximately 1 share of our common stock.
Series C1 Convertible Preferred Stock
The Series C1 preferred stock has terms that are substantially the
same as the Series C preferred stock, except that the Series C1
preferred stock does not pay dividends (unless and to the extent
declared on the common stock) or at-the-market “make-whole
payments” and, while it has the same anti-dilution protections
afforded the Series C preferred stock, it does not automatically
reset in connection with a reverse stock split or conversion of our
outstanding convertible debt.
Series C2 Convertible Preferred Stock
The terms of the Series C2 Preferred Stock are substantially the
same as the Series C1 Preferred Stock, except that (i) shares of
Series C1 preferred stock may not be convertible into the Company’s
common stock by their holder for a period of 180 days following the
date of the filing of the Certificate of Designation (the “Lock-Up
Period”); (ii) the Series C2 preferred stock has the right to vote
as a single class with the Company’s common stock on an
as-converted basis, notwithstanding the Lock-Up Period; and (iii)
the Series C2 preferred stock will automatically convert into that
number of securities sold in the next Qualified Financing (as
defined in the Exchange Agreement) determined by dividing the
stated value ($1,000 per share) of such share of Series C2
preferred stock by the purchase price of the securities sold in the
Qualified Financing.
Series D Convertible Preferred Stock
As of the date of this prospectus, 6,000 shares have been
designated as Series D Convertible Preferred Stock (“Series D
Preferred Stock”), of which 438 shares are issued and outstanding.
The following is a summary of the rights, privileges and
preferences of the Series D Preferred Stock, which such summary is
qualified in its entirety by the Series D Certificate of
Designation.
Each share of Series D Preferred Stock has a par value of $0.001
per share and a stated value equal to $763, subject to increase set
forth in its Certificate of Designation (the "Stated Value").
Each holder of Series D Preferred Stock is entitled to receive
cumulative dividends of 10% per annum, payable quarterly in cash
or, following the listing of the Company’s common stock on certain
Canadian trading markets and at the option of the Company, shares
of common stock.
Upon any liquidation, dissolution or winding-up of the Company, the
holders shall be entitled to receive an amount equal to the Stated
Value, plus any accrued and unpaid dividends thereon and any other
fees or liquidated damages then due and owing before any
distribution or payment shall be made to the holders of common
stock and any other securities junior to Series D Preferred
Stock.
Each share of Series D Preferred Stock is convertible, at any time
for a period of 5 years after issuance, into shares of common
stock. The conversion price for the Series D Preferred Stock is
$5.00, subject to adjustment set forth in the Series D Certificate
of Designation (the “Series D Conversion Price”). The conversion of
Series D Preferred Stock is subject to a 4.99% beneficial ownership
limitation, which may be increased to 9.99% at the election of the
holder of the Series D Preferred Stock. If the average of the VWAPs
(as defined under the Series D Certificate of Designation) for any
consecutive 5 trading day period (“Series D Measurement Period”)
exceeds 200% of the then Series D Conversion Price and the average
daily trading volume of the common stock on the primary trading
market exceeds a number of shares per trading day during the Series
D Measurement Period (subject to adjustments), the Company may
redeem the then outstanding Series D Preferred Stock, for cash in
an amount equal to aggregate Stated Value then outstanding plus
accrued but unpaid dividends.
Except for certain matters affecting the rights of Series D
Preferred Stock or as otherwise required by law, the holders of
Series D Preferred Stock do not have voting rights.
Series E Convertible Preferred Stock
As of the date of this prospectus, 6,000 shares have been
designated as Series E Convertible Preferred Stock (“Series E
Preferred Stock”), of which 888 shares are issued and outstanding.
The following is a summary of the rights, privileges and
preferences of the Series E Preferred Stock, which such summary is
qualified in its entirety by the Series E Certificate of
Designation.
Each share of Series E Preferred Stock has a par value of $0.001
per share and a Stated Value equal to $1,000, subject to increase
set forth in its Certificate of Designation.
Each holder of Series E Preferred Stock is entitled to receive
cumulative dividends of 8% per annum, payable annually in cash or,
following the listing of the Company’s common stock on certain
Canadian trading markets and at the option of the Company, shares
of common stock.
Upon any liquidation, dissolution or winding-up of the Company, the
holders shall be entitled to receive an amount equal to the Stated
Value, plus any accrued and unpaid dividends thereon and any other
fees or liquidated damages then due and owing before any
distribution or payment shall be made to the holders of common
stock and any other securities junior to Series D Preferred
Stock.
Each share of Series E Preferred Stock is convertible, at any time
for a period of 5 years after issuance, into that number of shares
of common stock. The conversion price for the Series E Preferred
Stock is $5.00, subject to adjustment set forth in the Series E
Certificate of Designation (the “Series E Conversion Price”). The
conversion of Series E Preferred Stock is subject to a 4.99%
beneficial ownership limitation, which may be increased to 9.99% at
the election of the holder of the Series E Preferred Stock. If the
average of the VWAPs (as defined under the Series E Certificate of
Designation) for any consecutive 5 trading day period (“Series E
Measurement Period”) exceeds 200% of the then Series E Conversion
Price and the average daily trading volume of the common stock on
the primary trading market exceeds a number of shares per trading
day during the Series E Measurement Period (subject to
adjustments), the Company may redeem the then outstanding Series E
Preferred Stock, for cash in an amount equal to aggregate Stated
Value then outstanding plus accrued but unpaid dividends.
Except for certain matters affecting the rights of Series E
Preferred Stock or as otherwise required by law, the holders of
Series E Preferred Stock do not have voting rights.
Series F Convertible Preferred Stock
As of the date of this prospectus, 1,500 shares have been
designated as Series F Convertible Preferred Stock (“Series F
Preferred Stock”), of which 1,071 shares are issued and
outstanding. The following is a summary of the rights, privileges
and preferences of the Series F Preferred Stock, which such summary
is qualified in its entirety by the Series F Certificate of
Designation.
Each share of Series F Preferred Stock has a par value of $0.001
per share and a Stated Value equal to $1,000, subject to increase
set forth in its Certificate of Designation.
Each holder of Series F Preferred Stock is entitled to receive
cumulative dividends of 6% per annum, payable annually in cash or,
following the listing of the Company’s common stock on certain
Canadian trading markets and at the option of the Company, shares
of common stock.
Upon any liquidation, dissolution or winding-up of the Company, the
holders shall be entitled to receive an amount equal to the Stated
Value, plus any accrued and unpaid dividends thereon and any other
fees or liquidated damages then due and owing before any
distribution or payment shall be made to the holders of common
stock and any other securities junior to Series F Preferred
Stock.
Each share of Series F Preferred is convertible, at any time for a
period of 5 years after issuance, into that number of shares of
Common Stock, determined by dividing the Stated Value by $5.00,
subject to certain adjustments set forth in the Series F
Certificate of Designation (the “Series F-2 Conversion Price”). The
conversion of Series F-2 Preferred is subject to a 4.99% beneficial
ownership limitation, which may be increased to 9.99% at the
election of the holder of the Series F Preferred. If the average of
the VWAPs (as defined in the Series F-2 Certificate of Designation)
for any consecutive 5 trading day period (“Measurement Period”)
exceeds 200% of the then Series F-2 Conversion Price and the
average daily trading volume of the Common Stock on the primary
trading market exceeds 50 shares per trading day during the
Measurement Period (subject to adjustments), the Company may redeem
the then outstanding Series F Preferred, for cash in an amount
equal to aggregate Stated Value then outstanding plus accrued but
unpaid dividends.
Except for certain matters affecting the rights of Series F
Preferred Stock or as otherwise required by law, the holders of
Series F Preferred Stock do not have voting rights.
Series F-2 Convertible Preferred Stock
As of the date of this prospectus, 3,500 shares have been
designated as Series F-2 Convertible Preferred Stock (“Series F-2
Preferred Stock”), of which 2,771 shares are issued and
outstanding. The following is a summary of the rights, privileges
and preferences of the Series F-2 Preferred Stock, which such
summary is qualified in its entirety by the Series F-2 Certificate
of Designation.
Each share of Series F-2 Preferred Stock has a par value of $0.001
per share and a Stated Value equal to $1,000, subject to increase
set forth in its Certificate of Designation.
Each holder of Series F-2 Preferred Stock is entitled to receive
cumulative dividends of 6% per annum, payable annually in cash or,
following the listing of the Company’s common stock on certain
Canadian trading markets and at the option of the Company, shares
of common stock.
Upon any liquidation, dissolution or winding-up of the Company, the
holders shall be entitled to receive an amount equal to the Stated
Value, plus any accrued and unpaid dividends thereon and any other
fees or liquidated damages then due and owing before any
distribution or payment shall be made to the holders of common
stock and any other securities junior to Series F-2 Preferred
Stock.
Each share of Series F-2 Preferred is convertible, at any time for
a period of 5 years after issuance, into that number of shares of
Common Stock, determined by dividing the Stated Value by $5.00,
subject to certain adjustments set forth in the Series F-2
Certificate of Designation (the “Series F-2 Conversion Price”). The
conversion of Series F-2 Preferred is subject to a 4.99% beneficial
ownership limitation, which may be increased to 9.99% at the
election of the holder of the Series F-2 Preferred. If the average
of the VWAPs (as defined in the Series F-2 Certificate of
Designation) for any consecutive 5 trading day period (“Measurement
Period”) exceeds 200% of the then Series F-2 Conversion Price and
the average daily trading volume of the Common Stock on the primary
trading market exceeds 50 shares per trading day during the
Measurement Period (subject to adjustments), the Company may redeem
the then outstanding Series F-2 Preferred, for cash in an amount
equal to aggregate Stated Value then outstanding plus accrued but
unpaid dividends.
Except for certain matters affecting the rights of Series F-2
Preferred Stock or as otherwise required by law, the holders of
Series F-2 Preferred Stock do not have voting rights.
Series G Callable Preferred Stock
The Series G Callable Preferred Stock (“Series G Preferred Stock”)
consists of 1,000,000 shares. As of the date of this prospectus
both $78,500 and $53,500, tranches of Series G Preferred Stock have
been redeemed.
Each share of Series G Preferred Stock had a par value of $0.001
per share and a Stated Value equal to $1.00, as set forth in the
Certificate of Designation.
Series G Preferred Stock had no right to vote on any matters
requiring shareholder approval or any matters on which shareholders
were permitted to vote. With respect to any voting rights of the
Series G Preferred Stock set forth, the Series G Preferred Stock
voted as a class, each share of Series G Preferred Stock had one
vote on any such matter, and any such approval was given via a
written consent in lieu of a meeting of the Series G Preferred
stockholders.
Each share of Series G Preferred Stock carried an annual dividend
in the amount of eight percent (8%) of the Stated Value (the
"Dividend Rate"), which was cumulative, payable solely upon
redemption, liquidation or conversion. Upon the occurrence of an
Event of Default (as defined herein), the Dividend Rate
automatically increased to twenty two percent (22%).
At any time after the date of the issuance of shares of Series G
Preferred Stock, the Company had the right, at the Company’s
option, to redeem all of the shares of Series G Preferred Stock by
paying an amount equal to: (i) the number of shares of Series G
Preferred Stock multiplied by the Stated Value (including accrued
dividends) (ii) multiplied by the corresponding percentage as
follows: Day 1-60, 105%; Day 61-90, 110%; Day 91-120, 115%; and Day
121-180, 122%. After the expiration of the 180 days following the
issuance date, except for mandatory redemption, the Company had no
right to redeem the Series G Preferred Stock. Mandatory redemption
occurred within 24 months. In addition, if the Company did not
redeem the Series G Preferred Stock then the holder would have the
option to convert into shares of common stock. The variable
conversion price was the value equal to a discount of 19% of the
trading price, which is calculated as the average of the three
lowest closing bid prices over the previous fifteen trading days.
The conversion of Series G Preferred Stock was subject to a 4.99%
beneficial ownership limitation, which was able to be increased to
9.99% at the election of the holder of the Series G Preferred
Stock. As of the date of this prospectus, the Series G
Preferred Stock is fully redeemed.
Warrants
Pre-Funded Warrants
The following summary of certain terms and provisions of the
pre-funded warrants that are being offered hereby is not complete
and is subject to, and qualified in its entirety by, the provisions
of the pre-funded warrant, the form of which is filed as an exhibit
to the registration statement of which this prospectus forms a
part. Prospective investors should carefully review the terms and
provisions of the form of pre-funded warrant for a complete
description of the terms and conditions of the pre-funded
warrants.
Duration and Exercise Price
Each pre-funded warrant offered hereby will have an initial
exercise price per share equal to $0.01. The pre-funded warrants
will be immediately exercisable and will not expire prior to
exercise. The exercise price and number of shares of common stock
issuable upon exercise is subject to appropriate adjustment in the
event of stock dividends, stock splits, reorganizations or similar
events affecting our common stock.
Exercisability
The pre-funded warrants will be exercisable, at the option of each
holder, in whole or in part, by delivering to us a duly executed
exercise notice accompanied by payment in full for the number of
shares of our common stock purchased upon such exercise (except in
the case of a cashless exercise as discussed below). A holder
(together with its affiliates) may not exercise any portion of the
pre-funded warrant to the extent that the holder would own more
than 4.99% of the outstanding common stock immediately after
exercise, except that upon at least 61 days’ prior notice from the
holder to us, the holder may increase the amount of beneficial
ownership of outstanding stock after exercising the holder’s
pre-funded warrants up to 9.99% of the number of shares of our
common stock outstanding immediately after giving effect to the
exercise, as such percentage ownership is determined in accordance
with the terms of the pre-funded warrants and Delaware law.
Purchasers of pre-funded warrants in this offering may also elect
prior to the issuance of the pre-funded warrants to have the
initial exercise limitation set at 9.99% of our outstanding common
stock.
Cashless Exercise
If, at the time a holder exercises its pre-funded warrants, a
registration statement registering the issuance of the shares of
common stock underlying the pre-funded warrants under the
Securities Act is not then effective or available for the issuance
of such shares, then in lieu of making the cash payment otherwise
contemplated to be made to us upon such exercise in payment of the
aggregate exercise price,