You should read the following discussion and analysis of our financial condition
and plan of operations together with "Summary Financial Data" and our financial
statements and the related notes appearing elsewhere in this Quarterly Report on
Form 10-Q. In addition to historical information, this discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those discussed
below. Factors that could cause or contribute to such differences include, but
are not limited to, those identified below, and those discussed in the section
titled "Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q.
All amounts in this Quarterly Report on Form 10-Q are in U.S. dollars, unless
otherwise noted.
Throughout this Quarterly Report on Form 10-Q, references to "we," "our," "us,"
"Company," "Optimus," or "Optimus Healthcare Services" refer to Optimus
Healthcare Services, Inc.., individually, or as the context requires,
collectively with its subsidiaries.
Overview
The Company is dedicated to: (1) improving patient/physician interactions and
outcomes through the acquisition and deployment of telehealth and compliance
technologies (TACT); (2) advancing access to clinical trial research; and (3)
improving and simplifying access to vaccines and pharmaceutical products.
Currently the Company provides these services through its portfolio companies,
AdhereRx Corporation (d/b/a "PainScript"), Clinical Research Alliance, Inc.
("CRA"), and Worker's Health Rx (d/b/a "Vitality Rx").
Our vision for the Company is to continue to grow by acquiring controlling
interests in healthcare-related businesses with strong leadership teams,
innovative products and services, and proven technologies or processes that
expand access to high quality healthcare and improve overall health outcomes and
physical well-being. Our goal at Optimus is to empower physicians and patients
with the information, guidance and tools needed to make informed health care
choices. The Company seeks synergies among its portfolio companies and
facilitates access to its management team which has extensive industry
experience - including 17 drug or device approvals - and its network of
financial and business partners to help finance growth and accelerate business
market trajectories.
Clinical Research Alliance
On December 28, 2020, the Company acquired 100% of the outstanding equity
interests in Optimus Healthcare Services, Inc., a Delaware corporation
("Optimus"), in exchange for 9,998,899 shares of its Series A convertible
preferred stock and 18,000,000 shares of its common stock. In connection with
the transaction all prior officers and directors of the Company (except Michael
Pruitt who recently resigned as a director) resigned and new officers and
directors were appointed as officers and directors of the Company. On November
25, 2020, Clinical Research Alliance Acquisition Corp. ("CRAAC"), an entity 99%
owned by Optimus, acquired 100% of the outstanding equity interests in CRA in
exchange for 70 shares of its common stock.
CRA provides services to a world-class team of dedicated oncologists across the
Tri-State area that are united by a shared commitment to conduct clinical
research. CRA provides independent, community-based oncology practices and
hospitals in diverse communities with the necessary infrastructure and support
to enroll their patients in cutting edge clinical trials without the patients
having to leave their physicians' offices, hospitals or local communities.
CRA currently supports a number of community-based physicians and has signed an
agreement with its first acute care hospital in New York City. CRA's current
focus is with oncologists in private practice, as well as rural and small
hospitals in diverse communities.
2
CRA contracts with pharmaceutical companies and Contract Research Organizations
("CRO") to conduct clinical trials (Phases I-IV) for investigational new drugs,
biologics and medical devices, and has worked with over 40 pharmaceutical
companies since inception. CRA's customers consist primarily of large and
mid-sized pharmaceutical and biotech companies. In the last 12 years, CRA has
conducted 180 clinical trials. As CRA was the highest enroller in many of these
clinical trials, many of those clinical trials led to FDA approval for the trial
compounds used to treat various cancers. Depending on the clinical trial design,
CRA invoices the pharmaceutical manufacturer for some or all of the following
services: startup fees, diagnostic tests, laboratory tests, patient stipends,
pharmacy fees, patient visits, document storage and the reporting of serious
adverse events.
CRA also contracts with independent community-based oncology practices and
hospitals in diverse communities to assist in the conduct of the clinical
trials. CRA's services to the community-based practices and hospitals in diverse
communities include:
(1) maintaining the documentation necessary for the conduct of the clinical
trial;
(2) obtaining Internal Review Board ("IRB") approval;
(3) collecting data required by the trial protocol;
(4) filing regulatory and compliance related documentation; and
(5) dispensing drugs necessary to conduct the clinical trial.
Our contracts with the community-based practices and hospitals include specific
budgets for particular services rendered. The contracts may range in duration
from a few months to several years or longer depending on the nature of the work
performed. In some cases, a portion of the contract fee is paid at the time the
contract is executed with the balance of the contract fee payable either monthly
or in installments upon the achievement of milestones over the study duration.
Our contracts generally may be terminated or reduced in scope either immediately
or upon short notice. Our contracts with our community-based oncology practices
and hospitals result in the payment of fees for services rendered to the
principal investigator that is conducting a particular clinical trial. The
COVID-19 pandemic did not impact any open trials that were ongoing as CRA was
able to conduct business remotely instead of through on-site visits. However, it
did impact the number of new trials that were initiated in 2020 and 2021.
CRA employs experienced Clinical Research Coordinators that travel to the
community-based practices and hospitals for required study visits. Additionally,
CRA's principal investigator for a specific clinical trial is in contact with
the oncology practices and hospitals to provide the necessary oversight.
Community-based practices and hospitals choose CRA because we provide the
opportunity to conduct and conveniently enroll their patients in important
clinical trials often unavailable to those community-based practice groups and
hospitals. In addition, CRA is committed to increasing clinical trial access to
patients from diverse and underserved communities that will better represent the
real-world population. Although CRA's historical focus has been in the area of
oncology, in the future we intend to expand our therapeutic reach into
gastroenterology, dermatology, cardiology, urology and ophthalmology. The
National Institutes of Health estimate that there are currently 126,164 active
clinical studies in these therapeutic areas.
The clinical research industry is fragmented, consisting of many small, niche
service providers, a number of medium-sized providers and a number of large CROs
that are differentiated by the scale of their global operations, breadth of
service portfolios and supporting technology infrastructure. Companies like CRA
generally compete on the basis of previous product experience, the ability to
recruit patients, the depth of therapeutic and scientific expertise, the
strength of project teams, price and increasingly on the ability to apply new
innovation that can drive significant time and cost savings throughout the
development process.
On May 1, 2020, CRA entered into a note agreement for an aggregate principal
amount of $146,250 with JPMorgan Chase Bank, N.A. ("JPMorgan Chase") under the
Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") administered by
the U.S. Small Business Administration ("SBA") (the "2020 PPP Loan"). On
February 19, 2021, CRA entered into a note agreement for an aggregate principal
amount of $148,975 with JPMorgan Chase under the CARES Act administered by the
SBA (the "2021 PPP Loan" and together with the 2020 PPP Loan, the "PPP Loans").
CRA received total aggregate proceeds of $295,225 under the PPP Loans. In
accordance with the requirements of the CARES Act, CRA used proceeds from the
PPP Loans primarily for payroll costs. The 2020 PPP Loan was scheduled to mature
on May 1, 2021 and the 2021 PPP Loan was scheduled to mature on February 19,
2022, each with a 1% interest rate and subject to the terms and conditions
applicable to loans administered by the SBA under the CARES Act. $126,545.50 of
the 2020 PPP Loan was forgiven on March 26, 2021. The remaining balance of
$19,136.50 of the 2020 PPP Loan was not forgiven because an employee was
terminated during the period. This amount is due in five years and is being
repaid on a monthly basis. The 2021 PPP Loan was fully forgiven on November 3,
2021.
3
PainScript
On March 25, 2021, Optimus Health, Inc., a wholly owned subsidiary of the
Company, acquired 100% of the outstanding equity interests in AdhereRx
Corporation (d/b/a PainScript) ("PainScript") in exchange for an aggregate of
2,000,000 shares of the Company's common stock, including shares issuable upon
satisfaction of certain milestones. On December 28, 2021, we entered into an
amendment to the stock acquisition agreement by and among the Company, Optimus
Health, AdhereRx Corporation and Daniel Cohen, pursuant to which we agreed to
modify the commercial milestones which need to be achieved for the release of
400,000 shares of the Company's common stock to be equal to: (i) the generation
of at least $80,000 in aggregate revenue between December 31, 2021 and March 31,
2022; or (ii) between December 31, 2021 and March 31, 2022, the entry into one
or more commercial enterprise contracts that will generate revenue during their
term not less than $200,000 from commercial sales of the Chronic Care Management
application (a "Commercialization Success"). On April 13, 2022, we entered into
a second amendment to the stock acquisition agreement by and among the Company,
Optimus Health, AdhereRx Corporation and Daniel Cohen, pursuant to which we
agreed that upon a Commercialization Success and the Company's receipt of
revenue in excess of $200,000 from the commercial enterprise contracts entered
into in connection with such Commercialization Success or a Change of Control
(as defined therein), the Company shall release the 400,000 shares of Company
common stock to the PainScript shareholders.
PainScript is a telehealth company that leverages a telehealth and compliance
technology (TACT) software-as-a-service platform (SaaS) focused on creating a
personalized pathway to support interventions for chronic care patients
suffering from opioid and other substance use disorders (SUD), as well as those
patients treated for pain management.
According to data released by the Centers for Medicare and Medicaid Services
(CMS), there were nearly 52.7 million fee-for-service telehealth visits by
Medicare beneficiaries in 2020, up from 840,000 in 2019. Based on information
included in an article published by the Substance Abuse and Mental Health
Services Administration in 2018, there are approximately 100 million chronic
pain patients, of which 23 million are chronic severe pain patients, and
approximately 18 - 20 million chronic pain patients currently in treatment. We
believe there are approximately 7-10.5 million patients with substance use
disorder (SUD), of which approximately 1-2 million are currently in treatment
and approximately 43.8 million patients with mental illness, of which 7 - 10
million are currently in treatment.
PainScript's SaaS platform has been scientifically validated in nine
peer-reviewed and published studies, co-funded by the National Institute of
Health, or NIH, and/or the National Institute of Mental Health, or NIMH.
PainScript's approach is easily accessible and user-friendly via a digital
platform to provide the physician and patients daily, evidence-based clinical
queries and telehealth monitoring interventions designed to effectively improve
patient compliance with individual care plans, treatment protocols, and
medication adherence. Increased compliance with physician prescribed treatments
is believed to lead to better health outcomes and a reduction in related
healthcare costs. The TACT platform uses daily contact between scheduled
physician meetings as clinical evidence demonstrates greater adherence to
treatment protocols that, in turn, may lead to an improved health benefit. The
TACT platform is designed with a HIPAA compliant "concierge medicine" approach,
allowing for real-time doctor-patient interactions, remote monitoring and
communication, and a potential early warning of treatment or health related
complications.
4
PainScript began initial commercial operations with a "soft launch" late in 3Q
2021, with commercial product application updates developed simultaneously with
commercial installations. Anticipating a 4-6-month sales cycle, PainScript began
commercial activities by offering physician practices a 60-90 day "Kickstarter"
program to deploy the TACT platform on a limited patient population. Following
validation of the initial approach, a traditional enterprise usage relationship
based on anticipated practice volume for patients that meet the standard
"medically necessary" criteria will be employed. By mid-April of 2022, and while
PainScript had enrolled over 960 patients across six different practice groups
in nine locations, the market clearly shifted as COVID restrictions relaxed and
a general return to normal activities changed practice needs for telehealth.
PainScript responded by adopting new practice approaches and price points for
services in 2Q2022, dropped the "Kick Starter" option and began to rebuild
customer relationships. With a contract salesforce and a new approach,
PainScript has relaunched with nine practice groups representing approximately
650 patients. The sales cycle remains 4-6 months, followed by a 60+ day
on-boarding to first patient enrollment. On-boarding is impacted by the time
required of Android and Apple store "white labeling" functions and is not a
controllable issue by PainScript. Initial practice revenue, priced on a per
patient/per month model, begins 30 days post-first patient enrollment.
PainScript derives revenues from the physician practice group based on a "per
patient, per month" model. Practices may consider billing for these services to
public and private healthcare plans (or payors) for medically necessary usage of
the PainScript TACT platform, using existing and closely aligned American
Medical Association (AMA) Current Procedural Terminology (CPT) codes. These
existing CPT codes may include Digital Evaluation and Management, Remote Patient
Monitoring and/or Remote Therapeutic Monitoring. All decisions of what to bill,
or if to bill, are made in the professional judgment of the treating physician.
The initial market focus is chronic pain patients under a physician's direct
management, medically assisted treatment facilities for Opioid Use Disorders and
related recovery and SUD patients under psychiatric care. An additional area of
focus for near term development as a subsequent vertical is bariatric treatment
- both physician based and surgical. A Scientific Advisory Board ("SAB") for
bariatric treatment has been recruited and the nascent division is anticipated
to operate under the d/b/a of "HealthScript."
The telehealth market is rapidly evolving and highly competitive. We expect
competition to intensify in the future as existing competitors and new entrants
introduce new telehealth services and software platforms or other technology to
U.S. healthcare providers, particularly hospitals and healthcare systems. We
currently face competition from a range of companies, including other
specialized software providers that are continuing to grow and enhance their
service offerings and develop sophisticated and effective transaction and
service platforms. In addition, large, well-financed healthcare providers have
in some cases developed their own telehealth services and technologies utilizing
their own and third-party platforms and may provide these solutions to their
patients.
Vitality Rx
On January 28, 2022, the Company entered into a stock purchase agreement with
Worker's Health Rx, Inc., d/b/a Vitality Rx ("Vitality Rx") and Marc Wiener, the
sole shareholder, who is also our President , pursuant to which we acquired 100%
of the outstanding equity interests of Vitality Rx in exchange for the issuance
of 250,000 shares of our common stock and $350,000. The cash portion of the
purchase price has been paid in full.
Vitality Rx is a pharmacy dedicated to serving the pharmacy needs of clients and
patients, community based or residing in Long-Term Care facilities, in a timely
and caring manner. The pharmacy maintains an extensive on-site inventory of
brand and generic medications and common and esoteric vaccines and hyperimmune
agents In addition, Vitality Rx is exploring the possibility of providing
pharmaceuticals and clinical and consulting services to senior living providers
which includes, but is not limited to, skilled nursing facilities, assisted
living facilities, memory care centers and group homes.
5
Recent Developments
On June 7, 2022, we entered into a securities purchase agreement with certain
accredited investors pursuant to which we issued senior secured convertible
notes in an aggregate principal amount of $2.2 million for an aggregate purchase
price of $2.0 million ("June 2022 Notes"). In connection with the issuance of
the June 2022 Notes, we issued to the investors warrants to purchase an
aggregate of 1,540,000 shares of common stock and 200,000 shares of common
stock.
The June 2022 Notes each have a term of twenty-four months and mature on June 7,
2024, unless earlier converted. The June 2022 Notes accrue interest at a rate of
9% per annum, subject to increase to 20% per annum upon and during the
occurrence of an event of default. Interest is payable in cash on a quarterly
basis beginning on July 1, 2022. The June 2022 Notes are convertible at any
time, at the holder's option, into shares of our common stock at an initial
conversion price of $1.00 per share, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 9.99%). The conversion price is
also subject to adjustment due to certain events, including stock dividends,
stock splits and in connection with the issuance by the Company of common stock
or common stock equivalents at an effective price per share lower than the
conversion price then in effect.
Each warrant is exercisable for a period of five years from the date of issuance
at an initial exercise price of $1.25 per share, subject to certain beneficial
ownership limitations (with a maximum ownership limit of 9.99%). The exercise
price is also subject to adjustment due to certain events, including stock
dividends, stock splits and in connection with the issuance by the Company of
common stock or common stock equivalents at an effective price per share lower
than the exercise price then in effect. The investors may exercise the warrants
on a cashless basis if the shares of common stock underlying the warrants are
not then registered pursuant to an effective registration statement. In the
event the investors exercise the warrants on a cashless basis, then we will not
receive any proceeds.
The June 2022 Notes rank pari passu with the senior secured convertible notes
issued in a May 2021 financing (the "May 2021 Notes") and senior to all current
and future indebtedness of the Company and are secured by substantially all of
the assets of the Company. In addition, some of the Company's subsidiaries
entered into a subsidiary guaranty agreement and guaranteed the obligations owed
to investors under the June 2022 Notes.
A Registration Rights Agreement was executed in connection with the issuance of
the June 2022 Notes, the warrants and the common stock. If we fail to have it
filed with the SEC within 180 days following the date of the financing, or if
the Company fails to maintain the effectiveness of the registration statement
until all of such shares of common stock have been sold or are otherwise able to
be sold pursuant to Rule 144 under the Securities Act of 1933, as amended,
without any volume or manner of sale restrictions, then the Company will be
obligated to pay to the holders of the May 2021 Notes then, in addition to any
other rights the holders may have hereunder or under applicable law, until the
applicable event of default is cured, liquidated damages equal to an amount in
cash, their pro rata portion of $20,000, on the date of such event of default
and on every thirtieth (30th) day (pro-rated for periods totaling less than
thirty days) thereafter. If the Company is not 144 eligible and if all the
securities included by this Registration Statement and the June 2022 financing
are not subject to one or more registration statements declared effective by the
Commission within 180 days of the date hereof, the following partial liquidated
damages shall apply: (i) if none of the registrable securities are so
registered, $40,000 per month; and (ii) if only the registrable securities
covered by the May 2021 Registration Rights Agreement are subject to a
registration statement declared effective by the Commission within the
applicable time period, $20,000 per month, in each case until cured.
On April 13, 2022, we entered into a second amendment to the stock acquisition
agreement by and among the Company, Optimus Health, AdhereRx Corporation and
Daniel Cohen, pursuant to which we agreed that upon a Commercialization Success
and the Company's receipt of revenue in excess of $200,000 from the commercial
enterprise contracts entered into in connection with such Commercialization
Success or a Change of Control (as defined therein), the Company shall release
the 400,000 shares of Company common stock to the PainScript shareholders.
6
On January 28, 2022, the Company entered into a stock purchase agreement with
Worker's Health Rx, Inc. (d/b/a "Vitality Rx") and Marc Wiener, the sole
shareholder, who is also our President, pursuant to which we acquired 100% of
the outstanding equity interests of Vitality Rx in exchange for the issuance of
250,000 shares of our common stock and $350,000. The cash portion of the
purchase price has been paid in full.
On December 17, 2021, the Company filed an amendment to its Amended and Restated
Articles of Incorporation amending the voting and conversion rights of the
Series A Preferred stock such that each share of Series A preferred stock now
converts into 1.25 shares of common stock and votes on an as converted basis.
On November 29, 2021, we entered into a non-binding Letter of Intent to acquire
all the outstanding capital stock of Worker's Health Rx., d/b/a Vitality Rx, for
250,000 shares of the Company's common stock and $350,000 cash.
We entered into a securities purchase agreement dated May 25, 2021, with funds
affiliated with Arena Investors LP ("Arena") pursuant to which we issued
convertible notes in an aggregate principal amount of $2.2 million for an
aggregate purchase price of $2.0 million (the "Notes"). In connection with the
issuance of the Notes, we issued Arena warrants to purchase an aggregate of
165,000 shares of common stock (the "May 2021 Warrants") and 1,727,859 shares of
common stock.
On March 25, 2021, Optimus Health, Inc., a wholly owned subsidiary of the
Company, acquired 100% of the outstanding equity interests in AdhereRx
Corporation (d/b/a PainScript) ("PainScript") in exchange for an aggregate of
2,000,000 shares of the Company's common stock, including shares issuable upon
satisfaction of certain milestones.
We filed a Certificate of Amendment with the Florida Secretary of State on
January 24, 2021, to reflect that we changed our name from Between Dandelions,
Inc. to Optimus Healthcare Services, Inc. In conjunction with the name change,
we received approval from the OTCIQ to change our company symbol from "HOPS" to
"OHCS."
On December 28, 2020, the Company acquired 100% of the outstanding equity
interests in Optimus Healthcare Services, Inc., a Delaware corporation
("Optimus") in exchange for 9,998,899 shares of its Series A convertible
preferred stock and 18,000,000 shares of its common stock. In connection with
the transaction all prior officers and directors of the Company (except Michael
Pruitt) resigned and new officers and directors were appointed as officers and
directors of the Company.
On November 25, 2020, Clinical Research Alliance Acquisition Corp. ("CRAAC"), an
entity majority owned by Optimus, acquired 100% of the outstanding equity
interests in Clinical Research Alliance, Inc. ("CRA") in exchange for 70 shares
of its common stock.
Impact of COVID-19
On January 30, 2020, the World Health Organization ("WHO") announced a global
health emergency because of a new strain of coronavirus originating in Wuhan,
China (the "COVID-19 outbreak") and the risks to the international community as
the virus spread globally beyond its point of origin. In March 2020, the WHO
classified the COVID-19 outbreak as a pandemic, based on the rapid increase in
exposure globally.
The full impact of the COVID-19 outbreak continues to evolve as of the date of
this Quarterly Report on Form 10-Q. As such, it is uncertain as to the full
magnitude that the pandemic will have on our financial condition, liquidity, and
future results of operations. Management is actively monitoring the global
situation and its impact on our financial condition, liquidity, operations,
suppliers, industry, and workforce.
The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to
change, and we do not yet know the full extent of potential delays or impacts on
our business, financing or clinical trial activities or on healthcare systems or
the global economy as a whole. The COVID-19 pandemic did not impact any open
trials that were ongoing as CRA able to conduct business remotely instead of
through on-site visits. However, it did impact the number of new trials that
were initiated in 2020 and 2021. Although we cannot estimate the length or
gravity of the impact of the COVID-19 outbreak nor estimate the potential impact
to our financial statements at this time, if the pandemic continues, it could
have a material adverse effect on our results of future operations, financial
position, liquidity, and capital resources, and those of the third parties on
which we rely.
7
Results of Operations
Comparison of the Three Months Ended September 30, 2022 and September 30, 2021
Revenues
Revenues were $347,159 for the three months ended September 30, 2022 and
$148,259 for the three months ended September 30, 2021, an increase of $198,900.
Revenues consist primarily of services to pharmaceutical companies for the
execution of oncology clinical trials. The increase in revenues was a result of
a rebound to normal operations in 2022 versus the prior period where the lower
revenues were impacted by COVID-19 and reducing the number of oncology trials
offered as many pharmaceuticals companies changed their focus to vaccine
development and treatment for COVID-19.
Cost of Sales
Cost of Sales were $65,020 for the three months ended September 30, 2022 and
$39,760 for the three months ended September 30, 2021, an increase of $25,260.
Cost of Sales consist primarily of outside physician services. The increase in
cost of sales was a result of a rebound to normal operations in 2022 versus the
prior period where the lower sales were impacted by COVID-19 and reducing the
number of oncology trials offered as many pharmaceuticals companies changed
their focus to vaccine development and treatment for COVID-19.
Gross Profit
Gross profit was $282,139 for the three months ended September 30, 2022 and
$108,499 for the three months ended September 30, 2021, an increase of $173,640.
The increase in gross profit was a result of a rebound to normal operations in
2022 versus the prior period where the lower sales were impacted by COVID-19 and
reducing the number of oncology trials offered as many pharmaceuticals companies
changed their focus to vaccine development and treatment for COVID-19.
Stock based compensation
Stock based compensation was $1,304,512 for the three months ended September 30,
2022 and $2,308,044 for the three months ended September 30, 2021. Stock based
compensation consists of options issued to employees and consultants.
Personnel Expenses
Personnel expenses were $715,028 for the three months ended September 30, 2022
and $368,162 for the three months ended September 30, 2021, an increase of
$346,866. Personnel expenses consist primarily of executive employment
agreements and employee salaries and payroll taxes. The increase was a result of
a new CEO and other employees for CRA.
General and Administrative Expenses
General and administrative expenses were $517,636 for the three months ended
September 30, 2022 and $154,747 for the three months ended September 30, 2021,
an increase of $362,889. General and administrative expenses consist primarily
of insurance, rent, study expenses and other corporate expenses.
Professional Fees
Professional Fees were $114,276 for the three months ended September 30, 2022
and $83,948 for the three months ended September 30, 2021, an increase of
$30,328. Professional Fees consist primarily of legal and accounting fees. The
increase was a result of increased legal fees.
8
Loss from Operations
The Company had a loss from operations of $2,369,313 for the three months ended
September 30, 2022 and $2,806,402 for the three months ended September 30, 2021,
an increase of $432,089.
Amortization of Debt Discount
Amortization of Debt Discount was $291,318 for the three months ended September
30, 2022 and $277,261 for the three months ended September 30 2021. The
increase was a result of new convertible debt issued in June 2022.
Interest Expense
Interest expense was $104,291 for the three months ended September 30, 2022 and
$77,866 for the three months ended September 30, 2021, an increase of $26,425.
Interest expense consists primarily of interest on convertible debt. The
increase was a result of new convertible debt issued in June 2022.
Loss on extinguishment of debt & accounts payable
The Company recorded a loss on extinguishment of debt & accounts payable in the
amount of $264,261 for the three months ended September 30, 2022.
Net Loss from Investments
Net loss from investments was $61,111 for the three months ended September 30,
2022 and $19,474 for the three months ended September 30, 2021. Net loss from
investments consists of realized and unrealized gains from marketable securities
purchased in 2021.
Net Loss
Net loss attributable to common shareholders was $3,090,287 for the three months
ended September 30, 2022 and $3,179,719 for the three months ended September 30,
2021, a decrease of $89,432.
Comparison of the Nine months Ended September 30, 2022 and September 30, 2021
Revenues
Revenues were $1,000,945 for the nine months ended September 30, 2022 and
$623,185 for the nine months ended September 30, 2021, an increase of $377,760.
Revenues consist primarily of services to pharmaceutical companies for the
execution of oncology clinical trials. The increase in revenues was a result of
a rebound to normal operations in 2022 versus the prior period where the lower
revenues were impacted by COVID-19 and reducing the number of oncology trials
offered as many pharmaceuticals companies changed their focus to vaccine
development and treatment for COVID-19.
Cost of Sales
Cost of Sales were $201,873 for the nine months ended September 30, 2022 and
$145,041 for the nine months ended September 30, 2021, an increase of $56,832.
Cost of Sales consist primarily of outside physician services. The increase in
Cost of Sales was a result of a rebound to normal operations in 2022 versus the
prior period where the lower sales were impacted by COVID-19 and reducing the
number of oncology trials offered as many pharmaceuticals companies changed
their focus to vaccine development and treatment for COVID-19.
9
Gross Profit
Gross profit was $799,072 for the nine months ended September 30, 2022 and
$478,144 for the nine months ended September 30, 2021, an increase of $320,928.
The increase in gross profit was a result of a rebound to normal operations in
2022 versus the prior period where the lower sales were impacted by COVID-19 and
reducing the number of oncology trials offered as many pharmaceuticals companies
changed their focus to vaccine development and treatment for COVID-19.
Stock based compensation
Stock based compensation was $5,191,214 for the nine months ended September 30,
2022 and $2,767,357 for the nine months ended September 30, 2021. Stock based
compensation consists of options issued to employees and consultants.
Personnel Expenses
Personnel expenses were $1,757,339 for the nine months ended September 30, 2022
and $989,260 for the nine months ended September 30, 2021, an increase of
$768,079. Personnel expenses consist primarily of executive employment
agreements and employee salaries and payroll taxes. The increase was a result of
a new employment agreement with the CEO for CRA and other employees for CRA.
General and Administrative Expenses
General and administrative expenses were $1,750,636 for the nine months ended
September 30, 2022 and $636,120 for the nine months ended September 30, 2021, an
increase of $1,114,516. General and administrative expenses consist primarily of
insurance, rent, study expenses and other corporate expenses. The increase was a
result of added expenses related to the acquisition of Vitality Rx.
Professional Fees
Professional Fees were $472,427 for the nine months ended September 30, 2022 and
$491,601 for the nine months ended September 30, 2021, a decrease of $19,174.
Professional Fees consist primarily of legal and accounting fees. The decrease
was a result of decreased legal and audit related fees from the prior period
where there were legal costs and auditing fees related to acquired companies.
Loss from Operations
The Company had a loss from operations of $8,372,544 for the nine months ended
September 30, 2022 and $4,406,194 for the nine months ended September 30, 2021,
an increase of $3,966,350. The increase was a result of added expenses related
to new acquisitions as well as stock-based compensation of $5,191,214.
Amortization of Debt Discount
Amortization of Debt Discount was $840,311 for the nine months ended September
30, 2022 and $385,754 for the nine months ended September 30 2021. The increase
was a result of new convertible debt issued in 2022.
Interest Expense
Interest expense was $223,015 for the nine months ended September 30, 2022 and
$101,720 for the nine months ended September 30, 2021, an increase of $121,295.
Interest expense consists primarily of interest on convertible debt. The
increase was a result of new convertible debt issued in 2022.
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Loss on extinguishment of debt & accounts payable
The Company recorded a loss on extinguishment of debt & accounts payable in the
amount of $264,261 for the nine months ended September 30, 2022.
Net Loss from Investments
Net loss from investments was $157,590 for the nine months ended September 30,
2022 and $19,474 for the nine months ended September 30, 2021. Net loss from
investments consists of realized and unrealized gains from marketable securities
purchased in 2021.
Net Loss
Net loss attributable to common shareholders was $10,524,260 for the nine months
ended September 30, 2022 and $4,754,322 for the nine months ended September 30,
2021, an increase of $5,560,555. The increase was a result of added expenses
related to new acquisitions as well as stock-based compensation of $5,191,214.
Liquidity and Capital Resources
The Company's current operations have focused on business planning and raising
capital. The Company has sustained operating losses since inception and expects
such losses to continue over the foreseeable future. In May 2021, the Company
issued approximately $2.2 million aggregate principal amount of notes and in
June 2022, the Company issued an additional $2.2 million aggregate principal
amount of notes on the same terms as the notes issued in May 2021. Substantial
additional financing will be needed by the Company to fund its operations and to
commercially develop its product candidates and services. Management is
currently evaluating different strategies to obtain the required funding for
future operations. These strategies may include but are not limited to: public
offerings of equity and/or debt securities, payments from potential strategic
research and development and licensing and/or marketing arrangements. Management
believes that these ongoing and planned financing endeavors, if successful, will
provide adequate financial resources to continue as a going concern for at least
the next nine months from the date the financial statements are issued; however,
there can be no assurance in this regard. If the Company is unable to secure
adequate additional funding, its business, operating results, financial
condition and cash flows may be materially and adversely affected.
The independent auditors' report accompanying our December 31, 2021 and 2020
financial statements contains an explanatory paragraph expressing substantial
doubt about our ability to continue as a going concern. The financial statements
of the Company have been prepared on a going-concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. Accordingly, the financial statements do not include any
adjustments that might be necessary should the Company be unable to continue in
existence. The Company has incurred substantial losses and negative cash flows
from operations since its inception and has an accumulated deficit of
approximately $18,831,946 at September 30, 2022. The Company has incurred
substantial losses and negative cash flows from operations since its inception
and has an accumulated deficit of approximately $8,307,686 for the year ended
December 31, 2021. The Company anticipates incurring additional losses until
such time, if ever, that it can generate significant sales or revenue from its
products and services. These factors raise substantial doubt about the Company's
ability to continue as a going concern.
As of September 30, 2022, we had cash of $680,876 and negative working capital
of $120,307. We may, however, in the future require additional cash resources
due to changing business conditions, implementation of our strategy to expand
our business, or other investments or acquisitions we may decide to pursue. If
our own financial resources are insufficient to satisfy our capital
requirements, we may seek to sell additional equity or debt securities. The sale
of additional equity securities could result in dilution to our stockholders.
The incurrence of indebtedness would result in increased debt service
obligations and could require us to agree to operating and financial covenants
that would restrict our operations. Financing may not be available in amounts or
on terms acceptable to us, if at all. Any failure by us to raise additional
funds on terms favorable to us, or at all, could limit our ability to expand our
business operations and could harm our overall business prospects. The ability
of the Company to continue as a going concern is dependent on the Company's
ability to raise additional capital and implement its business plan. The
financial statements do not include any adjustments that may be necessary if the
Company is unable to continue as a going concern. Management believes that
actions presently being taken to obtain additional funding and implement its
strategic plans for the Company's operating businesses provide the opportunity
for the Company to continue as a going concern.
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During the nine months ended September 30, 2022, we had net cash flow used by
operating activities of $3,032,629. The cash flow used by operating activities
resulted from the net loss for the period, an increase in outstanding
receivables, as partially offset by non-cash charges for stock-based
compensation and stock issuance costs, and the amortization of debt discounts.
We had net cash flow provided by investing activities of $779,616 for the nine
months ended September 30, 2022. The cash provided by investing activities was
the result of sales and purchases of marketable securities, cash acquired in a
business combination and acquisition of fixed assets.
We had net cash flow provided by financing activities of $2,673,051 for the nine
months ended September 30, 2022. The cash provided by financing activities was
primarily the result of proceeds from sale of equity and convertible securities.
As a result of the foregoing, the Company had a net increase in cash of $420,038
during the nine months ended September 30, 2022. On May 1, 2020, the Company
entered into a note agreement for an aggregate principal amount of $146,250 with
JPMorgan Chase Bank, N.A. ("JPMorgan Chase") under the Coronavirus Aid, Relief,
and Economic Security Act ("CARES Act") administered by the U.S. Small Business
Administration ("SBA") (the "2020 PPP Loan"). On February 19, 2021 the Company
entered into a note agreement for an aggregate principal amount of $148,975 with
JPMorgan Chase under the CARES Act administered by the SBA (the "2021 PPP
Loan"). The Company received total aggregate proceeds of $295,225 under
the PPP Loan. In accordance with the requirements of the CARES Act, the Company
used proceeds from the PPP Loan primarily for payroll costs. The
2020 PPP Loan was scheduled to mature on May 1, 2021 and the 2021 PPP Loan was
scheduled to mature on February 19, 2022, each with a 1% interest rate and is
subject to the terms and conditions applicable to loans administered by the SBA
under the CARES Act. $126,545.50 of the 2020 PPP Loan was forgiven on March 26,
2021. The remaining balance of $19,136.50 of the 2020 PPP Loan was not forgiven
because an employee was terminated during the period. This amount is due in five
years and is being repaid on a monthly basis. The 2021 PPP Loan was fully
forgiven on November 3, 2021.
The impact of COVID-19 on our business has been considered in these assumptions;
however, it is too early to know the full impact of COVID-19 or its timing on a
return to more normal operations.
Critical Accounting Policies
We consider the following accounting policies to be critical given they involve
estimates and judgments made by management and are important for our investors'
understanding of our operating results and financial condition. For more
information see Note 2.
Inflation
We believe that inflation has not had a material adverse impact on our business
or operating results during the periods presented.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as of the date of this Quarterly
Report on Form 10-Q.
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