UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ______.
Commission File Number
(Exact name of registrant as specified in its charter)
| 5047 |
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| |
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation ST (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐
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 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 | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). ☒
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
On August 11, 2022,
TABLE OF CONTENTS
2
ITEM 1. FINANCIAL STATEMENTS
ELECTROMEDICAL TECHNOLOGIES, INC.
BALANCE SHEETS
(UNAUDITED)
| June 30, 2022 |
| December 31, 2021 | |||
ASSETS |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable | $ | | $ | | ||
Credit cards payable |
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Accrued expenses and other current liabilities |
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Customer deposits |
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Convertible promissory notes, net of discount of $ |
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Related party notes payable |
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Long term debt, current portion |
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Total current liabilities |
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Long-term liabilities: |
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Bank debt, net of current portion |
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Government debt, net of current portion |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 9) |
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Stockholders’ deficit |
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Series A Preferred Stock, $ |
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Series B Preferred Stock, $ | ||||||
Common stock, $ |
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Additional paid-in-capital |
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Accumulated deficit |
| ( |
| ( | ||
Total stockholders’ deficit |
| ( |
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Total liabilities and stockholders’ deficit | $ | | $ | | ||
The accompanying notes are an integral part of these financial statements
3
ELECTROMEDICAL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, | SIX MONTHS ENDED JUNE 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Net sales | $ | | $ | | $ | | $ | | ||||
Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Loss from operations |
| ( | ( | ( |
| ( | ||||||
Other income (expense) |
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Interest expense |
| ( | ( | ( |
| ( | ||||||
Change in fair market value of derivative liabilities | — | | — | | ||||||||
Other income (expense) | — | ( | — | ( | ||||||||
Forgiveness of debt | — | — | — | | ||||||||
Loss on extinguishment of debt |
| ( | — | ( |
| — | ||||||
Total other expense |
| ( | ( | ( |
| ( | ||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Deemed dividend related to warrant resets | — | ( | ( | ( | ||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average shares outstanding - basic and diluted | | | |
| | |||||||
Weighted average loss per share - basic and diluted | ( | ( | ( | ( | ||||||||
The accompanying notes are an integral part of these financial statements
4
ELECTROMEDICAL TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2022
(UNAUDITED)
Total | ||||||||||||||||||||||||
Series A Preferred | Series B Preferred | Common Stock | Paid in | Accumulated | Stockholders’ | |||||||||||||||||||
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Capital |
| Deficit |
| Deficit | |||||||
Balance, December 31, 2021 | $ | |
| | $ | |
| | $ | |
| | $ | | $ | ( | $ | ( | ||||||
Shares issued for consulting services |
| — |
| — |
| — |
| — |
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| |
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| — |
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Warrants issued in conjunction with convertible promissory notes |
| — |
| — |
| — |
| — |
| — |
| — |
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| — |
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Warrants reset in conjunction with convertible promissory notes |
| — |
| — |
| — |
| — |
| — |
| — |
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| ( |
| — | ||||||
Adoption of ASU 2020-06 |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
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| ( | ||||||
Issuance of common stock for cash | — |
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Cashless warrant exercises |
| — |
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| — |
| — |
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| ( |
| — |
| — | ||||||
Stock-based compensation |
| — |
| — |
| — |
| — |
| — |
| — |
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| — |
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Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Balance, March 31, 2022 | |
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Shares issued for consulting services | — | — | — | — | | | | — | | |||||||||||||||
Shares issued in conjunction with forbearance of convertible promissory notes | — | — | — | — | | | | — | | |||||||||||||||
Conversion of convertible promissory notes and accrued interest | — | — | — | — | | | | — | | |||||||||||||||
Warrants issued in conjunction with debt extinguishment | — | — | — | — | — | — | | — | | |||||||||||||||
Cashless warrant exercises | — | — | — | — | | | ( | — | — | |||||||||||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Balance, June 30, 2022 | $ | | | $ | | | $ | | | $ | | $ | ( | $ | ( | |||||||||
The accompanying notes are an integral part of these financial statements
5
ELECTROMEDICAL TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
Total | |||||||||||||||||||
Preferred Stock | Common Stock | Paid in | Accumulated | Stockholders’ | |||||||||||||||
| Amount |
| Shares |
| Amount |
| Shares |
| Capital |
| Deficit |
| Deficit | ||||||
Balance, December 31, 2020 | $ | |
| | $ | |
| | $ | | $ | ( | $ | ( | |||||
Shares issued for consulting services |
| — |
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Warrant issued in conjunction with convertible promissory note |
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Warrants reset in conjunction with convertible promissory notes | — | — | — | — | | ( | — | ||||||||||||
Conversion of convertible promissory notes | — | — | | | | — | | ||||||||||||
Stock-based compensation |
| — |
| — |
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| — |
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Net loss |
| — |
| — |
| — |
| — | — |
| ( |
| ( | ||||||
Balance, March 31, 2021 | |
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Warrants reset in conjunction with convertible promissory notes | — | — | — | — | | ( | — | ||||||||||||
Conversion of convertible promissory notes | — | — | | | | — | | ||||||||||||
Shares issued for consulting services | — | — | | | | — | | ||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Balance, June 30, 2021 | $ | | | $ | | | $ | | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of these financial statements
6
ELECTROMEDICAL TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
| 2022 |
| 2021 | |||
Cash flows from operating activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation expense |
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Depreciation and amortization |
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Forgiveness of debt |
| — |
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Loss on extinguishment of debt | | — | ||||
Amortization of debt discount and day one derivative loss and warrant expense |
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Change in fair value of derivative liabilities- convertible promissory notes | — | ( | ||||
Change in operating assets and liabilities: | ||||||
Accounts receivable | | | ||||
Inventories |
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Prepaid expenses and other current assets | | | ||||
Other assets |
| — |
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Accounts payable |
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Credit cards payable |
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Accrued expenses and other current liabilities |
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Customer deposits |
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Other liabilities |
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Net cash used in operating activities |
| ( |
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Cash flows from financing activities: |
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Repayments on bank debt |
| ( |
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Related party notes payable-net |
| ( |
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Issuance of convertible promissory notes | | | ||||
Repayments on convertible promissory notes |
| ( |
| — | ||
Repayments on notes payable | — | ( | ||||
Issuance of common stock for cash - net | | — | ||||
Net cash provided by financing activities |
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Net (decrease) increase in cash and cash equivalents |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period | $ | | $ | | ||
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Supplemental disclosures of cash flow information: |
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Cash paid during the period for: |
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Interest | $ | | $ | | ||
Income taxes | $ | | $ | | ||
Non-cash investing and financing activities: |
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January 1, 2022 adoption of ASU2020-06 | $ | | $ | — | ||
Warrants, common stock and beneficial conversion feature issued in conjunction with convertible promissory notes | $ | | $ | | ||
Derivative liabilities issued in conjunction with convertible promissory notes | $ | — | $ | | ||
Conversion of convertible promissory notes, derivative liabilities and accrued interest into shares of common stock | $ | | $ | | ||
The accompanying notes are an integral part of these financial statements
7
ELECTROMEDICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1.ORGANIZATION AND NATURE OF BUSINESS
ElectroMedical Technologies, LLC (the “Company”), was formed in November 2010 as an Arizona limited liability company. In August 2017, the Company converted to a Delaware C Corporation under Electromedical Technologies, Inc. The Company is a bioelectronic engineering company with medical device certifications in the United States (FDA) and Mexico (Cofepris). The Company engineers simple-to-use portable bioelectronics devices, which provide fast and long -lasting pain relief across a broad range of ailments.
NOTE 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The accompanying unaudited financial statements of Electromedical Technologies, Inc. have been prepared in accordance with Accounting Principles Generally Accepted in the United States of America (“GAAP”) for interim financial information and in accordance with Rule 8-03 of Regulation S-X. Certain information and disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. These interim financial statements should be read in conjunction with the audited annual financial statements of the Company as of and for the year ended December 31, 2021. The results of operations for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the full year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, certain disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates affecting the financial statements have been prepared on the basis of the most current and best available information. However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the financial statements.
Going Concern
Since inception, the Company has incurred approximately $
As a result, there is significant uncertainty whether the Company will continue as a going concern and, therefore, whether it will realize its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial statements.
Accordingly, no adjustments have been made to the financial statements relating to the recoverability and classification of the asset carrying amounts or the amount and classification of liabilities that might be necessary should the entity not continue as a going concern. At this time, management is of the opinion that no asset is likely to be realized for an amount less than the amount at which it is recorded in the financial statements as of June 30, 2022.
Revenue Recognition
Revenues are recognized when performance obligations are satisfied through the transfer of promised goods to the Company’s customers. Control transfers upon shipment of product and when the title has been passed to the customers. This includes the transfer
8
of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. Revenue is recorded net of sales taxes collected from customers on behalf of taxing authorities, allowance for estimated returns, chargebacks, and markdowns based upon management’s estimates and the Company’s historical experience. The Company’s liability for sales return refunds is recognized within other current liabilities, and an asset for the value of inventory which is expected to be returned is recognized within other current assets on the balance sheets. The Company generally allows a
Certain larger customers pay in advance for future shipments. These advance payments totaled $
At the completion of the initial
Financial Instruments and Concentrations of Business and Credit Risk
The Company maintains cash balances that can, at times, exceed amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk.
The Company’s accounts receivable, which are unsecured, expose the Company to credit risks such as collectability and business risks such as customer concentrations. The Company mitigates credit risk by investigating the creditworthiness of all customers prior to establishing relationships with them, performing periodic review of the credit activities of those customers during the course of the business relationship, regularly analyzing the collectability of accounts receivables, and recording allowances for doubtful accounts when these receivables become uncollectible. The Company mitigates business risks by attempting to diversify its customer base.
Significant customer sales greater than 10% as a percentage of total sales are as follows:
THREE MONTHS ENDED JUNE 30, |
| SIX MONTHS ENDED JUNE 30, |
| ||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| |
Customer A |
| | % | | % | | % | | % |
Customer B |
| | % | — | | % | | % | |
Customer C | — | | % | — | — | ||||
Customer D |
| | % | — | — | — | |||
Amounts due these customers totaled $
The Company’s supplier concentrations expose the Company to business risks, which the Company mitigates by attempting to diversify its supply chain. Significant supplier purchases as a percentage of total inventory purchases are as follows:
| THREE MONTHS ENDED JUNE 30, |
| SIX MONTHS ENDED JUNE 30, |
| |||||
2022 | 2021 | 2022 | 2021 |
| |||||
Supplier A |
| | % | | % | | % | | % |
There were
The estimated fair value of financial instruments has been determined using available market information and appropriate valuation methodologies. However, considerable judgment is often required to interpret market data used to develop the estimates of fair value. Accordingly, the estimates presented may not be indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts.
9
Inventories
Inventories are stated at the lower of cost or market. Cost is determined based on the first-in, first-out cost flow assumption (“FIFO”) while market is determined based upon the estimated net realizable value less an allowance for selling and distribution expenses and a normal gross profit. The Company evaluates the need for inventory reserves associated with obsolete, slow moving, and non-sellable inventory by reviewing estimated net realizable values on a periodic basis. As of June 30, 2022 and December 31, 2021, the Company believes there are no excess and obsolete inventories and accordingly, did not record an inventory reserve. Inventories consist of purchased finished goods.
Sales Taxes
FASB ASC Subtopic 605-45, Revenue Recognition – Principal Agent Considerations, provides that the presentation of taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions (e.g. sales, use, and excise taxes) between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. In addition, for any such taxes that are reported on a gross basis, the amounts of those taxes should be disclosed in the financial statements for each period for which a statement of operations is presented if those amounts are significant. Sales taxes for the six months ended June 30, 2022 and 2021, were recorded on a net basis. Included in accrued expenses at both June 30, 2022 and December 31, 2021 is approximately $
Warranty
The Company warranties the sale of most of its products and records an accrual for estimated future claims. The standard warranty is typically for a period of
Net Loss per Share
Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. As all potentially dilutive securities are anti-dilutive as of June 30, 2022 and December 31, 2021, diluted net loss per share is the same as basic net loss per share for each period.
Conversion of outstanding warrants, stock options and convertible promissory notes at June 30, 2022 may result in an estimated
COVID-19
On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the COVID-19 include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. COVID-19, and actions taken to mitigate it, have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial effect will be to the Company, COVID-19 has had an adverse effect on our business, including our supply chains and distribution systems. While we are taking diligent steps to mitigate disruptions to our supply chain, we are unable to predict the extent or nature of these impacts at this time to our future financial condition and results of operations.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt —Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). This update simplifies the accounting for certain convertible
10
instruments by removing the separation models for convertible debt with a cash conversion feature and for convertible instruments with a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, this update amends the diluted earnings per share calculation for convertible instruments by requiring the use of the if-converted method. The treasury stock method is no longer available. Entities may adopt the requirements of ASU 2020-06 using either a full or modified retrospective approach, and it is effective for public businesses, excluding entities eligible to be smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.
We adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method of transition, which resulted in an increase in convertible promissory notes of $
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability, measured on a discounted basis, on the balance sheet for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statements of operations and comprehensive loss. A modified retrospective transition approach is required for capital and operating leases existing at the date of adoption, with certain practical expedients available. The accounting guidance, which is effective for the Company beginning on January 1, 2022, has been adopted with no significant financial statement impact.
Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
NOTE 3.PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of:
| June 30, |
| December 31, | |||
2022 | 2021 | |||||
Building | $ | | $ | | ||
Furniture and equipment |
| |
| | ||
| |
| | |||
Less: accumulated depreciation and amortization |
| ( |
| ( | ||
$ | | $ | | |||
Depreciation and amortization expense related to property and equipment was $5,469 and $
NOTE 4.NOTES PAYABLE
In April 2020, the Company received $
Related Party Notes Payable
On December 1, 2021, the Company entered into a settlement agreement with the related party to repay the then remaining balance of $
11
Convertible Promissory Notes
We adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method of transition. This resulted in an increase in convertible promissory notes of $
On September 3, 2021, the Company entered into a forbearance agreement with one of its lenders. As additional consideration for entering into the forbearance agreement, the Company has agreed to issue the lender the number of shares equal to $
On March 25, 2022, the Company amended the forbearance agreement. Under the amendment, the maturity dates of the outstanding notes were changed to October 1, 2022. In addition, the Company will issue
In June 2022, the Company entered into a settlement agreement with the above lender to convert the outstanding convertible notes payable of $
During the six months ended June 30, 2022, the Company issued convertible promissory notes to certain investors totaling $
In April 2022, the Company entered into an agreement with one of its lenders to push back the allowable conversion date of a convertible note payable totaling $
During the six months ended June 30, 2022, the subsequent issuance of convertible promissory notes with certain terms and warrant exercises triggered a conversion price reset on the pre-existing convertible promissory notes to $
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The aggregate of convertible promissory notes is as follows:
| June 30, | December 31, | ||||
Convertible promissory notes | 2022 | 2021 | ||||
Principal balance | $ | | $ | | ||
Debt discount balance |
| ( |
| ( | ||
Net Notes balance | $ | | $ | | ||
The Net Notes balance at June 30, 2022 is comprised of the following:
| Principal |
| Debt Discount |
| Net | ||||
Pre 2020 | $ | | $ | — | $ | | |||
October 2021 | | — | | ||||||
February 2022 | | ( | | ||||||
March 2022 | | ( | | ||||||
$ | | $ | ( | $ | | ||||
The Net Notes balance at December 31, 2021 is comprised of the following:
| Principal |
| Debt Discount |
| Net | ||||
Pre 2020 | $ | | $ | — | $ | | |||
July 2020 | | — | | ||||||
August 2020 | | — | | ||||||
September 2020 | | — | | ||||||
November 2020 | | ( | | ||||||
December 2020 | | ( | | ||||||
October 2021 | | ( | | ||||||
$ | | $ | ( | $ | | ||||
NOTE 5.LONG-TERM DEBT
Government Debt
In June 2020, the Company received a $
Bank Debt
In September 2015, the Company entered into a credit agreement for a $
The long-term debt agreements do not contain any financial covenants.
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NOTE 6.RELATED PARTY TRANSACTIONS
The Company repaid the remaining principal balance of $
The Company paid the Company’s CEO a bonus of $
In February 2021, the Company issued
NOTE 7.STOCKHOLDERS’ DEFICIT
In February 2021, the Company issued
During the six months ended June 30, 2021, the Company issued
On March 18, 2022, the Company’s board of directors approved a resolution to amend the Company’s Certificate of Incorporation to increase the Company’s authorized common shares authorized from
During the six months ended June 30, 2022, the Company issued
In January and February 2022, the Company sold
During the six months ended June 30, 2022, certain lenders exercised
NOTE 8.STOCK OPTIONS AND WARRANTS
Stock Options
In 2017, the Company’s Board of Directors approved the 2017 Employee and Consultant Stock Ownership Plan, (the “Plan”). The Plan provides that the Board of Directors may grant stock units, incentive stock options and non-statutory stock options to officers, key employees and certain consultants and advisors to the Company up to a maximum of
The Company recorded pretax stock compensation expense of $
14
Warrants
During the six months ended June 30, 2022, the Company issued warrants to purchase
The warrants qualified for equity accounting as the warrants did not fall within the scope of ASC Topic 480, Distinguishing Liabilities from Equity. The warrants were measured at fair value at the time of issuance and classified as equity.
The Company valued the warrants using a Black Scholes Merton pricing model and recorded the warrants as a reduction of the notes included in the debt discount balance. The following table summarizes the assumptions used in the valuation model to determine the fair value of the warrants:
Fair Value of Common Share |
| $ | ||
Exercise Price | $ | | ||
Risk Free Rate |
| % | ||
Expected Life (Yrs.) |
| |||
Volatility |
| % |
The relative fair value of the warrants of $
The Company is required to issue warrants in conjunction these convertible debt financings to a third- party financial advisor. In accordance with the terms of the advisory agreement, such warrants shall equal
In April 2022, the Company entered into an agreement with one of its lenders to push back the allowable conversion date of a convertible note payable totaling $
The warrants qualified for equity accounting as the warrants did not fall within the scope of ASC Topic 480, Distinguishing Liabilities from Equity. The warrants were measured at fair value at the time of issuance and classified as equity.
The Company valued the warrants using a Black Scholes pricing model. The following table summarizes the assumptions used in the valuation model to determine the fair value of the warrants:
Fair Value of Common Share |
| $ | | |
Exercise Price | $ | | ||
Risk Free Rate |
| | % | |
Expected Life (Yrs.) |
| |||
Volatility |
| | % |
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The following table summarizes the information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable at June 30, 2022:
Date Issued |
| Exercise Price |
| Number Outstanding |
| Expiration Date | ||
December 1, 2018 | $ | |
| | December 1, 2023 | |||
May 1, 2020 | $ | |
| | May 1, 2025 | |||
October 1, 2021 | $ | | | October 1, 2026 | ||||
October 17, 2021 | $ | | | October 17, 2024 | ||||
February 11, 2022 | $ | | | February 11, 2027 | ||||
March 10, 2022 | $ | |
| | March 10, 2027 | |||
April 15, 2022 | $ | | | April 15, 2027 | ||||
|
|
| |
| ||||
The following table summarizes the information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable at December 31, 2021:
Date Issued |
| Exercise Price |
| Number Outstanding |
| Expiration Date | ||
December 1, 2018 | $ | |
| | December 1, 2023 | |||
May 1, 2020 | $ | |
| | May 1, 2025 | |||
February 8, 2021 | $ | |
| | February 8, 2026 | |||
October 1, 2021 | $ | | | October 1, 2026 | ||||
October 13, 2021 | $ | | | October 13, 2026 | ||||
October 17, 2021 | $ | | | October 17, 2024 | ||||
| ||||||||
During the six months ended June 30, 2022, the subsequent issuance of convertible promissory notes with certain terms and convertible promissory note conversions triggered the warrant reset feature on certain previously issued warrants. The resets for all outstanding warrants were recorded as a reduction to retained earnings and in an increase to additional paid-in-capital of $
NOTE 9.COMMITMENTS AND CONTINGENCIES
Commitments
The Company has entered into a product development with payments totaling approximately $
Contingencies
The Company is subject to various loss contingencies and assessments arising in the normal course of the business, some of which relate to litigation, claims, property taxes and sales and use tax or goods and services tax assessments. The Company considers the likelihood of the loss or the incurrence of a liability, as well as its ability to reasonably estimate the amount of loss in determining loss contingencies and assessments. An estimated loss contingency or assessment is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Management regularly evaluates current information available to them to determine whether such accruals should be adjusted. Based on the information presently available, including discussion with counsel and other consultants, management believes that resolution of these matters will not have a material adverse effect on its business, results of operations, financial condition or cash flows.
NOTE 10.SUBSEQUENT EVENTS
The Company has evaluated subsequent events that have occurred through the date of this filing and determined that there were no subsequent events or transactions that required recognition or disclosure in the financial statements, except as disclosed below.
On July 6, 2022, the Company borrowed $
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added to the principal balance for an outstanding balance of $
As of August 10, 2022, 2022, one of the Company’s lenders, converted $
On August 8, 2022, the Company entered into an agreement to borrow $
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The statements contained in this report that are not statements of historical fact, including without limitation, statements containing the words “believes,” “expects,” “anticipates” and similar words, constitute forward-looking statements that are subject to a number of risks and uncertainties. From time to time we may make other forward-looking statements. Investors are cautioned that such forward-looking statements are subject to an inherent risk that actual results may materially differ as a result of many factors, including the risks discussed from time to time in this report, including the risks described under “Risk Factors” in any filings we have made with the SEC.
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, certain disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates affecting the financial statements have been prepared on the basis of the most current and best available information. However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the financial statements.
Background
The Company was formed in Nevada in August 30, 2002 as IntelSource Group, Inc. and began operations in 2003. In 2007, IntelSource Group, Inc. merged with ElectroMedical Technologies, LLC. The Company began acting as Electro Medical Technologies, LLC, an Arizona limited liability company on November 9, 2010 after the merger with ElectroMedical Technologies, LLC, a Nevada Company. The Company converted to a corporation in the State of Delaware on August 23, 2017.
Electromedical Technologies is a bioelectronics manufacturing and marketing company. We offer U.S. Food and Drug Administration (FDA) cleared medical devices for pain management.
Bioelectronics is a developing field of “electronic” medicine, which uses electrical impulses over the body’s neural circuitry to try to alleviate pain, without drugs. The human body is controlled by electrical signals sent through the nervous system, which can become distorted after accidents or as a result of disease. The field of bioelectronic medicine aims to safely correct irregularities in the nervous system by modifying the electrical language of the body related to pain relief.
Our mission is to improve global wellness for people suffering from various painful conditions by relieving chronic and acute pain using energy, frequency and vibration as an alternative to pharmaceuticals; and one day, read and modifies electrical signals passing along nerves in the body, to restore long-term health.
Additionally, we have a corporate goal to offer the public effective alternatives to addictive pain -relieving drugs, such as opioids. According to the Society of Actuaries, opioid overdose deaths are now the single largest factor slowing the growth in U.S. life expectancy and has led to stagnation or decreases in life expectancy three years in a row for the first time since 1915–1918, when the country was facing World War I and the Spanish flu pandemic. The U.S. Centers of Disease Control and Prevention (CDC) has reported that, from 1999 through 2017, nearly 400,000 have died from overdoses from prescription or illicit opioids. It is our aim to offer effective alternatives to pain management.
Results of Operations
Overview and Financial Condition
Going Concern
Since inception, the Company has incurred approximately $19.3 million of accumulated net losses. In addition, during the six months ended June 30, 2022, the Company used $415,765 in operations and had a working capital deficit of $1,361,177. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company expects to obtain funding through additional debt and equity placement offerings until it consistently achieves positive cash flows from operations. If the Company is unable to obtain additional funding, it may not be able to meet all of its obligations as they come due for the next twelve months. The
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continuing viability of the entity and its ability to continue as a going concern is dependent upon the entity being successful in its continuing efforts in growing its revenue base and/or accessing additional sources of capital, and/or selling assets.
As a result, there is significant uncertainty whether the entity will continue as a going concern and, therefore, whether it will realize its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial statements.
Accordingly, no adjustments have been made to the financial statements relating to the recoverability and classification of the asset carrying amounts or the amount and classification of liabilities that might be necessary should the entity not continue as a going concern. At this time, management is of the opinion that no asset is likely to be realized for an amount less than the amount at which it is recorded in the financial statements at June 30, 2022.
While priority is on generating cash from operations through the sale of the Company’s products, management is also seeking to raise additional working capital through various financing sources, including the sale of the Company’s equity and/or debt securities, which may not be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to continue our business as desired and our operating results will be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us and/or our shareholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing shareholders will be reduced and the new equity securities may have rights, preferences or privileges senior to those of the current holders of our shares of Common Stock.
The following table sets forth the unaudited results of our operations for the three months ended June 30,
| 2022 |
| 2021 | |||
Net Sales | $ | 225,251 | $ | 202,954 | ||
Cost of goods sold: |
| 45,335 |
| 49,741 | ||
Gross profit |
| 179,916 |
| 153,213 | ||
Operating Expenses |
| 463,179 |
| 677,871 | ||
Loss from operations |
| (283,263) |
| (524,658) | ||
Other expense |
| (252,668) |
| (249,874) | ||
Net Loss | $ | (535,931) | $ | (774,532) | ||
Operating Results
April 1, 2022 through June 30, 2022 Compared to April 1, 2021 through June 30, 2021
Our sales totaled $225,251 for the three months ended June 30, 2022 and $202,954 for the three months ended June 30, 2021, an increase of $22,297 or 11%. The increase is primarily related to an increase in units sold. In the 2021 period, the COVID -19 pandemic had an impact on worldwide manufacturing and supply and affected our ability to replenish inventory. In addition, we were not able to attend trade shows.
Cost of sales and gross margins for the three months ended June 30, 2022 and for the three months ended June 30, 2021 were $45,335 and 80% and $49,741 and 75%, respectively. Our cost of sales consists of the cost of materials and distribution expenses. Cost of sales and gross margins are affected by product mix as well as the mix in the level of sales between commissioned agents and distributors. Higher shipping and distribution costs in 2021 period contributed to the increase in gross margin.
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The following table sets forth the operating expenses for the three months ended June 30:
| 2022 |
| 2021 |
| Change | ||||
Marketing | $ | 2,860 | $ | 56,756 | $ | (53,896) | |||
Commissions | 45,514 | 47,666 | (2,152) | ||||||
Payroll related | 207,164 | 205,909 | 1,255 | ||||||
Consulting and professional fees | 139,766 | 196,091 | (56,325) | ||||||
Research and development | 15,000 | 133,921 | (118,921) | ||||||
Other operating expenses | 52,875 | 37,528 | 15,347 | ||||||
$ | 463,179 | $ | 677,871 | $ | (214,692) | ||||
The following table sets forth the stock- based compensation expense included in the above operating expenses for the three months ended June 30:
| 2022 |
| 2021 |
| Change | ||||
Marketing | $ | — | — | — | |||||
Commissions | — | — | — | ||||||
Payroll related | — | — | — | ||||||
Consulting and professional fees | 45,000 | 110,400 | (65,400) | ||||||
Research and development | — | — | — | ||||||
Other operating expenses | — | — | — | ||||||
$ | 45,000 | $ | 110,400 | $ | (65,400) | ||||
Selling, general and administrative expenses consist primarily of payroll related expenses, commissions, consulting and professional fees, sales and marketing, research and development and other operating expenses. Selling, general and administrative expenses totaled $463,179 for the three months ended June 30, 2022 and $677,871 for the three months ended June 30,2021 a decrease of $214,692 or about 32%. The change is primarily due to decreases in research and development costs, professional fees and marketing.
The decrease in research and development costs reflects the initial development payment of approximately $122,000 made under contract in the 2021 period. Ongoing payments are made upon achievement of certain contractual milestones. The decrease in consulting and professional fees is the result of stock-based compensation recorded in conjunction with shares issued for investor relations and financial advisory services. The decrease in marketing expenses is due to the termination of various third- party arrangements.
Other expense increased by $2,794 primarily due to a decrease in gain in the change in fair market value of derivative liabilities and the loss on debt extinguishment of $116,200, partially offset by a decrease in interest expense of $636,012. The decrease in interest expense reflects a decrease in the amortization of debt discount related to debt conversions and maturities that occurred since June 2021 as well as no day 1 derivative loss for newly incurred debt in the 2022 period, as compared to the 2021 period. All derivative liabilities were settled as of December 31, 2021.
As a result of the foregoing, we recorded a net loss of $535,931 for the three months ended June 30, 2022, compared to a net loss of $774,532 for the three months ended June 30, 2021. The decrease in net loss is primarily attributed to the decrease in interest expense, the decrease in selling, general and administrative expenses and increased gross profit.
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The following table sets forth the unaudited results of our operations for the six months ended June 30:
| 2022 |
| 2021 | |||
Net Sales | $ | 447,145 | $ | 369,394 | ||
Cost of goods sold: |
| 112,976 |
| 91,332 | ||
Gross profit |
| 334,169 |
| 278,062 | ||
Operating Expenses |
| 1,342,989 |
| 2,367,254 | ||
Loss from operations |
| (1,008,820) |
| (2,089,192) | ||
Other expense |
| (671,647) |
| (1,245,724) | ||
Net Loss | $ | (1,680,467) | $ | (3,334,916) | ||
January 1, 2022 through June 30, 2022 Compared to January 1, 2021 through June 30, 2021
Our sales totaled $447,145 for the six months ended June 30, 2022 and $369,394 for the six months ended June 30, 2021. The increase is primarily related to an increase in units sold.
Cost of sales and gross margins for the six months ended June 30, 2022 and for the six months ended June 30, 2021 were $112,976 and 75% and $91,332 and 75%, respectively. Our cost of sales consists of the cost of materials and distribution expenses. Cost of sales and gross margins are affected by product mix as well as the mix in the level of sales between commissioned agents and distributors.
The following table sets forth the operating expenses for the six months ended June 30:
| 2022 |
| 2021 |
| Change | ||||
Marketing | $ | 6,098 | $ | 74,367 | $ | (68,269) | |||
Commissions | 87,247 | 88,640 | (1,393) | ||||||
Payroll related | 461,753 | 957,917 | (496,164) | ||||||
Consulting and professional fees | 669,225 | 1,024,739 | (355,514) | ||||||
Research and development | 30,000 | 142,221 | (112,221) | ||||||
Other operating expenses | 88,666 | 79,370 | 9,296 | ||||||
$ | 1,342,989 | $ | 2,367,254 | $ | (1,024,265) | ||||
The following table sets forth the stock- based compensation expense included in the above operating expenses for six months ended June 30:
| 2022 |
| 2021 |
| Change | ||||
Marketing | $ | — | $ | — | $ | — | |||
Commissions | — | — | — | ||||||
Payroll related | 4,703 | 604,890 | (600,187) | ||||||
Consulting and professional fees | 401,900 | 804,237 | (402,337) | ||||||
Research and development | — | — | — | ||||||
Other operating expenses | — | — | — | ||||||
$ | 406,603 | $ | 1,409,127 | $ | (1,002,524) | ||||
Selling, general and administrative expenses consist primarily of payroll related expenses, commissions, consulting and professional fees, sales and marketing, research and development and other operating expenses. Selling, general and administrative expenses totaled $1,342,989 for the six months ended June 30, 2022 and $2,367,254 for the six months ended June 30, 2021, a decrease of $1,024,265 or about 43%. The change is primarily due to decreases in stock-based compensation expense of $1,002,524, research and development costs of $112,221 and marketing costs of $68,269, partially offset by non -stock-based compensation related increases in payroll related costs of $104,023 and consulting and professional fees of $46,823. Stock-based compensation expense for the six months ended June 30, 2021, includes $804,237 related to third party agreements for financial and strategic advisory services and $604,890 related to shares of common stock issued to the Company’s CEO as compensation. Stock-based compensation expense for the six months ended June 30, 2022, includes $401,900 related to third party agreements for financial and strategic advisory services.
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The decrease in research and development costs reflects the initial development payment of approximately $122,000 made under contract in the 2021 period. Ongoing payments are made upon achievement of certain contractual milestones. The decrease in consulting and professional fees is the result of stock-based compensation recorded in conjunction with shares issued for investor relations and financial advisory services. The decrease in marketing expenses is due to the termination of various third- party arrangements.
The non -stock-based compensation increase in payroll related costs consists primarily of additional employee headcount and an increase in bonus paid to the Company’s CEO of approximately $42,000. The non-stock-based compensation increase in consulting and professional fees relates primarily to costs associated with operating as a public company.
Other expense decreased by $574,077 primarily due to a decrease in interest expense of $1,482,935, partially offset by a decrease in gain in the change in fair market value of derivative liabilities and a loss on extinguishment of debt of $371,882. The decrease in interest expense reflects a decrease in the amortization of debt discount related to debt conversions and maturities that occurred since June 2021 as well as no day 1 derivative loss for newly incurred debt in the 2022 period, as compared to the 2021 period. All derivative liabilities were settled as of December 31, 2021.
As a result of the foregoing, we recorded a net loss of $1,680,467 for the six months ended June 30, 2022, compared to a net loss of $3,334,916 for the six months ended June 30, 2021. The decrease in net loss is primarily attributed to the decrease in interest expense, the decrease in selling, general and administrative expenses and increased gross profit.
COVID-19 may impact our business.
On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the COVID-19 include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. COVID-19, and actions taken to mitigate it, have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical areas in which we operate. While it is unknown how long these conditions will last and what the complete financial effect will be to the Company, COVID-19 may have an adverse effect on our business. While we are taking diligent steps to mitigate any possible disruptions to our business, we are unable to predict the extent or nature of these impacts, at this time, to our future financial condition and results of operations.
Liquidity and Capital Resources
During the six months ended June 30, 2022 our cash and cash equivalents decreased by $317,941 reflecting cash used in operations of $415,765, partially offset by net proceeds from financing activities of $97,824. At June 30, 2022, the Company had a working capital deficit of $1,361,177 and cash on hand of $65,229. During the six months ended June 30, 2021, our cash and cash equivalents increased by $115,530, reflecting cash provided by financing activities of $844,037, partially offset by cash used in operations of $728,507.
Operating Activities
Cash flows used in operating activities totaled $415,765 for the six months ended June 30,2022 as compared to cash flows used of $728,507 for the six months ended June 30, 2021. The change in cash flows used in operating activities is primarily the result of a decrease in inventory purchases, increases in accounts payable and accrued liabilities as well as a decrease in the loss from operations.
Financing Activities
Cash flows provided by financing activities totaled $97,824 for the six months ended June 30, 2022 as compared to $844,037 for the six months ended June 30, 2021. The cash flows provided in the 2022 period reflect $494,220 in net proceeds from convertible promissory notes and $42,766 from the sale of common stock, partially offset by repayment of convertible promissory notes and related party notes payable totaling $425,375. The cash flows provided in the 2021 period are primarily the result of $950,000 in net proceeds from convertible promissory notes partially offset by related party notes payable repayments totaling $80,000.
On September 3, 2021, the Company entered into a forbearance agreement with one of its lenders. As additional consideration for entering into the forbearance agreement, the Company has agreed to issue the lender the number of shares equal to $100,000 on January 15,2022 at a 25% discount based upon the previous 15-day average closing price. Effective after January 15, 2022, if the Company enters into an agreement with a third-party investor for consideration per share less than the $0.50 fixed price per share of the notes, the
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Company agrees to amend and restate the notes to reduce the conversion price. On January 20, 2022, the conversion price was reset to $0.025 for the remaining outstanding notes.
On March 25, 2022, the Company amended its forbearance agreement with one of its lenders. Under the amendment, the maturity dates of the outstanding notes were changed to October 1, 2022. In addition, the Company will issue 8,000,000 shares of its common stock at a share price of $0.025, 4,000,000 which is in lieu of the discounted shares equal to $100,000 stated in the original agreement. The Company will also make six monthly payments of $30,000. The Company made a good faith payment of $30,000 in February 2022 and its first payment under the amendment in March 2022. On May 9, 2022, the Company issued 8,000,000 shares of its common stock as per the terms of the forbearance agreement. In June 2022, the Company entered into a settlement agreement with the lender to convert the outstanding convertible notes payable of $617,353 and accrued interest of $51,017 into 26,734,801 restricted shares of the Company’s common stock at a price of $0.025 per share. Under the terms of the settlement agreement, the number of shares of common stock to be issued under the earlier forbearance agreement was reduced to 4,000,000 and was recorded as a reduction of $142,800 in the extinguishment of debt resulting in a total loss for the six months ended June 30, 2022 of $62,800.
On July 6, 2022, the Company borrowed $172,540 in conjunction with an unsecured promissory note with an investor. Proceeds of $154,000 include an original issue discount of $18,480. An up-front interest charge at twelve percent (12%) of the principal will be added to the principal balance for an outstanding balance of $193,178 to be paid in ten monthly payments of $19,318 beginning August 30, 2022. The note matures on July 6, 2023.
As of August 10, 2022, 2022, one of the Company’s lenders, converted $60,953 in principal and $44,047 in accrued interest and fees into 4,200,000 of restricted common shares at a conversion price of $0.025. The same lender exercised 3,507,998 cashless warrants at $0.025 per share issuing 2,710,000 shares of restricted common stock.
On August 8, 2022, the Company entered into an agreement to borrow $176,000 in conjunction with an unsecured convertible promissory note from an investor. Proceeds of $160,000 include an original issue discount of $16,000 The note matures on May 9, 2023. The lender has the right at any time prior to maturity to convert the debt into fully paid and non- assessable shares of common stock at a price of $0.025 per share. Conversions are subject to adjustments due to stock dividends, stock splits, rights offerings or combinations, recapitalizations and reorganizations. Interest accrues at the rate of twelve percent (12%) per annum. As additional consideration for the financing, the Company issued the investor a 3-year warrant to purchase 3,000,000 shares of common stock at $0.025 per share, subject to price adjustments for certain actions, including dilutive issuances. The warrant does not provide for registration rights. Funding has not occurred as of the date of this filing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely and reliable financial reporting and the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America.
As of the period ended June 30, 2022, our principal executive officer and principal financial officer completed an assessment of the effectiveness of our disclosure controls and procedures, to determine the existence of any material weaknesses or significant deficiencies. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.
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Based on this evaluation, the Company’s management concluded its internal controls over financial reporting were not effective as of June 30, 2022. The ineffectiveness of the Company’s internal control over financial reporting was due to the following identified material weaknesses and significant deficiencies:
Material Weakness
Management identified the following material weaknesses:
Changes in Internal Control over Financial Reporting.
Our management will continue to monitor and evaluate the designation, implementation and effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are presently no material pending legal proceedings to which the Company, any executive officer, or any owner of record or beneficially of more than five percent of any class of voting securities is a party, or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.
ITEM 1A. RISK FACTORS
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In February and March 2017, the Company executed a promotion whereby distributors who made purchases during the promotional period would receive credits towards either future purchases of product through September 1, 2017 or shares of stock. Credits totaling $173,955 were earned by such distributors of which $1,010 had been applied against purchases of product. The remaining credit of $172,945 would be satisfied in shares of the Company’s common stock. As of and for the year ended December 31, 2017, an accrual for $170,930 of the amount of the net credits has been recorded as marketing expense in the statement of operations as well as within accrued liabilities on the accompanying balance sheet. The Company recorded the amount as marketing expense as the promotion was provided directly to distributors rather than to end users. In 2018, the Company issued 243,584 common shares to 25 unaffiliated shareholders earned in the 2017 promotional program. The issuances were made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. The distributors were “accredited investors” and/or “sophisticated investors” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning their qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to the distributors full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the
24
restricted securities. The distributors acquired the restricted common stock for their own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On December 31, 2017, the Company issued 15,000,000 common shares to Matthew Wolfson (“Wolfson”) for services valued at $697,984. Two million were registered in the Company’s S-1 made effective August 6, 2020. The issuance to Wolfson was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Wolfson was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Wolfson full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Wolfson acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On September 19, 2018, the Company issued 5,000 common shares to Body Tone, a sole proprietorship (“Body Tone”) for $5,000. The issuance to Body Tone was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Body Tone was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Body Tone full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Body Tone acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On October 31, 2018, the Company issued 100,000 common shares to Gene Taubman (“Taubman”) for $100,000. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Taubman was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Taubman was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Taubman full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Taubman acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On November 29, 2018, the Company issued 247,565 common shares to EBI (“EBI”) as a settlement for debt valued at 175,771. The issuance to EBI was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. EBI was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to EBI full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. EBI acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On January 24, 2019, the Company issued 28,169 common shares to Robert L. Hymers, III (“Hymers”) for $20,000. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Hymers was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated
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thereunder, with respect to the issuance of the restricted stock. Hymers was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Hymers full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Hymers acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 7, 2019, the Company issued 20,000 common shares to Chester W. Hedderman (“Hedderman”) for $20,000. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Hedderman was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Hedderman was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Hedderman full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Hedderman acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 12, 2019, the Company sold 150,000 common shares to Robert L. Hymers, III (“Hymers”) for services valued at $106,500. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Hymers was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Hymers was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Hymers full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Hymers acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 28, 2019, the Company sold 21,126 common shares to Robert L. Hymers, III (“Hymers”) for 15,000. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020.The issuance to Hymers was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Hymers was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Hymers full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Hymers acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On March 27, 2019, the Company sold 35,211 common shares to James Hancock (“Hancock”) for $25,000. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Hancock was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Hancock was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Hancock full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Hancock acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant
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to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On June 28, 2019, the Company sold 43,461 common shares to Robert L. Hymers, III (“Hymers”) for services valued at $30,857. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Hymers was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Hymers was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Hymers full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Hymers acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On July 1, 2019, the Company sold 42,253 common shares to Robert L. Hymers, III (“Hymers”) for $30,000. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020.The issuance to Hymers was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Hymers was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Hymers full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Hymers acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On July 1, 2019, the Company sold 10,000 shares to PYP Enterprises (“PYP”) for services valued at $7,100. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to PYP was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. PYP was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to PYP full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. PYP acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On July 1, 2019, the Company sold 10,000 common shares to Brenda Andrews (“Andrews”) for services valued at $7,100. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Andrews was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Andrews was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning her qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Andrews full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Andrews acquired the restricted common stock for her own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On October 11, 2019, the Company sold 64,215 common shares to Nikolai Ogorodikov (“Ogorodikov”) for conversion of a note and accrued interest. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Ogorodikov was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Ogorodikov was an “accredited
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investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Ogorodikov full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Ogorodikov acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On October 24, 2019, the Company sold 39,363 common shares to Ben and Carol Howden (“Howden”) for conversion of a note and accrued interest. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Howden was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Howden was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning their qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Howden full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Howden acquired the restricted common stock for their own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On October 30, 2019, the Company sold 28,169 common shares to Eyelyn Easson (“Easson”) for settlement of a liability. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Easson was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Easson was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning her qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Easson full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Easson acquired the restricted common stock for her own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On November 1, 2019, the Company sold 1,000,000 common shares to Donald Steinberg (“Steinberg”) for conversion of KISS note. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Steinberg was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Steinberg was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Steinberg full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Steinberg acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On January 23, 2020, the Company sold 10,355 common shares to Tim Manning (“Manning”) settlement of a liability. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Manning was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Manning was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Manning full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Manning acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold
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unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 11, 2020, the Company sold 200,000 common shares to Robert L. Hymers, III (“Hymers”) for services valued at $102,000. These shares were registered in the Company’s S-1 registration statement made effective August 6, 2020. The issuance to Hymers was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Hymers was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning his qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Hymers full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Hymers acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 27, 2020, the Company sold 400,000 common shares to RedStone Consultants (“RedStone”) for services valued at $188,000. The issuance to RedStone was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. RedStone was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to RedStone full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. RedStone acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On June 4, 2020, the Company sold 100,000 common shares to Vista Capital (“Vista”) as original issue discount on debt valued at $51,000. The issuance to Vista was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Vista was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Vista full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Vista acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On June 15, 2020, the Company sold 142,857 common shares to Pro Active Capital (“Pro Active”) for $50,000. The issuance to Pro Active was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Pro Active was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Pro Active full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Pro Active acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On November 3, 2020, the Company sold 65,000 common shares to PCG Advisory for services valued at $55,900. The issuance to PCG was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. PCG was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties
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and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to PCG full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. PCG acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On December 14, 2020 Vista Capital Investments, LLC converted is promissory note of unpaid principal and accrued interest $118,800 in 339,429 shares of common stock. The issuance to Vista was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Vista was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Vista full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Vista acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 18, 2021, Redstart Holdings Corp. converted $30,000 of unpaid principal into 112,824 common shares from a convertible note. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 22, 2021, Redstart Holdings Corp. converted $35,000 of unpaid principal into 145,833 common shares from a convertible note. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On March 9, 2021, Redstart Holdings Corp. converted $15,000 of unpaid principal into 88,600 common shares from a convertible note dated August 11, 2020. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
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On March 10, 2021, Redstart Holdings Corp. converted $23,000 of unpaid principal and $5,150 of accrued and unpaid interest into 171,856 common shares from a convertible note dated August 11, 2020. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On March 15, 2021, Redstart Holdings Corp. converted $25,000 of unpaid principal into 152,625 common shares from a convertible note dated September 8, 2020. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On March 18, 2021, Redstart Holdings Corp. converted $53,000 of unpaid principal and $3,900 of accrued and unpaid interest into 347,375 common shares from a convertible note dated September 8, 2020. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On April 1, 2021, JSJ Investments, Inc. converted $30,000 of unpaid principal into 238,095 common shares from a convertible note. The issuance to JSJ was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. JSJ was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to JSJ full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. JSJ acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On April 8, 2021, JSJ Investments, Inc. converted $40,000 of unpaid principal into 361,572 common shares from a convertible note. The issuance to JSJ was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. JSJ was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to JSJ full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. JSJ acquired the restricted common stock for its own account, for
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investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On April 28, 2021, JSJ Investments, Inc. converted $38,000 of unpaid principal and $5,795.07 in accrued interest into 639,539 common shares from a convertible note dated September 28, 2020. The issuance to JSJ was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. JSJ was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to JSJ full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. JSJ acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On April 28, 2021, Redstart Holdings Corp. converted $30,000 of unpaid principal into 373,134 common shares from a convertible note dated October 22, 2020. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On May 6, 2021, Redstart Holdings Corp. converted $20,000 of unpaid principal into 385,356 common shares from a convertible note dated October 22, 2020. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On May 7, 2021, Redstart Holdings Corp. converted $35,000 of unpaid principal into 674,374 common shares from a convertible note dated October 22, 2020. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On May 12, 2021, Redstart Holdings Corp. converted $25,000 of unpaid principal into 520,833 common shares from a convertible note dated October 22, 2020. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2)
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of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On May 17, 2021, Redstart Holdings Corp. converted $18,000 of unpaid principal and $6,400 of interest into 602,469 common shares from a convertible note dated October 22, 2020. The issuance to Redstart was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Redstart was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Redstart full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Redstart acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On May 25, 2021, YA II PN, Ltd, converted $60,000 of unpaid principal and $1,301.37 of interest into 1,802,981 common shares from a convertible note dated May 7, 2021. The issuance to YA II PN, Ltd, was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. YA II PN, Ltd, was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to YA II PN, Ltd, full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. YA II PN, Ltd, acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On June 8, 2021, Jefferson Street Capital, LLC converted $40,000 of unpaid principal and $750 of expense into 1,344,440 common shares from a convertible note dated December 1, 2020. The issuance to Jefferson Street Capital, LLC was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Jefferson Street Capital, LLC was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Jefferson Street Capital, LLC full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Jefferson Street Capital, LLC acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On June 16, 2021, YA II PN, Ltd, converted $65,000 of unpaid principal and, $1,197.26 of interest into 1,946,978 common shares from a convertible note dated May 7, 2021. The issuance to YA II PN, Ltd, was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. YA II PN, Ltd, was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to YA II PN, Ltd, full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. YA II PN, Ltd, acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale
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or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On June 17, 2021, GS Capital Partners, LLC converted $40,000 in principal and $2,005.48 in interest and $325 of expense into 1,675,591 common shares from a convertible note dated December 11, 2020. The issuance to GS Capital Partners, LLC was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. GS Capital Partners, LLC was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to GS Capital Partners, LLC full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. GS Capital Partners, LLC acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On July 8, 2021, YA II PN, Ltd, converted $85,000 of unpaid principal and, $787.67 of interest into 1,910,638 common shares from a convertible note dated May 7, 2021. The issuance to YA II PN, Ltd, was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. YA II PN, Ltd, was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to YA II PN, Ltd, full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. YA II PN, Ltd, acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On July 9, 2021, Jefferson Street Capital, LLC converted $50,000 of unpaid principal and expenses of $750 into 1,169,354 common shares from a convertible note dated December 1, 2020. The issuance to Jefferson Street Capital, LLC was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Jefferson Street Capital, LLC was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Jefferson Street Capital, LLC full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Jefferson Street Capital, LLC acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On July 15, 2021, GS Capital Partners, LLC converted $40,000 in principal and $2,312.33 in interest and $175 in expense into 1,087,745 common shares from a convertible note dated December 11, 2020. The issuance to GS Capital Partners, LLC was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. GS Capital Partners, LLC was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to GS Capital Partners, LLC full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. GS Capital Partners, LLC acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
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On July 23, 2021, YA II PN, Ltd, converted $80,000 of unpaid principal and, $4,021.92 of interest into 2,386,985 common shares from a convertible note dated May 7, 2021. The issuance to YA II PN, Ltd, was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. YA II PN, Ltd, was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to YA II PN, Ltd, full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. YA II PN, Ltd, acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On August 9, 2021, GS Capital Partners, LLC converted $30,000 in principal and $1,939.73 in interest and $175 in expense into 1,193,811 common shares from a convertible note dated December 11, 2020. The issuance to GS Capital Partners, LLC was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. GS Capital Partners, LLC was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to GS Capital Partners, LLC full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. GS Capital Partners, LLC acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 11, 2022, the Company issued 3,629,725 common shares to Mast Hill Fund, LP from its exercise of a warrant dated October 13, 2021. The issuance to Mast Hill Fund, LP was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Mast Hill Fund, LP was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Mast Hill Fund, LP full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Mast Hill Fund, LP acquired the restricted common stock for its own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 17, 2022, the Company issued 7,500,000 common shares to Robert L. Hymers, III, for consulting services. The issuance to Mr. Hymers was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Mr. Hymers was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Mr. Hymers full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Mr. Hymers acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 23, 2022, the Company issued 850,000 common shares to Gene Taubman, for consulting services. The issuance to Mr. Taubman was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Mr. Taubman was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Mr. Taubman full information regarding its business and operations. There was no general
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solicitation in connection with the offer or sale of the restricted securities. Mr. Taubman acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 24, 2022, the Company issued to Robert L. Hymers, III, 7,500,000 common shares for consulting services. The issuance to Mr. Hymers was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. Mr. Hymers was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to Mr. Hymers full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. Mr. Hymers acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
On February 24, 2022, the Company issued 2,500,000 common shares to North Equities USA, Ltd., for consulting services. The issuance to North Equities was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder, with respect to the issuance of the restricted stock. North Equities was an “accredited investor” and/or “sophisticated investor” pursuant to Section 501(a)(b) of the Securities Act, who provided the Company with representations, warranties and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made available to North Equities full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. North Equities acquired the restricted common stock for his own account, for investment purposes and not with a view to public resale or distribution thereof within the meaning of the Securities Act. The restricted shares cannot be sold unless pursuant to an effective registration statement by the Company, or by an exemption from registration requirements of Section 5 of the Securities Act—the existence of any such exemption subject to legal review and approval by the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
On November 10, 2021, the Company entered into a material definitive agreement not made in the normal course of its business. The parties are the Company, White Lion Capital, LLC and Univest Securities, LLC. With the exception of the entry into the material definitive agreement, no material relationship exists between the Company, or any of the Company’s affiliates or control persons, and White Lion and Univest, or any of their respective affiliates or control persons.
Pursuant to a Common Stock Purchase Agreement between the Company and White Lion, White Lion agreed to invest up to Five Million Dollars ($5,000,000) to purchase the Company’s Common Stock, par value $0.00001per share. Concurrently, the Company and White Lion entered into a Registration Rights Agreement, as an inducement to White Lion to execute and deliver the Common Stock Purchase Agreement, whereby the Company agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, and applicable state securities laws, with respect to the shares of Common Stock issuable for White Lion’s investment pursuant to the Common Stock Purchase Agreement.
The Common Stock Purchase Agreement terminates thirty-six (36) months after the Effective Date, or conditioned upon the following events: (i) when White Lion has purchased an aggregate of Five Million Dollars ($5,000,000) in the Company’s Common Stock; (ii) at such time that the Registration Statement agreed to in the Registration Rights Agreement is no longer in effect: (iii) upon White Lion’s
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material breach of contract; (iv) in the event a voluntary or involuntary bankruptcy petition is filed concerning the Company; or, (v) if a Custodian is appointed for the Company or for all or substantially all of its property or the Company makes a general assignment for the benefit of its creditors.
On November 10, 2021In connection with the material definitive agreement, the Company also contracted with Univest Securities, LLC as the Company’s non-exclusive placement agent in connection with the offering and sale by the Company of the securities pursuant to Section 4(a)(2) under the Securities Act, with the terms of such offering to be subject to market conditions and negotiations between the Company, the Placement Agent and the Investor.
ITEM 6. EXHIBITS
The following exhibits are included as part of this report:
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38
39
40
10.60 | November 10, 2021 Registration Rights Agreement, White Lion Capital, LLC | Incorporated by reference from the Company’s Form 10-Q filed November 15, 2021. | ||
10.61 | November 10, 2021 Common Stock Purchase Agreement, White Lion Capital, LLC | Incorporated by reference from the Company’s Form 10-Q filed November 15, 2021. | ||
10.62 | June 21, 2022 Settlement Agreement and Release with JR-HD Enterprises III, LLC | |||
20.01 | Incorporated by reference to the Company’s Form 10-K filed on March 30, 2021. | |||
31.1 | ||||
32.1 | ||||
101.INS | Inline XBRL Instance Document | Filed herewith. | ||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed herewith. | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith. | ||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith. | ||
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | Filed herewith. | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith. | ||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 15, 2022
| ELECTROMEDICAL TECHNOLOGIES INC. | |
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| By: | /s/ Matthew Wolfson |
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| Matthew Wolfson |
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| President Chief Executive Officer |
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| (Principal Executive Officer) |
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| By: | /s/ Matthew Wolfson |
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| Matthew Wolfson |
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| Chief Financial Officer |
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| (Principal Financial and Accounting Officer) |
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