Item
1. Financial Statements.
Vivos
Inc.
Condensed
Balance Sheets
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September 30, 2018
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December 31, 2017
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|
(unaudited)
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(audited)
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ASSETS
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|
|
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|
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|
|
|
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Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
-
|
|
|
$
|
8,317
|
|
Prepaid expenses
|
|
|
11,062
|
|
|
|
6,711
|
|
Total current assets
|
|
|
11,062
|
|
|
|
15,028
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|
|
|
|
|
|
|
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|
Fixed assets, net of accumulated depreciation
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|
|
-
|
|
|
|
-
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|
|
|
|
|
|
|
|
|
|
Other assets:
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|
|
|
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|
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Deposits
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|
669
|
|
|
|
669
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|
Total other assets
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|
669
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|
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|
669
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|
|
|
|
|
|
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Total assets
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|
$
|
11,731
|
|
|
$
|
15,697
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|
|
|
|
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
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Current liabilities:
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Accounts payable and accrued expenses
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|
$
|
1,013,076
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|
|
$
|
840,972
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|
Related party payables
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106,833
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57,297
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|
Accrued interest payable
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476,599
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|
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|
347,069
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|
Payroll liabilities payable
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|
290,336
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|
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|
85,786
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|
Derivative liability
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|
30,059,956
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|
|
|
-
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Convertible notes payable, net
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2,328,269
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|
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2,563,272
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Loan from shareholder
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50,000
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-
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Related party promissory note
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383,771
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383,771
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Total current liabilities
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|
34,708,840
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4,278,167
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Total liabilities
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34,708,841
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4,278,167
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Commitments and contingencies
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-
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-
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Stockholders’ equity (deficit):
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Preferred stock, $.001 par value, 20,000,000 shares authorized; 2,770,939 and 3,778,622 shares issued and outstanding, respectively
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2,770
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3,779
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Paid in capital, preferred stock
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9,498,134
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13,547,780
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Common stock, $.001 par value; 2,000,000,000 shares authorized; 715,255,247 and 65,695,213 shares issued and outstanding, respectively
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715,255
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65,695
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Paid in capital
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53,200,468
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46,408,443
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Accumulated deficit
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(98,113,736
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)
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(64,288,167
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)
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Total stockholders’ equity (deficit)
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|
(34,697,109
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)
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(4,262,470
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)
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|
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|
|
|
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Total liabilities and stockholders’ equity (deficit)
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|
$
|
11,731
|
|
|
$
|
15,697
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|
The
accompanying notes are an integral part of these condensed financial statements.
Vivos
Inc.
Condensed
Statements of Operations
(unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2018
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2017
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2018
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2017
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Revenues
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$
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-
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$
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-
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$
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-
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$
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4,054
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Operating expenses
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Sales and marketing expenses
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750
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52,620
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13,700
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93,870
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|
Depreciation and amortization
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-
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-
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-
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1,473
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|
Professional fees
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|
16,223
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|
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|
211,954
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231,501
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642,101
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|
Reserved stock units granted
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19,515
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169,650
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|
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|
104,410
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169,650
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|
Stock options granted
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|
-
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|
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|
24,283
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|
|
|
45,400
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|
|
|
79,582
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|
Payroll expenses
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|
82,500
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|
|
|
436,319
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|
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|
243,570
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|
722,594
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Research and development
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2,455
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|
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|
43,758
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77,035
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157,168
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General and administrative expenses
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15,463
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23,215
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49,884
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83,301
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|
Total operating expenses
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136,906
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|
961,799
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765,500
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1,949,739
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|
|
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Operating loss
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|
(136,906
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)
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|
(961,799
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)
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(765,500
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)
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(1,945,685
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)
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Non-operating income (expense)
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Interest expense
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(60,752
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)
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(527,188
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)
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|
(5,626,892
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)
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(1,836,279
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)
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Net gain on sale of assets
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|
-
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|
-
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|
-
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|
|
2,800
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|
Grants received
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|
-
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|
-
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|
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17,583
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|
|
|
-
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|
Net gain (loss) on debt extinguishment
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|
|
394,618
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|
|
|
(369,428
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)
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|
|
526,222
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|
|
|
(423,291
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)
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Gain (loss) on derivative liability
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|
(27,109,374
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)
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|
9
|
|
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(27,976,982
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)
|
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|
408,488
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|
Non-operating income (expense), net
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|
|
(26,775,508
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)
|
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|
(896,607
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)
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|
|
(33,060,069
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)
|
|
|
(1,848,282
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)
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Income (Loss) before Income Taxes
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(26,912,414
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)
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(1,858,406
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)
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(33,825,569
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)
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(3,793,967
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)
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Income Tax Provision
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|
-
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|
-
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-
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-
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Net Income (Loss)
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|
$
|
(26,912,414
|
)
|
|
$
|
(1,858,406
|
)
|
|
$
|
(33,825,569
|
)
|
|
$
|
(3,793,967
|
)
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|
|
|
|
|
|
|
|
|
|
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Basic and Diluted Income (Loss) per Common Share
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$
|
(0.07
|
)
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|
$
|
(0.04
|
)
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|
$
|
(0.19
|
)
|
|
$
|
(0.08
|
)
|
|
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|
|
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|
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|
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Basic and Diluted Weighted average common shares outstanding
|
|
|
386,361,058
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|
52,471,896
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|
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|
181,985,090
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|
|
|
45,777,689
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|
The
accompanying notes are an integral part of these condensed financial statements.
Vivos
Inc.
Condensed
Statements of Cash Flow
(Unaudited)
|
|
Nine months ended September 30,
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|
|
2018
|
|
|
2017
|
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(33,825,569
|
)
|
|
$
|
(3,793,967
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used by operating activities:
|
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|
|
|
|
|
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Depreciation of fixed assets
|
|
|
-
|
|
|
|
1,473
|
|
Amortization of convertible debt discount
|
|
|
791,937
|
|
|
|
1,473,205
|
|
Gain on sale of assets
|
|
|
-
|
|
|
|
(2,800
|
)
|
Common stock issued for services
|
|
|
449
|
|
|
|
250,393
|
|
Common stock issued for wages
|
|
|
-
|
|
|
|
365,989
|
|
Stock options and warrants issued for services
|
|
|
45,400
|
|
|
|
79,582
|
|
Reserved stock units issued for services
|
|
|
104,410
|
|
|
|
169,650
|
|
New derivatives recorded as loan fees
|
|
|
4,636,517
|
|
|
|
-
|
|
(Gain) loss on derivative liability
|
|
|
27,976,982
|
|
|
|
(408,488
|
)
|
(Gain) loss on settlement of debt
|
|
|
(526,222
|
)
|
|
|
423,291
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(4,351
|
)
|
|
|
5,198
|
|
Accounts payable
|
|
|
239,596
|
|
|
|
22,226
|
|
Accounts payable from related parties
|
|
|
(9,955
|
)
|
|
|
(4,675
|
)
|
Payroll liabilities
|
|
|
204,550
|
|
|
|
(67,310
|
)
|
Accrued interest
|
|
|
198,448
|
|
|
|
361,951
|
|
Net cash used by operating activities
|
|
|
(167,808
|
)
|
|
|
(1,124,282
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Sale of fixed assets
|
|
|
-
|
|
|
|
2,800
|
|
Net cash from investing activities
|
|
|
-
|
|
|
|
2,800
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payments made for loan fees
|
|
|
-
|
|
|
|
(101,631
|
)
|
Proceeds from shareholder advances
|
|
|
50,000
|
|
|
|
137,000
|
|
Proceeds from related party advances
|
|
|
59,491
|
|
|
|
-
|
|
Proceeds from convertible debt
|
|
|
50,000
|
|
|
|
1,080,334
|
|
Net cash provided by financing activities
|
|
|
159,491
|
|
|
|
1,115,703
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(8,317
|
)
|
|
|
(5,779
|
)
|
Cash, beginning of period
|
|
|
8,317
|
|
|
|
27,889
|
|
|
|
|
|
|
|
|
|
|
CASH, END OF PERIOD
|
|
$
|
-
|
|
|
$
|
22,110
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these condensed financial statements.
Vivos
Inc.
Notes
to Condensed Financial Statements
(Unaudited)
NOTE
1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The
accompanying condensed financial statements of Vivos Inc. (the “
Company
”) have been prepared without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures required
by accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations.
These condensed financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly
the results of operations of the Company for the period presented. The results of operations for the nine months ended September
30, 2018, are not necessarily indicative of the results that may be expected for any future period or the fiscal year ending December
31, 2018 and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31,
2017, filed with the Securities and Exchange Commission on April 2, 2018.
In
April of 2017, the Company filed a Certificate of Merger with the Delaware Division of Corporations in order to merge the Company’s
wholly-owned subsidiary, IsoPet Solutions Corporation, with and into the Company. The Company therefore no longer prepares Consolidated
Financial Statements.
Use
of Estimates
The
preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Fair
Value of Financial Instruments
Fair
Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet,
where it is practicable to estimate that value. As of September 30, 2018 and December 31, 2017, the balances reported for cash,
prepaid expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes
the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
These tiers include:
Level
1, defined as observable inputs such as quoted prices for identical instruments in active markets;
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not
active; and
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are
unobservable.
The
Company measures certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value
on a recurring basis were calculated using the Black-Scholes pricing model and are as follows at September 30, 2018:
September 30, 2018
|
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|
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|
|
|
|
|
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|
|
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|
|
|
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|
|
|
|
|
|
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Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability
|
|
$
|
30,059,956
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
30,059,956
|
|
Total Liabilities Measured at Fair Value
|
|
$
|
30,059,956
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
30,059,956
|
|
Derivative
Liabilities
The
Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded
components of those contracts qualify as derivatives to be separately accounted for in accordance with Accounting Standards Codification
topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretations
of this standard and Accounting Standards Update 2017-11, which was adopted by the Company effective January 1, 2018. In accordance
with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured
at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the
host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in
earnings.
The
result of this accounting treatment is that the fair value of the derivative instrument is marked-to-market each balance sheet
date and with the change in fair value recognized in the statement of operations as other income or expense.
Upon
conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion,
exercise or cancellation and then that the related fair value is removed from the books. Gains or losses on debt extinguishment
are recognized in the statement of operations upon conversion, exercise or cancellation of a derivative instrument after any shares
issued in such a transaction are recorded at market value. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments
that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value
of the instrument on the reclassification date. Instruments that become a derivative after inception are recognized as a derivative
on the date they become a derivative with the offsetting entry recorded in earnings.
The
Company determines the fair value of derivative instruments and hybrid instruments, considering all of the rights and obligations
of each instrument, based on available market data using the Black-Scholes model, adjusted for the effect of dilution, because
it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk-free rates) necessary
to fair value these instruments. For instruments in default with no remaining time to maturity the Company uses a one-year term
for their years to maturity estimate unless a sooner conversion date can be estimated or is known. Estimating fair values of derivative
financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over
the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques
(such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock.
Reclassifications
Certain
account balances from prior periods have been reclassified in the current period financial statements so as to conform to current
period classifications.
Recent
Accounting Pronouncements
There
are no recently issued accounting pronouncements that the Company has not yet adopted that they believe are applicable or would
have a material impact on the financial statements of the Company.
NOTE
2: GOING CONCERN
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has
suffered recurring losses and used significant cash in support of its operating activities and the Company’s cash position
is not sufficient to support the Company’s operations. Research and development of the Company’s brachytherapy product
line has been funded with proceeds from the sale of equity and debt securities as well as a series of grants. The Company requires
funding of approximately $1.5 million annually to maintain current operating activities. Over the next 12 to 24 months, the Company
believes it will cost approximately $5.0 million to $10.0 million to fund: (1) the FDA approval process and initial deployment
of the brachytherapy products, and (2) initiate regulatory approval processes outside of the United States. The continued deployment
of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel. The
principal variables in the timing and amount of spending for the brachytherapy products in the next 12 to 24 months will be the
FDA’s classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any
requirements for additional studies which may possibly include clinical studies. Thereafter, the principal variables in the amount
of the Company’s spending and its financing requirements would be the timing of any approvals and the nature of the Company’s
arrangements with third parties for manufacturing, sales, distribution and licensing of those products and the products’
success in the U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing
and partnership agreements or additional capital raises.
Following
receipt of required regulatory approvals and financing, in the U.S., the Company intends to outsource material aspects of manufacturing,
distribution, sales and marketing. Outside of the U.S., the Company intends to pursue licensing arrangements and/or partnerships
to facilitate its global commercialization strategy.
In
the longer-term, subject to the Company receiving adequate funding, regulatory approval for RadioGel™ and other brachytherapy
products, and thereafter being able to successfully commercialize its brachytherapy products, the Company intends to consider
resuming research efforts with respect to other products and technologies intended to help improve the diagnosis and treatment
of cancer and other illnesses
Based
on the Company’s financial history since inception, its auditor has expressed substantial doubt as to the Company’s
ability to continue as a going concern. The Company has limited revenue, nominal cash, and has accumulated deficits since inception.
If the Company cannot obtain sufficient additional capital, the Company will be required to delay the implementation of its business
strategy and may not be able to continue operations.
As
of September 30, 2018, the Company has no cash. There are currently commitments to vendors for products and services purchased,
plus, the employment agreements of the CEO and CFO of the Company that will necessitate liquidation of the Company if it is unable
to raise additional capital. The current level of cash is not enough to cover the fixed and variable obligations of the Company.
Assuming
the Company is successful in the Company’s sales/development effort, it believes that it will be able to raise additional
funds through strategic agreements or the sale of the Company’s stock to either current or new stockholders. There is no
guarantee that the Company will be able to raise additional funds or to do so at an advantageous price.
The
financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern
is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain
profitability. The Company plans to seek additional funding to maintain its operations through debt and equity financing and to
improve operating performance through a focus on strategic products and increased efficiencies in business processes and improvements
to the cost structure. There is no assurance that the Company will be successful in its efforts to raise additional working capital
or achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
NOTE
3: FIXED ASSETS
Fixed
assets consist of the following at September 30, 2018 and December 31, 2017:
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
Production equipment
|
|
$
|
15,182
|
|
|
$
|
15,182
|
|
Less accumulated depreciation
|
|
|
(15,182
|
)
|
|
|
(15,182
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Depreciation
expense for the above fixed assets for the three months ended September 30, 2018 and 2017, respectively, was $0 and $0 and for
the nine months ended September 30, 2018 and 2017, respectively, was $0 and $1,473.
NOTE
4: RELATED PARTY TRANSACTIONS
Related
Party Convertible Notes Payable
In
March 2017, the Company combined Outstanding Notes owed to a director and major stockholder, along with $51,576 of accrued interest
payable, into one promissory note (the “
Related Party Note
”). The Related Party Note accrues interest at a
rate of 10% and was due and payable on December 31, 2017. The note holder agreed to an extension of the due date until May 9,
2018. On August 9, 2018 the Company entered into a Path Forward and Restructuring Agreement whereby this Convertible Note would
convert at a conversion price of $0.004 per share concurrently with a funding of at least $500,000 (the “Qualified Financing”).
The Qualified Financing occurred on October 10, 2018 at which time this note was fully converted into 50,000,000 common and 385,302
Series B preferred shares of the Company. As of September 30, 2018 and December 31, 2017 the balance of the Related Party Note
was $383,771 and $383,771, respectively, and the accrued interest payable on the Related Party Note was $57,934 and $29,230, respectively.
Related
Party Payables
The
Company periodically receives advances for operating funds from related parties or has related parties make payments on the Company’s
behalf. As a result of these activities the Company had related party payables of $106,833 and $57,297 as of September 30, 2018
and December 31, 2017, respectively.
Preferred
Shares Issued to Officers
During
2017, the Company issued 100,000 shares of its Series A Preferred to its CEO, in exchange for $32,308 of accrued payroll, $67,692
of accounts payable, and wages valued at $199,690.
During
2017, the Company issued 83,279 shares of its Series A Preferred to its CFO, in exchange for $83,280 of accrued payroll and wages
valued at $166,299.
Rent
Expenses
The
Company was renting office space from a significant shareholder and director of the Company on a month-to-month basis with a monthly
payment of $1,500. This rental agreement was terminated as of April 1, 2017.
There
was no rental expense for each of the three months ended September 30, 2018 and 2017. Rental expense was $0 and $4,500 for the
nine months ended September 30, 2018 and 2017, respectively.
NOTE
5: CONVERTIBLE NOTES PAYABLE
As
of September 30, 2018 and December 31, 2017 the Company had the following convertible notes outstanding:
|
|
September
30, 2018
|
|
|
December
31, 2017
|
|
|
|
Principal
(net)
|
|
|
Accrued
Interest
|
|
|
Principal
(net)
|
|
|
Accrued
Interest
|
|
July and August 2012 $1,060,000
Notes convertible into common stock at $4.60 per share, 12% interest, due December 2013 and January 2014
|
|
$
|
45,000
|
|
|
$
|
33,246
|
|
|
$
|
45,000
|
|
|
|
29,218
|
|
May through October 2015 $605,000 Notes convertible
into preferred stock at $1 per share, 8-10% interest, due September 30, 2015
|
|
|
-
|
|
|
|
18,396
|
|
|
|
-
|
|
|
|
17,341
|
|
October through December 2015 $613,000 Notes
convertible into preferred stock at $1 per share, 8% interest, due June 30, 2016, net of debt discount of $0 and $0, respectively
|
|
|
-
|
|
|
|
5,953
|
|
|
|
-
|
|
|
|
5,953
|
|
January through March 2016 $345,000 Notes convertible
into preferred stock at $1 per share, 8% interest, due June 30, 2016
|
|
|
-
|
|
|
|
696
|
|
|
|
-
|
|
|
|
696
|
|
May 2017 $2,378,155 Notes convertible into common
stock after April 15, 2018 at a 45% discount to lowest trade price for previous 30 days ($0.0026 at September 30, 2018), 7.5%
interest, due May 2018 therefore in default as of September 30, 2018, net of debt discounts of $0 and $544,845, respectively
|
|
|
1,631,061
|
|
|
|
206,812
|
|
|
|
1,833,310
|
|
|
|
178,304
|
|
May 2017 $820,420 Notes convertible into common
stock after April 15, 2018 at a 45% discount to lowest trade price for previous 30 days ($0.0026 at September 30, 2018), 7.5%
interest, due May 2018 therefore in default as of September 30, 2018, net of debt discounts of $0 and $147,335, respectively
|
|
|
448,039
|
|
|
|
56,200
|
|
|
|
500,703
|
|
|
|
52,831
|
|
May 2017 $110,312 Notes convertible after April
15, 2018 into common stock at a 45% discount to lowest trade price for previous 30 days ($0.0026 at September 30, 2018), 7.5%
interest, due May 2018 therefore in default as of September 30, 2018, net of debt discounts of $0 and $25,085, respectively
|
|
|
2,892
|
|
|
|
27
|
|
|
|
85,227
|
|
|
|
15,773
|
|
November 2017 $166,666 Note convertible at maturity
at a 50% discount to lowest trade price for previous 25 days ($0.0026 at September 30, 2018), with a one-time interest charge
of 10%, due April 15, 2018 therefore in default as of September 30, 2018, net of debt discounts of $0 and $74,662, respectively
|
|
|
142,906
|
|
|
|
96,667
|
|
|
|
92,004
|
|
|
|
16,667
|
|
July 2018 $50,000 Note convertible upon a Company
capital raise of at least $500,000. Conversion is into same securities as are issued in the capital raise after the total
of the principal and interest in increased to 120% of the balance owed including 8% interest.
|
|
|
50,000
|
|
|
|
668
|
|
|
|
|
|
|
|
|
|
Penalties on notes
in default
|
|
|
8,371
|
|
|
|
-
|
|
|
|
7,028
|
|
|
|
-
|
|
Total Convertible
Notes Payable, Net
|
|
$
|
2,328,269
|
|
|
$
|
417,610
|
|
|
$
|
2,563,272
|
|
|
$
|
316,784
|
|
NOTE
6: DERIVATIVE LIABILITY
During
the nine months ended September 30, 2018 the Company had certain convertible notes become convertible on a set date at variable
conversion rates. Upon becoming convertible the Company bifurcated the embedded conversion feature and recorded a derivative liability
at fair value with the offsetting entry recorded in the statement of operations. The activity in the derivative liability account
during the nine months ended September 30, 2018 is summarized as follows:
Derivative Liability at December 31, 2017
|
|
$
|
-
|
|
Derivative Liability Recorded
|
|
|
4,636,517
|
|
Elimination of Liability on Conversion
|
|
|
(2,553,543
|
)
|
Change in Fair Value
|
|
|
27,976,982
|
|
Derivative Liability at September 30, 2018
|
|
$
|
30,059,956
|
|
The
Company uses the Black-Scholes pricing model to estimate fair value for those instruments convertible into common stock at inception,
at conversion date, and at each reporting date. During the nine months ended September 30, 2018 the Company used the following
assumptions in their Black-Scholes model:
Risk-free interest rate
|
|
|
1.62% - 2.59
|
%
|
Expected life in years
|
|
|
0.11 – 1.10
|
|
Dividend yield
|
|
|
0
|
%
|
Expected volatility
|
|
|
174.46% - 519.42
|
%
|
NOTE
7: COMMON STOCK OPTIONS AND WARRANTS
Common
Stock Options
The
Company recognizes in the financial statements compensation related to all stock-based awards, including stock options and warrants,
based on their estimated grant-date fair value. The Company has estimated expected forfeitures and is recognizing compensation
expense only for those awards expected to vest. All compensation is recognized by the time the award vests.
The
following schedule summarizes the changes in the Company’s stock options:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Options Outstanding
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
Exercise
|
|
|
|
Of
|
|
|
Price
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Price
|
|
|
|
Shares
|
|
|
Per Share
|
|
|
Life
|
|
|
Value
|
|
|
Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
|
1,222,500
|
|
|
$
|
0.50-15
|
|
|
|
2.91 years
|
|
|
$
|
-
|
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Options exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Options expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2018
|
|
|
1,222,500
|
|
|
$
|
0.50-15
|
|
|
|
2.16 years
|
|
|
$
|
-
|
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2018
|
|
|
1,222,500
|
|
|
$
|
0.50-15
|
|
|
|
2.16 years
|
|
|
$
|
-
|
|
|
$
|
1.08
|
|
During
the three and nine months ended September 31, 2018 the Company recognized $0 and $45,400 worth of stock based compensation related
to the vesting of its stock options.
Common
Stock Warrants
The
following schedule summarizes the changes in the Company’s stock warrants:
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Warrants
Outstanding
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
Exercise
|
|
|
|
Of
|
|
|
Price
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Price
|
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Life
|
|
|
Value
|
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
|
304,200
|
|
|
$
|
0.40-10
|
|
|
|
1.19 years
|
|
|
$
|
-
|
|
|
$
|
2.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
|
|
Warrants exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
|
|
Warrants expired/cancelled
|
|
|
233,733
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September
30, 2018
|
|
|
70,467
|
|
|
$
|
10
|
|
|
|
2.25
years
|
|
|
$
|
-
|
|
|
$
|
10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2018
|
|
|
70,467
|
|
|
$
|
10
|
|
|
|
2.25 years
|
|
|
$
|
-
|
|
|
$
|
10.00
|
|
Restricted
Stock Units
The
following schedule summarizes the changes in the Company’s restricted stock units:
|
|
|
|
|
Weighted
|
|
|
|
Number
|
|
|
Average
|
|
|
|
Of
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
|
5,740,000
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
RSU’s granted
|
|
|
-
|
|
|
$
|
-
|
|
RSU’s vested
|
|
|
(1,860,000
|
)
|
|
$
|
-
|
|
RSU’s forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2018
|
|
|
3,880,000
|
|
|
$
|
0.07
|
|
During
the three and the nine months ended September 30, 2018 the Company recognized $19,515 and $104,410 worth of expense related to
the vesting of its RSU’s. As of September 30, 2018, the Company had $250,019 worth of expense yet to be recognized for RSU’s
not yet vested.
NOTE
8: STOCKHOLDERS’ EQUITY
Common
Stock
During
the nine months ending September 30, 2018 the Company issued 637,613,204 shares of its common stock valued at $3,240,661 for conversion
of convertible debt, 10,000 shares of its common stock valued at $449 for services, 10,076,830 shares of its common stock valued
at $4,050,654 for conversions of 1,007,683 shares of Series A Preferred Stock, and 1,860,000 shares of its common stock valued
at $1,860 in the form of Restricted Stock Units.
NOTE
9: SUPPLEMENTAL CASH FLOW INFORMATION
During
the nine months ending September 30,2018 the Company had the following non-cash investing and financing
activities:
|
●
|
Exchanged
$32,279 of accounts payable for a one year, 18% Promissory note.
|
|
|
|
|
●
|
Issued
10,076,830 shares of common stock in exchange for 1,007,683 shares of Series A Preferred stock decreasing preferred stock
by $1,008, decreasing paid in capital, preferred stock by $4,049,646, increasing common stock by $10,077, and increasing paid
in capital by $4,040,577.
|
|
|
|
|
●
|
Increased
common stock and decreased paid in capital by $1,860 due to the vesting of restricted stock units.
|
|
|
|
|
●
|
Issued
637,613,204 shares of common stock in exchange for convertible note principal of $1,078,274, notes payable principal of $32,279,
and accrued interest of $67,553, reducing the derivative liability by $2,553,543.
|
NOTE
10: COMMITMENTS AND CONTINGENCIES
The
Company is continuing work on many avenues to find the money needed to fund operations and provide sufficient funds needed to
bring its product to market. The Company entered into an agreement in May 2018 to find accredited investors for funding the Company
under which it will pay a 5% finders fee of the gross proceeds for any financing made available to the Company plus common stock
shares equal to 5% of the aggregate proceeds divided by the price per share of common stock issued in connection with the financing.
NOTE
11: SUBSEQUENT EVENTS
|
●
|
On
October 8, 2018 the Company created out of the shares of Preferred Stock, par value $0.001 per share, of the Company, as authorized
in Article IV of the Company’s Certificate of Incorporation, a series of Preferred Stock of the Company, to be named
“Series B Convertible Preferred Stock,” consisting of Five Million (5,000,000) shares.
|
|
|
|
|
●
|
On
October 10, 2018 the Company successfully completed the terms of the path forward and restructuring agreement eliminating
the remaining outstanding balance on all the secured debentures totaling
$2,253,538, converting the debt into Company stock at a fixed conversion price of $.004, resulting in the issuance of 299,821,300
common shares, 251,800 Series A preferred shares, and 2,610,452 Series B preferred shares. These shares will be subject to
a restriction on any sales below $.02 through December 31, 2018 and will have volume limitations on any sales below $.01 during
the first six months of 2019.
|
|
|
|
|
●
|
On
October 10, 2018 the Company completed a common stock equity financing through a
private
placement financing of $738,140 of new cash funding, as well as an additional $1,010,455 from the exchange of bridge notes,
past due executive compensation, and certain other liabilities into the private placement. All shares to be issued in
the private placement are restricted securities. Under the terms of the private placement, the per share purchase price
is $.005 per share resulting in the issuance of 287,168,409 common shares, and 695,302 Series B preferred shares. The
private placement purchasers are also to be issued warrants in an amount equal to 50% of the common shares purchased.
The warrants have a two-year term and an exercise price of $.01.
On
October 3, 2018 the Company exchanged 70,547 of Series A preferred for 705,470 of common shares.
|
The
Company has evaluated subsequent events through the date of this filing pursuant to ASC Topic 855 and has determined that, except
as disclosed herein, there are no additional subsequent events to disclose.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Except
for statements of historical fact, certain information described in this Form 10-K report contains “forward-looking statements”
that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,”
“should,” “will,” “would” or similar words. The statements that contain these or similar words
should be read carefully because these statements discuss the Company’s future expectations, including its expectations
of its future results of operations or financial position, or state other “forward-looking” information. Vivos Inc.
believes that it is important to communicate its future expectations to its investors. However, there may be events in the future
that the Company is not able to accurately predict or to control. Further, the Company urges you to be cautious of the forward-looking
statements which are contained in this Form 10-Q report because they involve risks, uncertainties and other factors affecting
its operations, market growth, service, products and licenses. The risk factors in the section captioned “Risk Factors”
in Item 1A of the Company’s previously filed Form 10-K, as well as other cautionary language in this Form 10-Q report, describe
such risks, uncertainties and events that may cause the Company’s actual results and achievements, whether expressed or
implied, to differ materially from the expectations the Company describes in its forward-looking statements. The occurrence of
any of the events described as risk factors could have a material adverse effect on the Company’s business, results of operations
and financial position.
General
Statement of Business
Vivos
Inc. (the
“Company” or “we”
) was incorporated under the laws of Delaware on December 23, 1994 as
Savage Mountain Sports Corporation (“
SMSC
”). On December 28, 2017, the Company changed its name from Advanced
Medical Isotope Corp. to Vivos Inc. The Company has authorized capital of 2,000,000,000 shares of common stock, $0.001 par value
per share, and 20,000,000 shares of preferred stock, $0.001 par value per share.
Our
principal place of business is 719 Jadwin Avenue, Richland, Washington 99352. Our telephone number is (509) 736-4000. Our corporate
website address is http://www.radiogel.com. Our common stock is currently listed for quotation on the OTC Pink Marketplace under
the symbol “RDGL.”
Overview
The
Company is a radiation oncology medical device company engaged in the development of its yttrium-90 based brachytherapy device,
RadioGel™, for the treatment of non-resectable tumors. A prominent team of radiochemists, scientists and engineers, collaborating
with strategic partners, including national laboratories, universities and private corporations, lead the Company’s development
efforts. The Company’s overall vision is to globally empower physicians, medical researchers and patients by providing them
with new isotope technologies that offer safe and effective treatments for cancer.
The
Company’s current focus is on the development of our RadioGel™ device candidate, including obtaining approval from
the Food and Drug Administration (“
FDA
”) to market and sell RadioGel™ as a Class II medical device. RadioGel™
is an injectable particle-gel for brachytherapy radiation treatment of cancerous tumors in people and animals. RadioGel™
is comprised of a hydrogel, or a substance that is liquid at room temperature and then gels when reaching body temperature after
injection into a tumor. In the gel are small, one micron, yttrium-90 phosphate particles (“
Y-90
”). Once injected,
these inert particles are locked in place inside the tumor by the gel, delivering a very high local radiation dose. The radiation
is beta, consisting of high-speed electrons. These electrons only travel a short distance so the device can deliver high radiation
to the tumor with minimal dose to the surrounding tissue. Optimally, patients can go home immediately following treatment without
the risk of radiation exposure to family members. Since Y-90 has a half-life of 2.7 days, the radioactivity drops to 5% of its
original value after ten days.
The
Company’s lead brachytherapy products, including RadioGel™, incorporate patented technology developed for Battelle
Memorial Institute (“
Battelle
”) at Pacific Northwest National Laboratory, a leading research institute for
government and commercial customers. Battelle has granted the Company an exclusive license to patents covering the manufacturing,
processing and applications of RadioGel™ (the “
Battelle License
”). This exclusive license is to terminate
upon the expiration of the last patent included in this agreement. Other intellectual property protection includes proprietary
production processes and trademark protection in 17 countries. The Company plans to continue efforts to develop new refinements
on the production process, and the product and application hardware, as a basis for future patents.
Regulatory
History
Human
Therapy
RadioGel™
has a long regulatory history with the Food and Drug Administration (“
FDA
”). Initially, the Company submitted
a presubmission (Q130140) to obtain FDA feedback about the proposed product. The FDA requested that the Company file a request
for designation with the Office of Combination Products (RFD130051), which led to the determination that RadioGel™ is a
device for human therapy for non-resectable cancers, which must be reviewed and ultimately regulated by the Center for Devices
and Radiological Health (“
CDRH
”). The Company then submitted a 510(k) notice for RadioGel™ (K133368),
which was found Not Substantially Equivalent due to the lack of a suitable predicate, and RadioGel™ was assigned to the
Class III product code NAW (microspheres). Class III products or devices are generally the highest risk devices and are therefore
subject to the highest level of regulatory review, control and oversight. Class III products or devices must typically be approved
by FDA before they are marketed. Class II devices represent lower risk products or devices than Class III and require fewer regulatory
controls to provide reasonable assurance of the product’s or device’s safety and effectiveness. In contrast, Class
I products and devices are deemed to be lower risk than Class II of III, and are therefore subject to the least regulatory controls.
A
pre-submission meeting (Q140496) was held with the FDA on June 17, 2014, during which the FDA maintained that RadioGel™
should be considered a Class III device and therefore subject to pre-market approval. On December 29, 2014, the Company submitted
a
de novo
petition for RadioGel™ (DEN140043). The
de novo
petition was denied by the FDA on June 1, 2015,
with the FDA providing numerous comments and questions. On September 29, 2015, the Company submitted a follow-up pre-submission
informational meeting request with the FDA (Q151569). This meeting took place on November 9, 2015, at which the FDA indicated
acceptance of the Company’s applied dosimetry methods and clarified the FDA’s outstanding questions regarding RadioGel™.
Following the November 2015 pre-submission meeting, the Company prepared a new pre-submission package to obtain FDA feedback on
the proposed testing methods, intended to address the concerns raised by the FDA staff and to address the suitability of RadioGel™
for
de novo
reclassification. This pre-submission package was presented to the FDA in a meeting on August 29, 2017. During
the August 2017 meeting, the FDA clarified their position on the remaining pre-clinical testing needed for RadioGel™. Specifically,
the FDA addressed proposed dosimetry calculating techniques, dosimetry distribution between injections, hydrogel viscoelastic
properties, and the details of the Company’s proposed animal testing.
The
Company believes that its submissions to the FDA to date have taken into account all the FDA staff’s feedback over the past
three years. Of particular importance, the Company has provided corresponding supporting data for proposed future testing of RadioGel™
to address any remaining questions raised by the FDA. We believe, although no assurances can be given, that the clinical testing
modifications presented to the FDA in August 2017 will result in a
de novo
reclassification for RadioGel™ by the
FDA. In addition, in previous FDA submittals, the Company proposed applying RadioGel™ for a very broad range of cancer therapies,
referred to as Indication for Use. The FDA requested that the Company reduce its Indications for Use. To comply with that request,
the Company expanded its Medical Advisory Board (“
MAB
”) and engaged doctors from respected hospitals who have
evaluated the candidate cancer therapies based on three criteria: (1) potential for FDA approval and successful therapy. (2) notable
advantage over current therapies. and (3) probability of wide spread acceptance by the medical community.
The
MAB selected eighteen applications for RadioGel™, each of which meet the criteria described above. This large number confirms
the wide applicability of the device and defines the path for future business growth. The Company’s application establishes
a single Indication for Use - treatment of basal cell and squamous cell skin cancers. We anticipate that this initial application
will facilitate each subsequent application for additional Indications for Use, and the testing for many of the subsequent applications
could be conducted in parallel, depending on available resources.
In
the event the FDA denies the Company’s application for
de novo
review, and therefore determines that RadioGel™
cannot be classified as a Class I or Class I1 device, the Company will then need to submit a pre-market approval application to
obtain the necessary regulatory approval as a Class III device.
Animal
Therapy
As
noted above, the Office of Combination Products previously classified RadioGel™ as a device for human therapy for non-sectable
cancers. In January 2018, the Center for Veterinary Medicine Product Classification Group ruled that RadioGel™ should be
classified as a device for animal therapy of feline sarcomas and canine soft tissue sarcomas. In addition, the FDA also reviewed
and approved our label, which is a requirement for any device used in animals. We expect the result of such classification and
label approval is that no additional regulatory approvals are necessary for the use of RadioGel™ for the treatment of skin
cancer in animals.
Based
on the FDA’s recommendation, RadioGel™ will be marketed as “IsoPet® for use by veterinarians to avoid any
confusion between animal and human therapy. The Company already has trademark protection for the “IsoPet®” name.
IsoPet® and RadioGel™ are used synonymously throughout this document. As we stated the only distinction between the
two is the FDA’s recommendation we use IsoPet® for all veterinarian usage and reserve RadioGel™ for human therapy.
IsoPet®
Solutions
The Company’s IsoPet®
Solutions division was established in May 2016 to focus on the veterinary oncology market, namely engagement of university veterinarian
hospital to develop the detailed therapy procedures to treat animal tumors and ultimately use of the technology in private clinics.
The Company has worked with four different university veterinarian hospitals on RadioGel™ testing and therapy. Colorado
State University demonstrated the procedures and the CT and PET-CT imaging of RadioGel™. Washington State University treated
five cats for feline sarcoma. They concluded that the product was safe and effective in killing cancer cells. A contract was signed
with University of Missouri to treat canine sarcomas and equine sarcoids starting early in 2019. The safety review at UC Davis
was completed. One dog was treated for canine soft tissue sarcoma in June 2018. The principle investigator rated the
tumor as CR, Complete Response, after three months. This RECIST rating means that the tumor was totally eliminated by the IsoPet
therapy. Four other dogs will be treated on this test plan series.
These
animal therapies will generate the additional data required by the private veterinary clinics to assure them of the safety and
efficacy of IsoPet® to complement the previous work at Washington State University.
The
Company anticipates that future profit will be derived from direct sales of RadioGel™ (under the name IsoPet®) and related
services, and from licensing to private medical and veterinary clinics in the U.S. and internationally.
Based
on the Company’s financial history since inception, its auditor has expressed substantial doubt as to the Company’s
ability to continue as a going concern. The Company has limited revenue, nominal cash, and has accumulated deficits since inception.
If the Company cannot obtain sufficient additional capital, the Company will be required to delay the implementation of its business
strategy and not be able to continue operations.
Results
of Operations
Comparison
of the Three Months Ended September 30, 2018 and 2017
The
following table sets forth information from our statements of operations for the three months ended September 30, 2018 and 2017.
|
|
Three Months Ended
September 30, 2018
|
|
|
Three Months Ended
September 30, 2017
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
Operating expenses
|
|
|
(136,906
|
)
|
|
|
(961,799
|
)
|
Operating loss
|
|
|
(136,906
|
)
|
|
|
(961,799
|
)
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
|
Gain (loss) on debt extinguishment
|
|
|
394,618
|
|
|
|
(369,428
|
)
|
Gain (loss) on derivative liability
|
|
|
(27,109,374
|
)
|
|
|
9
|
|
Interest expense
|
|
|
(60,752
|
)
|
|
|
(527,188
|
)
|
Net income (loss)
|
|
$
|
(26,775,508
|
)
|
|
$
|
(1,858,406
|
)
|
Revenue
Revenue
was $0 for the three months ended September 30, 2018 and September 30, 2017.
Operating
Expenses
Operating
expenses for the three months ended September 30, 2018 and 2017 consists of the following:
|
|
Three months ended
September 30, 2018
|
|
|
Three months ended
September 30, 2017
|
|
Depreciation and amortization expense
|
|
$
|
-
|
|
|
$
|
-
|
|
Professional fees
|
|
|
16,223
|
|
|
|
211,954
|
|
Reserved stock units granted
|
|
|
19,515
|
|
|
|
169,650
|
|
Stock options granted
|
|
|
-
|
|
|
|
24,283
|
|
Payroll expenses
|
|
|
82,500
|
|
|
|
436,319
|
|
Research and development
|
|
|
2,455
|
|
|
|
43,758
|
|
General and administrative expenses
|
|
|
15,463
|
|
|
|
23,215
|
|
Sales and marketing expense
|
|
|
750
|
|
|
|
52,620
|
|
Total operating expenses
|
|
$
|
136,906
|
|
|
$
|
961,799
|
|
Operating expenses for
the three months ended September 30, 2018 and 2017 was $136,906 and $961,799, respectively. The decrease in operating expenses
from 2017 to 2018 can be attributed to the decrease in payroll expense ($436,319 for the three months ended September 30, 2017
versus $82,500 for the three months ended September 30, 2018. The reason for the $353,819 additional payroll for the three
months ended September 30, 2017 was due to approximately $366,000 of officers past due payroll that was settled by the issuance
of common stock shares); decrease in professional fees expenses ($211,954 for the three months ended September 30, 2017 versus
$16,223 for the three months ended September 30, 2018. The reason for the $195,731 additional professional fees for the three
months ended September 30, 2017 was due to approximately $60,000 of consulting fees and $129,000 of legal fees that were attributable
to a shareholder meeting and preparation for and meetings with the FDA); decrease in sales and marketing expense ($52,620
for the three months ended September 30, 2017 versus $750 for the three months ended September 30, 2018. The reason for the
$51,870 additional sales and marketing expense for the three months ended September 30, 2017 was due to expenses incurred for
an investors relations firm and the attendance of a convention); decrease in research and development ($43,758 for the three
months ended September 30, 2017 versus $2,455 for the three months ended September 30, 2018. The reason for the $41,303 additional
research and development costs for the three months ended September 30, 2017 was due to costs incurred in the development of the
Company’s RadioGel product); decrease in reserved stock units granted ($169,650 for the three months ended September
30, 2017 versus $19,515 for the three months ended September 30, 2018. The reason for the $150,135 additional reserved stock
units granted costs for the three months ended September 30, 2017 was due to the 6,820,000 granted versus the 620,000 granted
for the three months ended September 30, 2018); decrease in stock options granted ($24,283 for the three months ended September
30, 2017 versus $0 for the three months ended September 30, 2018); and the decrease in general and administrative expense ($23,215
for the three months ended September 30, 2017 versus $15,463 for the three months ended September 30, 2018).
Non-Operating
Income (Expense)
Non-operating
income (expense) for the three months ended September 30, 2018 and 2017 consists of the following:
|
|
Three months ended
September 30, 2018
|
|
|
Three months ended
September 30, 2017
|
|
Interest expense
|
|
$
|
(60,752
|
)
|
|
$
|
(527,188
|
)
|
Net (gain) loss on debt extinguishment
|
|
|
394,618
|
|
|
|
(369,428
|
)
|
(Gain) loss on derivative liability
|
|
|
(27,109,374
|
)
|
|
|
9
|
|
Non-operating income (expense)
|
|
$
|
(26,775,508
|
)
|
|
$
|
(896,607
|
)
|
Non-operating income (expense)
for the three months ended September 30, 2018 varied from the three months ended September 30, 2017 primarily due to a loss on
debt extinguishment of $369,428 for the three months ended September 30, 2017 versus a gain of $394,618 for the three months ended
September 30, 2018; a gain on derivative liability for the three months ended September 30, 2017 of $9 versus a loss of $27,109,374
for the three months ended September 30, 2018; and an decrease in interest expense from $527,188 for the three months ended September
30, 2017 to $60,752 for the three months ended September 30, 2018. The reason for the increase in non-operating expenses for
the three months ended September 30, 2018 versus September 30, 2017 was due to the expiration of the due date of the convertible
debt thereby causing the reversal of the accrued debt discount and the conversions of convertible debt resulting in a loss on
derivative liability after calculation of Black Sholes for each of the conversions.
Net
Loss
Our
net income (loss) for the three months ended September 30, 2018 and 2017 was $(26,912,414) and $(1,858,406), respectively.
Comparison
of the Nine Months Ended September 30, 2018 and 2017
The
following table sets forth information from our statements of operations for the nine months ended September 30, 2018 and 2017.
|
|
Nine Months
Ended
September 30, 2018
|
|
|
Nine Months
Ended
September 30, 2017
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
4,054
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
765,500
|
|
|
|
1,949,739
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(765,500
|
)
|
|
|
(1,945,685
|
)
|
Non-operating income (expense)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(5,626,892
|
)
|
|
|
(1,836,279
|
)
|
Net gain on sale of assets
|
|
|
-
|
|
|
|
2,800
|
|
Grants received
|
|
|
17,583
|
|
|
|
-
|
|
Net gain (loss) on debt extinguishment
|
|
|
526,222
|
|
|
|
(423,291
|
)
|
Gain (loss) on derivative liability
|
|
|
(27,976,982
|
)
|
|
|
408,488
|
|
Net Income (Loss)
|
|
$
|
(33,825,569
|
)
|
|
$
|
(3,793,967
|
)
|
Revenue
Revenue
was $4,054 for the nine months ended September 30, 2017, compared to $0 for the nine months ended September 30, 2018, a period
over period decrease of $4,054. The decrease was a result of a loss of consulting revenue, currently our only source of revenue,
during the first half of the fiscal year. Consulting revenue consists of providing clients with assistance in strategic targetry
services, and research into production of radiopharmaceuticals and the operations of radioisotope production facilities. No proprietary
information belonging to our Company is shared during the process of this consulting. Consulting services had been our only source
of revenue. The Company does not have any current contracts or arrangements for consulting services, and, until such time as the
Company secures contracts or arrangements to provide consulting services, the Company does not expect to generate any additional
revenue during the fourth quarter of 2018 and beyond.
Management
does not anticipate that the Company will generate revenue sufficient to sustain operations until such time as the Company secures
revenue-generating arrangements with respect to RadioGel™ and/or any of our other brachytherapy technologies.
Operating
Expense
Operating
expenses for the nine months ended September 30, 2018 and 2017 consists of the following:
|
|
Nine months
ended
September 30, 2018
|
|
|
Nine months
ended
September 30, 2017
|
|
Depreciation and amortization expense
|
|
$
|
-
|
|
|
$
|
1,473
|
|
Professional fees
|
|
|
231,501
|
|
|
|
642,101
|
|
Reserved stock units granted
|
|
|
104,410
|
|
|
|
169,650
|
|
Stock options granted
|
|
|
45,400
|
|
|
|
79,582
|
|
Payroll expenses
|
|
|
243,570
|
|
|
|
722,594
|
|
Research and development
|
|
|
77,035
|
|
|
|
157,168
|
|
General and administrative expenses
|
|
|
49,884
|
|
|
|
83,301
|
|
Sales and marketing expense
|
|
|
13,700
|
|
|
|
93,870
|
|
Total operating expenses
|
|
$
|
765,500
|
|
|
$
|
1,949,739
|
|
Operating expenses for
the nine months ended September 30, 2018 and 2017 was $765,500 and $1,949,739, respectively. The decrease in operating expenses
from 2017 to 2018 can be attributed to the decrease in professional fees expense from 2017 to 2018 ($642,101 for the nine months
ended September 30, 2017 versus $231,501 for the nine months ended September 30, 2018. This decrease was due to a reduction
in accounting fees from $119,686 to $74,099 for the nine months ended September 30 2017 and 2018, respectively; a decrease in
consulting fees from $176,977 to $53,705 for the nine months ended September 30 2017 and 2018, respectively, due to the costs
incurred for a shareholder meeting in 2017 and none in 2018 and approximately $61,000 for the value of common stock shares given
to the Medical Advisory Board in 2017 and none in 2018.); a decrease in reserved stock units granted from 2017 to 2018 ($169,650
for the nine months ended September 30, 2017 versus $104,410 for the nine months ended September 30, 2018); a decrease in stock
options granted from 2017 to 2018 ($79,582 for the nine months ended September 30, 2017 versus $45,400 for the nine months ended
September 30, 2018); a decrease in payroll expenses from 2017 to 2018 ($722,594 for the nine months ended September 30, 2017 versus
$243,570 for the nine months ended September 30, 2018. This decrease was due approximately $366,000 of officers past due payroll
that was settled by the issuance of common stock shares and due to the Company having five employees in 2017 versus 2 in 2018);
a decrease in research and development from 2017 to 2018 ($157,168 for the nine months ended September 30, 2017 versus $77,035
for the nine months ended September 30, 2018. The reason for the $80,133 additional research and development costs for the
nine months ended September 30, 2017 was due to costs incurred in the development of the Company’s RadioGel product.);
a decrease in general and administrative expense from 2017 to 2018 ($83,301 for the nine months ended September 30, 2017 versus
$49,884 for the nine months ended September 30, 2018); and a decrease in sales and marketing expense from 2017 to 2018 ($93,870
for the nine months ended September 30, 2017 versus $13,700 for the nine months ended September 30, 2018. The reason for the
$80,170 additional sales and marketing expense for the nine months ended September 30, 2017 was due to expenses incurred for an
investors relations firm and the attendance at conventions). ).
Non-Operating
Income (Expense)
Non-Operating
income (expense) for the nine months ended September 30, 2018 and 2017 consists of the following:
|
|
Nine months
ended
September 30, 2018
|
|
|
Nine months
ended
September 30, 2017
|
|
Interest expense
|
|
$
|
(5,626,892
|
)
|
|
$
|
(1,836,279
|
)
|
Net gain on sale of assets
|
|
|
-
|
|
|
|
2,800
|
|
Grants received
|
|
|
17,583
|
|
|
|
-
|
|
Net gain (loss) on debt extinguishment
|
|
|
526,222
|
|
|
|
(423,291
|
)
|
Gain (loss) on derivative liability
|
|
|
(27,976,982
|
)
|
|
|
408,488
|
|
Non-operating income (expense)
|
|
$
|
(33,060,069
|
)
|
|
$
|
(1,848,282
|
)
|
The Company had non-operating
expense of $1,848,282 during the nine months ended September 30, 2017, as compared to non-operating expense of $33,060,069 during
the nine months ended September 30, 2018. As shown above, this increase in non-operating expense is primarily due to a loss on
derivative liability of $27,976,982 for the nine months ended September 30, 2018, as compared to a gain of $408,488 during the
same period in 2017. The Company’s gain on debt extinguishment increased from a loss of $423,291 during the nine months
ended June 30, 2017, as compared to a gain of $526,222 for the nine months ended September 30, 2018. Additionally, the Company
experienced an increase in interest expense from $1,836,279 for the nine months ended September 30, 2017, as compared to $5,626,892
for the nine months ended September 30, 2018. The majority of the interest recorded by the Company consists of amortization of
debt discount and new derivative liabilities recorded as loan fees. The reason for the increase in non-operating expenses for
the nine months ended September 30, 2018 versus September 30, 2017 was due to the expiration of the due date of the convertible
debt thereby causing the reversal of the accrued debt discount and the conversions of convertible debt resulting in a loss on
derivative liability after calculation of Black Sholes for each of the conversions.
Net
Gain (Loss)
Our
net income (loss) for the nine months ended September 30, 2018 and 2017 was $(33,825,569) and $(3,793,967) respectively.
Liquidity
and Capital Resources
At
September 30, 2018, the Company had negative working capital of $34,697,778 as compared to $4,262,470 at December 31, 2017. During
the nine months ended September 30, 2018 the Company experienced negative cash flow from operations of $167,808 and it received
$0 for investing activities while adding $159,491 of cash flows from financing activities. As of September 30, 2018, the Company
had no commitments for capital expenditures.
Cash
used in operating activities decreased from $1,124,282 for the nine month period ending September 30, 2017 to $167,808 for the
nine month period ending September 30, 2018. Cash used in operating activities was primarily a result of the Company’s net
loss, partially offset by non-cash items, such as loss on derivative liability and amortization and depreciation, included in
that net loss and preferred and common stock issued for services and other expenses. The Company received $0 and $2,800 in cash
from investing activities for the nine month periods ended September 30, 2018 and 2017, respectively. Cash provided from financing
activities decreased from $1,115,703 for the nine month period ending September 30, 2017 to $159,491 for the nine month period
ending September 30, 2018. The decrease in cash provided from financing activities was primarily a result of decrease in proceeds
from convertible debt, as well as a decrease in shareholder advances.
The
Company has generated material operating losses since inception. The Company had a net loss of $33,825,569 for the nine months
ended September 30, 2018, and a net loss of $3,793,967 for the nine months ended September 30, 2017. The Company expects to continue
to experience net operating losses. Historically, the Company has relied upon investor funds to maintain its operations and develop
the Company’s business. The Company anticipates raising additional capital within the next twelve months from investors
for working capital as well as business expansion, although the Company can provide no assurance that additional investor funds
will be available on terms acceptable to the Company. If the Company is unable to obtain additional financing to meet its working
capital requirements, it may have to curtail its business.
The
Company anticipates raising additional capital within the next twelve months from investors for working capital as well as business
expansion, although the Company can provide no assurance that additional investor funds will be available on terms acceptable
to the Company. If the Company is unable to obtain additional financing to meet its working capital requirements, it may have
to cease operations.
The
Company requires funding of at least $1.5 million per year to maintain current operating activities. Over the next 12 to 24 months,
the Company believes it will cost approximately $11.0 million to fund: (1) the FDA approval process and initial deployment of
RadioGel™ and other brachytherapy products. The continued deployment of the Company’s brachytherapy products, including
RadioGel™, and a worldwide regulatory approval effort will require additional resources and personnel. The principal variables
in the timing and amount of spending for the brachytherapy products in the next 12 to 24 months will be the FDA’s classification
of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional
studies, which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company’s
spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements
with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the
U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership
agreements or additional capital raises.
Although
the Company is seeking to raise additional capital and has engaged in numerous discussions with investment bankers and investors,
the Company has not received firm commitments for the required funding. Based upon its discussions, the Company anticipates that
if the Company is able to obtain the funding required to retire outstanding debt, pay past due payables and maintain its current
operating activities, that the terms thereof will be materially dilutive to existing shareholders.
Recent
geopolitical events, including the inherent instability and volatility in global capital markets, as well as the lack of liquidity
in the capital markets, could impact the Company’s ability to obtain financing and its ability to execute its business plan.
Accounting
Policies and Estimates
The
preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited
condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these
estimates under different assumptions or conditions. During the period ended September 30, 2018, we believe there have been no
significant changes to the items disclosed as significant accounting policies in management’s notes to the consolidated
financial statements in our annual report on Form 10-K for the year ended December 31, 2017, filed on April 2, 2018.
Off-Balance
Sheet Arrangements
The
Company does not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on the
Company’s financial condition, revenues, results of operations, liquidity or capital expenditures.