You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes appearing elsewhere in this annual report on Form 10-K. This discussion
and analysis contain forward-looking statements that involve risks,
uncertainties and assumptions. The actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including, but not limited to, those set forth under 'Risk Factors' and
elsewhere in this annual report on Form 10-K.
Results of Operations years ending December 31, 2022 and 2021
The following table sets forth a summary of certain key financial information
for the years ended December 31, 2022 and 2021:
2022 2021
Revenue $ 37,500 $ 59
Gross profit $ 18,856 $ 34
Operating (expenses) $ (2,820,895 ) $ (29,800,669 )
Operating (loss) $ (2,802,039 ) $ (29,800,635 )
Other income (expense) $ 1,114,538 $ (748,548 )
Net (loss) $ (1,687,501 ) $ (30,549,183 )
Basic and diluted $ (0.01 ) $ (0.14 )
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Year ended December 31, 2022 versus year ended December 31, 2021
During the year ended December 31, 2022 and 2021, the Company had $37,500 and
$59 of revenues, respectively. The Company fulfilled an order to one customer,
which accounted for all the revenue during the year ended December 31, 2022.
The Company generated minimal revenues during the years ended December 31, 2022
and 2021 due to focusing its capital and resources towards seeking a Class III
PMA.
Total operating expenses for the year ended December 31, 2022 and 2021 were
$2,820,895 and $29,800,669, respectively. The decrease in operating expenses is
due primarily to a $26,377,647 decrease in stock-based compensation expense, a
decrease of $224,972 in loss on settlement of debt and a decrease of $232,000 of
litigation settlement expense (see Note 7 to the financial statements) compared
to 2021.
The decrease in stock-based compensation is primarily related to vesting and
amortization of RSUs. During the year ended December 31, 2021, the Company
amended the RSU agreement with its former Chief Executive Officer and Chairman.
The amendment resulted in the vesting of 21,970,000 RSUs along with the issuance
of an additional 2,000,000 shares of restricted stock as a bonus. The change in
vesting and issuance of the bonus shares of common stock resulted in the
immediate recognition of $26,127,300 in stock-based compensation expense. The
Company also recognized $43,121 of stock-based compensation due to the
amortization of the RSUs that vested on January 1, 2021, issued 100,000 shares
of common stock for settlement of a consulting agreement valued at $111,000,
issued 125,000 shares of common stock for services valued at $102,500 and issued
560,000 shares of common stock valued at $477,175 due to vesting of RSUs.
During the year ended December 31, 2022, the Company recorded $483,450 of
stock-based compensation. The Company issued 1,170,000 shares of common stock
for services valued at $483,450 and did not have any RSUs vest during the year
ended December 31, 2022.
Other income (expense) for the year ended December 31, 2022 and 2021 was
$1,114,538 and $(748,548), respectively. The increase in other income was due to
other income of $1,402,981 offset by total interest expense of $78,845 and loss
on settlement of debt of $209,598. The increase in other income was due to the
Company receiving $392,000 as a settlement payment from its former auditor
related to litigation and the receipt of $202,200 in cash and 2,085,258 shares
of common stock as payment of $808,781 from its former Chief Executive Officer
to satisfy a disgorgement obligation during the year ended December 31, 2022
compared with the Company receiving $304,273 for settlement of its December
2019 arbitration with Maxim during the year ended December 31, 2021.
The decrease in interest expense is primarily due to the amortization of
beneficial conversion features on convertible notes payable and convertible
notes payable - related party during the year ended December 31, 2022 totaling
$16,533 compared to $608,710 in the year ended December 31, 2021. The decrease
in the loss on settlement of debt is due to the Company issuing common stock
with a fair value of $458,001 for the settlement of an aggregate of $330,626 of
accrued liabilities and accrued liabilities - related parties and recording
$82,223 in loss on settlement of debt related to lowering the conversion price
of a convertible note as an inducement for conversion during the year ended
December 31, 2022 compared to issuing shares of common stock with a fair value
of $1,205,718 for the settlement of $771,148 of various debts and accrued
liabilities - related party during the year ended December 31, 2021.
Our net loss for the year ended December 31, 2022 was $1,687,501 as compared to
a net loss of $30,549,183 for the prior year. The decrease in the net loss was
due to the Company having a decrease in operating expenses of $26,979,774 along
with an increase in other income (expense) from $(748,548) during the year ended
December 31, 2021 to $1,114,538 for the year ended December 31, 2022, as
explained above.
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Financial Condition, Liquidity and Capital Resources
As of December 31, 2022, the Company had a negative working capital of
$2,344,416. The Company has not yet attained a level of operations, and for the
foreseeable future will not be pursuing commercial operations, which will allow
it to meet its current overhead expense obligations. The report of our
independent registered public accounting firm on our 2022 and 2021 financial
statements includes an explanatory paragraph expressing substantial doubt about
our ability to continue as a going concern. The Company generated minimal
revenues during the years ended December 31, 2022 and 2021 due to focusing its
capital and resources towards seeking a Class III PMA for its HemoStyp
technology, and has funded its initial operations with private placements, and
unsecured loans from related parties. There can be no assurance that adequate
financing will continue to be available to the Company and, if available, on
terms that are favorable to the Company. Our ability to continue as a going
concern is also dependent on many events outside of our direct control,
including, among other things, our ability to achieve our business goals and
objectives, as well as improvement in the economic climate.
As discussed in Note 6 of the financial statements, the Company entered into a
common stock purchase agreement ("CSPA") with White Lion, which gives the
Company the right, but not the obligation, to require White Lion to purchase up
to $10,000,000 of the Company's common stock, subject to certain limitations and
conditions set forth in the CSPA. As of the date of this filing, the Company has
received $577,855 in proceeds from White Lion to pay for its operations and
finalization of its Class III PMA application. The sale of additional equity or
convertible debt securities would be dilutive to our shareholders. In addition,
economic conditions and actions by policymaking bodies are contributing to
rising interest rates and significant capital market volatility, which, along
with increases in our borrowing levels, could increase our future borrowing
costs.
Cash Flows
The Company's cash on hand as of December 31, 2022 and 2021 was $13,377 and
$21,799, respectively.
The following table summarizes selected items from our statements of cash flows
for the years ended December 31, 2022 and 2021:
2022 2021
Net cash used in operating activities $ (619,720 ) $ (828,079 )
Net cash used in investing activities (40,500 ) -
Net cash provided by financing activities 651,798 803,802
Net increase (decrease) in cash and cash equivalents $ (8,422 ) $ (24,277 )
Net Cash Provided by (Used in) Operating Activities
Net cash used in operating activities for the year ended December 31, 2022 was
$619,720. The Company had net loss of $1,687,501 and $808,781 as stock received
as other income offset by stock for services and compensation of $483,450,
amortization expense of $4,050, amortization of debt discount of $16,533 and a
loss on debt settlement of $209,598. The Company had an increase in accounts
payable and accrued expenses of $638,721, an increase in accrued liabilities -
related party of $296,872, an increase in accrued litigation settlement of
$280,000, an increase in prepaid expenses of $17,932 and an increase in
inventory of $34,730.
Net cash used in operating activities for the year ended December 31, 2021 was
$828,079. The Company had net loss of $30,549,183 offset by non-cash stock-based
compensation of $26,861,097, amortization of debt discount of $608,710, stock
issued for litigation settlement of $312,000, write-off of inventory of $69,649,
write-off of property and equipment of $101,350 and a loss on settlement of debt
of $434,570. The Company also had a decrease in inventory of $26, change in
accounts payable and accrued expenses of $693,692, a change in accounts payable
and accrued expenses related party of $525,011 and a change in accrued
litigation settlement of $120,000. The Company also had an increase in prepaid
and other current assets of $5,000.
Net Cash Used by Investing Activities
The Company paid $40,500 related to the patent application fees during the year
ended December 31, 2022.
The Company did not have any investing activities during the year ended December
31, 2021.
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Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities for the year ended December 31, 2022
was $651,798. This was due to the Company receiving $383,275 in proceeds from
related parties, $175,887 in proceeds from the sale of stock, $93,000 in
proceeds from convertible notes - related party and $392,975 in proceeds from
convertible notes payable offset by making payments of $226,275 on loans payable
- related party, $90,864 on a promissory note payable, $26,200 of offering costs
and repurchasing $50,000 of common stock.
Net cash provided by financing activities for the year ended December 31, 2021
was $803,802 consisting of $245,500 in proceeds from related party loans,
$479,802 in proceeds from the sale of stock and $115,000 in proceeds from the
issuance of convertible notes offset by $36,500 of repayments to related
parties.
Off-Balance Sheet Arrangements
As of December 31, 2022 and 2021, we had no off-balance sheet arrangements.
Related Parties
Information concerning related party transactions is included in the financial
statements and related notes, appearing elsewhere in this annual report on Form
10-K.
Critical Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States ("GAAP") requires estimates and
assumptions that affect the reported amounts of assets and liabilities, revenues
and expenses in the financial statements and accompanying notes. Critical
accounting estimates are those estimates made in accordance with GAAP that
involve a significant level of estimation uncertainty and have had or are
reasonably likely to have a material impact on the financial condition or
results of operations of the Company. Based on this definition, we have the
critical accounting estimates identified below. We also have other key
accounting policies, which involve the use of estimates, judgments, and
assumptions that are significant to understanding our results which are found in
Note 2 - Significant Accounting Policies of the accompanying financial
statements. Although we believe that our estimates, assumptions, and judgments
are reasonable, they are based upon information presently available. Actual
results may differ significantly from these estimates under different
assumptions, judgments, or conditions.
Stock-Based Compensation
The Company accounts for stock-based compensation under the provisions of ASC
718, Compensation-Stock Compensation. Stock-based compensation expense for
employees and non-employees is measured at the grant date fair value.
Stock-based compensation for all stock-based awards to employees and directors
is recognized as an expense over the requisite service period, which is
generally the vesting period.
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