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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022.

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 000-56192

Graphic

ELECTROMEDICAL TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation)

5047
(Primary Standard Industrial
Classification Code Number)

82-2619815
(I.R.S. Employer
Identification No.)

16561 N. 92nd Street, Ste. 101

 

Scottsdale, AZ

85260

(Address of principal executive offices)

(Zip Code)

888-880-7888

(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. Yes No

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 No

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

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

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 No

On November 11, 2022, 172,884,530 shares of common stock were outstanding.

Explanatory Statement

This amendment deletes an erroneous duplicative disclosure under Part II, Item 2, Unregistered Sales of Securities, concerning a February 24, 2022, issuance to Robert L. Hymers, III.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

 

 

 

 

Item 1.

UNAUDITED FINANCIAL STATEMENTS:

3

 

 

BALANCE SHEETS AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

3

 

 

STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

4

 

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

5

 

 

STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

7

 

 

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

8

 

 

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

18

 

 

 

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

22

 

 

 

Item 4.

CONTROLS AND PROCEDURES

23

 

 

 

PART II. OTHER INFORMATION

24

 

 

 

Item 1.

LEGAL PROCEEDINGS

24

 

 

 

Item 1A.

RISK FACTORS

24

 

 

 

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

25

 

 

 

Item 3.

DEFAULTS UPON SENIOR SECURITIES

38

 

 

 

Item 4.

MINE SAFETY DISCLOSURE

39

 

 

 

Item 5.

OTHER INFORMATION

39

 

 

 

Item 6.

EXHIBITS

40

 

 

 

SIGNATURES

45

2

ITEM 1. FINANCIAL STATEMENTS

ELECTROMEDICAL TECHNOLOGIES, INC.

BALANCE SHEETS

(UNAUDITED)

    

September 30, 2022

    

December 31, 2021

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

458,915

$

383,170

Accounts receivable

 

16,681

 

35,085

Inventories

 

117,550

 

218,510

Prepaid expenses and other current assets

 

101,194

 

38,002

Total current assets

 

694,340

 

674,767

Property and equipment, net

 

710,938

 

727,344

Total assets

$

1,405,278

$

1,402,111

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

277,085

$

214,785

Credit cards payable

 

43,031

 

11,283

Accrued expenses and other current liabilities

 

717,628

 

317,037

Customer deposits

 

25,840

 

Convertible promissory notes, net of discount of $592,869 and $723,166, respectively

 

1,384,327

 

811,687

Related party notes payable

 

 

57,875

Long term debt, current portion

 

31,119

 

29,502

Total current liabilities

 

2,479,030

 

1,442,169

Long-term liabilities:

 

  

 

  

Bank debt, net of current portion

 

497,079

 

518,849

Government debt, net of current portion

 

153,882

 

154,429

Other liabilities

 

11,045

 

9,167

Total liabilities

 

3,141,036

 

2,124,614

Commitments and contingencies (Note 9)

 

 

Stockholders’ deficit

 

  

 

  

Series A Preferred Stock, $.00001 par value, 1,000,000 shares authorized and 1,000,000 and 500,000 outstanding at September 30, 2022 and December 31, 2021, respectively

 

365,000

 

355,000

Series B Preferred Stock, $.00001 par value, 1 share authorized and 0 outstanding

Common stock, $.00001 par value, 999,000,000 and 250,000,000 shares authorized; 157,950,530 and 87,725,842 shares outstanding at September 30, 2022 and December 31, 2021, respectively

 

1,577

 

876

Additional paid-in-capital

 

21,867,892

 

20,804,333

Accumulated deficit

 

(23,970,227)

 

(21,882,712)

Total stockholders’ deficit

 

(1,735,758)

 

(722,503)

Total liabilities and stockholders’ deficit

$

1,405,278

$

1,402,111

The accompanying notes are an integral part of these financial statements

3

ELECTROMEDICAL TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

THREE MONTHS ENDED SEPT 30,

NINE MONTHS ENDED SEPT 30,

    

2022

    

2021

    

2022

    

2021

Net sales

$

279,551

$

301,157

$

726,696

$

670,551

Cost of sales

 

58,008

66,733

170,984

 

158,065

Gross profit

 

221,543

234,424

555,712

 

512,486

Selling, general and administrative expenses

 

558,919

454,997

1,901,908

 

2,822,251

Loss from operations

 

(337,376)

(220,573)

(1,346,196)

 

(2,309,765)

Other income (expense)

 

 

Interest expense

 

(160,570)

(1,105,069)

(510,417)

 

(2,937,851)

Change in fair market value of derivative liabilities

(1,974,164)

(1,436,756)

Other income (expense)

(432)

Forgiveness of debt

50,082

Loss on extinguishment of debt

 

(460,000)

(781,800)

 

Total other expense

 

(620,570)

(3,079,233)

(1,292,217)

 

(4,324,957)

Net loss

$

(957,946)

$

(3,299,806)

$

(2,638,413)

$

(6,634,722)

Deemed dividend related to warrant resets

(19,780)

(8,396)

(83,161)

(3,748,695)

Net loss attributable to common stockholders

$

(977,726)

$

(3,308,202)

$

(2,721,574)

$

(10,383,417)

Weighted average shares outstanding - basic and diluted

146,993,139

54,356,854

119,799,025

 

39,670,934

Weighted average loss per share - basic and diluted

$

(0.01)

$

(0.06)

$

(0.02)

$

(0.26)

The accompanying notes are an integral part of these financial statements

4

ELECTROMEDICAL TECHNOLOGIES, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

(UNAUDITED)

Total

Preferred Stock

Common Stock

Paid in

Accumulated

Stockholders’

    

Amount

    

Shares

    

Amount

    

Shares

    

Capital

    

Deficit

    

Deficit

Balance, December 31, 2021

$

355,000

 

500,000

$

876

 

87,725,842

$

20,804,333

$

(21,882,712)

$

(722,503)

Adoption of ASU2020-06

 

(1,013,414)

 

634,059

 

(379,355)

 

Shares issued for consulting services

 

 

106

10,600,000

356,794

 

 

356,900

Warrants issued in conjunction with convertible promissory notes

142,996

142,996

Warrants reset in conjunction with convertible promissory notes

63,381

(63,381)

Cashless warrant exercises

51

5,129,725

(51)

Issuance of common stock for cash

15

1,500,000

42,751

42,766

Stock-based compensation

 

 

4,703

 

 

4,703

Net loss

 

 

 

(1,144,536)

 

(1,144,536)

Balance, March 31, 2022

$

355,000

500,000

$

1,048

104,955,567

$

20,401,493

$

(22,456,570)

$

(1,699,029)

Shares issued for consulting services

30

3,000,000

44,970

45,000

Shares issued in conjunction with forbearance of convertible promissory notes

40

4,000,000

142,760

142,800

Convertible promissory notes payable settlement

267

26,734,801

668,103

668,370

Warrants issued in conjunction with debt extinguishment

65,000

65,000

Cashless warrant exercises

35

3,550,162

(35)

Net loss

(535,931)

(535,931)

Balance, June 30, 2022

$

355,000

500,000

$

1,420

142,240,530

$

21,322,291

$

(22,992,501)

$

(1,313,790)

Warrants issued in conjunction with convertible promissory notes

 

 

 

302,978

 

 

302,978

Warrants reset in conjunction with convertible promissory notes

 

 

 

19,780

 

(19,780)

 

Cashless warrant exercises

 

 

27

2,710,000

 

(27)

 

 

Convertible promissory note conversions

 

 

62

6,200,000

 

154,938

 

 

155,000

Shares issued for consulting services

68

6,800,000

67,932

68,000

Stock based compensation

10,000

500,000

10,000

Net loss

(957,946)

(957,946)

Balance, September 30, 2022

$

365,000

1,000,000

$

1,577

157,950,530

$

21,867,892

$

(23,970,227)

$

(1,735,758)

5

ELECTROMEDICAL TECHNOLOGIES, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

(UNAUDITED)

Total

Preferred Stock

Common Stock

Paid in

Accumulated

Stockholders’

    

Amount

    

Shares

    

Amount

    

Shares

    

Capital

    

Deficit

    

Deficit

Balance, December 31, 2020

$

355,000

500,000

$

269

27,175,800

$

7,957,860

$

(9,631,732)

$

(1,318,603)

Shares issued for consulting services

 

 

 

11

 

1,084,120

 

693,815

 

 

693,826

Warrant issued in conjunction with convertible promissory note

 

 

 

 

 

420,096

 

 

420,096

Warrants reset in conjunction with convertible promissory notes

 

 

 

 

 

510,222

 

(510,222)

 

Conversion of convertible promissory notes

 

 

 

10

 

1,019,113

 

380,093

 

 

380,103

Stock-based compensation

 

 

 

11

 

1,100,000

 

604,890

 

 

604,901

Net loss

 

 

 

 

 

 

(2,560,384)

 

(2,560,384)

Balance, March 31, 2021

$

355,000

 

500,000

 

301

 

30,379,033

$

10,566,976

$

(12,702,338)

$

(1,780,061)

Warrants reset in conjunction with convertible promissory notes

 

 

 

 

 

3,230,077

 

(3,230,077)

 

Conversion of convertible promissory notes

 

 

 

122

 

12,161,575

 

974,192

 

 

974,314

Shares issued for consulting services

 

 

 

13

 

1,250,000

 

110,387

 

 

110,400

Net loss

 

 

 

 

 

 

(774,532)

 

(774,532)

Balance, June 30, 2021

$

355,000

 

500,000

$

436

 

43,790,608

$

14,881,632

$

(16,706,947)

$

(1,469,879)

Warrants reset in conjunction with convertible promissory notes

 

 

 

 

 

8,396

 

(8,396)

 

Conversion of convertible promissory notes

 

 

 

301

 

30,136,103

 

2,938,776

 

 

2,939,077

Shares issued in conjunction with warrant cancellation

 

 

 

10

 

1,000,000

 

(10)

 

 

Net loss

 

 

 

 

 

 

(3,299,806)

 

(3,299,806)

Balance, September 30, 2021

$

355,000

 

500,000

$

747

 

74,926,711

$

17,828,794

$

(20,015,149)

$

(1,830,608)

6

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

    

2022

    

2021

Cash flows from operating activities:

 

  

 

  

Net loss

$

(2,638,413)

$

(6,634,722)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Provision for allowance for doubtful accounts

 

 

3,495

Stock-based compensation expense

 

484,603

 

1,409,127

Depreciation and amortization

 

16,406

 

16,406

Forgiveness of debt

 

 

(49,783)

Loss on extinguishment of debt

781,800

Amortization of debt discount and day one derivative loss and warrant expense

 

367,257

 

2,785,844

Change in fair value of derivative liabilities- convertible promissory notes

1,436,756

Change in operating assets and liabilities:

Other

2,839

Accounts receivable

18,404

(16,732)

Inventories

 

100,960

 

(151,194)

Prepaid expenses and other current assets

(63,192)

261,924

Other assets

 

 

7,000

Accounts payable

 

62,300

 

(11,350)

Credit cards payable

 

31,748

 

(8,941)

Accrued expenses and other current liabilities

 

70,171

 

75,083

Customer deposits

 

25,840

 

(26,384)

Other liabilities

 

1,878

 

(5,441)

Net cash used in operating activities

 

(740,238)

 

(906,073)

Cash flows from financing activities:

 

 

Repayments on bank debt

 

(20,700)

 

(19,684)

Related party notes payable-net

 

(57,875)

 

(99,000)

Issuance of convertible promissory notes

1,545,140

937,500

Repayments on convertible promissory notes

 

(693,348)

 

Repayments on notes payable

(12,846)

Issuance of common stock for cash - net

42,766

Net cash provided by financing activities

 

815,983

 

805,970

Net (decrease) increase in cash and cash equivalents

 

75,745

 

(100,103)

Cash and cash equivalents, beginning of period

 

383,170

 

264,913

Cash and cash equivalents, end of period

$

458,915

$

164,810

Supplemental disclosures of cash flow information:

 

 

Cash paid during the period for:

 

 

Interest

$

89,079

$

29,625

Income taxes

$

$

Non-cash investing and financing activities:

 

  

 

  

January 1, 2022 adoption of ASU2020-06

$

379,355

$

Warrants, common stock and beneficial conversion feature issued in conjunction with convertible promissory notes

$

653,774

$

420,096

Derivative liabilities issued in conjunction with convertible promissory notes

$

$

1,197,607

Conversion of convertible promissory notes, derivative liabilities and accrued interest into shares of common stock

$

823,370

$

4,290,655

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 nine months ended September 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 $20.2 million of accumulated net losses. In addition, during the nine months ended September 30, 2022, the Company used $740,238 in operations, and as of September 30, 2022, the Company had a working capital deficit of $1,784,690. 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 12 months. The 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 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 September 30, 2022.

8