UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the Fiscal Year Ended
Or
For the Transition Period From to
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| 5047 (Primary Standard Industrial Classification Code Number) |
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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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 S-T (§ 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).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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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 ☐ No
The aggregate market value of common equity held by non-affiliates of the Registrant as of December 31, 2023 was approximately $
As at April 30, 2024,
TABLE OF CONTENTS
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PART I.
ITEM 1. BUSINESS
This annual report on Form 10-K (including, but not limited to, the following disclosures regarding our Business) contains forward-looking statements regarding our business, financial condition, results of operations, and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements in this annual report on Form 10-K. Additionally, statements concerning future matters such as the development of new products, enhancements or technologies, sales levels, expense levels and other statements regarding matters that are not historical are forward-looking statements.
Forward-looking statements in this annual report on Form 10-K reflect our good faith judgment based on facts and factors currently known to us. Forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this annual report on Form 10-K. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this annual report on Form 10-K. Readers are urged to carefully review and consider the various disclosures made in this annual report on Form 10-K, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Company 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 that 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 because 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 that one day, read and modify 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.
We believe that we do this by delivering innovative solutions that provide fast and long-lasting pain relief across the broadest range of ailments. We engineer simple-to-use bioelectronics therapy devices, which send a proprietary sequence of electrical signals. We believe our devices have proven to be highly effective over the past decade and have the technological capability to be used in medical research.
The Company is publicly traded on the OTC Markets under the symbol EMED.
Business Overview
Bioelectronics
Electromedical Technologies is a bioelectronics manufacturing and marketing company. We offer U.S. Food and Drug Administration (FDA) cleared medical devices for pain management.
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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 that one day, read and modify electrical signals passing along nerves in the body, to restore long-term health. We believe that we do this by delivering innovative solutions providing fast and long-lasting pain relief across the broadest range of ailments. We engineer simple-to-use bioelectronics therapy devices, which send a proprietary sequence of electrical signals. We believe our devices have proven to be highly effective over the past decade and have the technological capability to be used in medical research.
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 Centers for Disease Control (CDC) reports that overdose deaths involving prescription opioids have quadrupled since 1999 and that drug overdoses now kill more people every year than gun violence or car accidents. From 1999 to 2017, more than 702,000 people have died from a drug overdose. In 2017, more than 70,000 people died from drug overdoses, making it a leading cause of injury-related death in the United States. It is our aim to offer effective nontoxic, noninvasive alternatives to pain management.
We believe that we can provide an opioid-free solution to over 100 million people suffering from chronic and acute pain just in the US market alone. In recent years, we have also focused on the market for U.S. military service veterans, many of whom do not have many options other than powerful drugs that can cause side effects when it comes to treating chronic or acute pain. We intend to include a special program that will offer our new POD devices at no upfront cost for the veterans of the U.S. armed forces and their immediate families, which, according to the Census Bureau, as of 2014, consists of nearly 22 million individuals.
Industry and Regulatory Overview
Medical devices are regulated by the Food and Drug Administration (“FDA”) in the United States and can be regulated by foreign governments for devices sold internationally. The Company has medical device certifications in the USA (FDA),
The Federal Food, Drug and Cosmetic Act and regulations issued by the FDA regulate testing, manufacturing, packaging, and marketing of medical devices. Under the current regulations and standards, we believe that our devices are subject to general controls, including compliance with labeling and record-keeping rules. In addition, our medical devices require pre-market approval, which for TENS devices can be achieved through a 510(k) premarket notification submission.
Our manufacturing processes and facilities are also subject to regulations, including the FDA’s QSR requirements (formerly Good Manufacturing Practices). These regulations govern the way we manufacture our products and maintain documentation for our manufacturing, testing, and control activities. In addition, to the extent we manufacture and sell products abroad, those products are subject to the relevant laws and regulations of those countries.
The labeling of our devices, our promotional activities, and marketing materials are regulated by the FDA and various state agencies. Activities that are constrained by these regulations include the marketing of our products for “off-label” usage; that is, recommendations to use our products for purposes other than what is indicated in the labeling. Violations of this requirement may result in administrative, civil, or criminal actions against the manufacturer or seller by the FDA or governing state agencies.
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An element of our strategy is to continue to upgrade our products, add new features and expand clearance or approval of our current products to new indications. In the United States, before we can market a new medical device, or a new use of, a new claim for or significant modification to an existing product, we must first receive either clearance under Section 510(k) of the Federal Food, Drug, and Cosmetic Act, or the FDCA, or approval of a premarket approval application, or PMA, from the FDA, unless an exemption applies. In the 510(k) clearance process, before a device may be marketed, the FDA must determine that a proposed device is “substantially equivalent” to a legally marketed “predicate” device, which includes a device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (pre-amendments device), a device that was originally on the U.S. market pursuant to an approved PMA and later down-classified, or a 510(k)-exempt device. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data are sometimes required to support substantial equivalence. In the PMA process, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical, pre-clinical, clinical trial, manufacturing, and labeling data. Our ability to successfully obtain clearance for any new indications will be dependent on us submitting data as to the successful completion of clinical trials evidencing safety and efficacy. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. However, some devices are automatically subject to the PMA pathway regardless of the level of risk they pose because they have not previously been classified into a lower-risk class by the FDA. Manufacturers of these devices may request that the FDA review such devices in accordance with the de novo classification procedure, which allows a manufacturer whose novel device would otherwise require the submission and approval of a PMA prior to marketing to request down-classification of the device on the basis that the device presents low or moderate risk. If the FDA agrees with the down classification, the applicant will then receive authorization to market the device. This device type can then be used as a predicate device for future 510(k) submissions. We initially received marketing authorization for our device through the de novo classification process, and we have made changes to our system through subsequent 510(k) clearances. The process of obtaining regulatory clearances or approvals or completing the de novo classification process to market a medical device can be costly and time-consuming, and we may not be able to successfully obtain pre-market reviews on a timely basis if at all.
Modifications to products that are approved through a PMA application generally require FDA approval. Similarly, certain modifications made to products cleared through a 510(k) or authorized through the de novo classification process may require a new 510(k) clearance. Each of the PMA approval, de novo classification and the 510(k) clearance processes can be expensive, lengthy and uncertain. The FDA’s 510(k) clearance process usually takes from three to 12 months but can last longer. The process of obtaining a PMA is much more costly and uncertain than the 510(k) -clearance process and generally takes from one to three years, or even longer, from the time the application is filed with the FDA. In addition, a PMA generally requires the performance of one or more clinical trials.
Despite the time, effort, and cost, a device may not be approved or cleared by the FDA. Any delay or failure to obtain necessary regulatory approvals or clearances could harm our business. Furthermore, even if we are granted regulatory clearances or approvals, they may include significant limitations on the indicated uses for the device, which may limit the market for the device.
Any modifications to our existing products may require new 510(k) clearance; however, future modifications may be subject to the substantially more costly, time-consuming and uncertain PMA process. If the FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected, product introductions or modifications could be delayed or canceled, which could cause our sales to decline.
The FDA can delay, limit, or deny clearance or approval of a device for many reasons, including: we may be unable to demonstrate to the FDA’s satisfaction that the product or modification is substantially equivalent to the proposed predicate device or safe and effective for its intended use; the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required; and the manufacturing process or facilities we use may not meet applicable requirements.
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Even if granted, a 510(k) clearance, de novo classification, or PMA approval imposes substantial restrictions on how our devices may be marketed or sold, and the FDA continues to place considerable restrictions on our products and operations. For example, the manufacture of medical devices must comply with the FDA’s Quality System Regulation or QSR. In addition, manufacturers must register their manufacturing facilities, list the products with the FDA, and comply with requirements relating to labeling, marketing, complaint handling, adverse event, and medical device reporting, reporting of corrections and removals, and import and export. The FDA monitors compliance with the QSR and these other requirements through periodic inspections. If our facilities or those of our manufacturers or suppliers are found to be in violation of applicable laws and regulations, or if we or our manufacturers or suppliers fail to take satisfactory corrective action in response to an adverse inspection, the regulatory authority could take enforcement action, including any of the following sanctions: untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; customer notifications or repair, replacement, refunds, detention or seizure of our products; operating restrictions or partial suspension or total shutdown of production; refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; withdrawing 510(k) marketing clearances or PMA approvals that have already been granted; refusing to provide Certificates for Foreign Government; refusing to grant export approval for our products; or pursuing criminal prosecution. Any of these sanctions could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands and could have a material adverse effect on our reputation, business, results of operations, and financial condition. We may also be required to bear other costs or take other actions that may have a negative impact on our sales and our ability to generate profits.
In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions that may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances. We also cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these executive actions, including the Executive Orders, will be implemented and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.
In order to sell our products in member countries of the EEA our products must comply with the essential requirements of the EU Medical Devices Directive (Council Directive 93/42/EEC). Compliance with these requirements is a prerequisite to be able to affix the CE Mark to our products, without which they cannot be sold or marketed in the EEA. To demonstrate compliance with the essential requirements, we must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can issue an EC Declaration of Conformity based on a self-assessment of the conformity of its products with the essential requirements of the EU Medical Devices Directive, a conformity assessment procedure requires the intervention of an organization accredited by a Member State of the EEA to conduct conformity assessments, or a Notified Body. Depending on the relevant conformity assessment procedure, the Notified Body would typically audit and examine the technical file and the quality system for the manufacture, design, and final inspection of our devices. The Notified Body issues a certificate of conformity following the successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the essential requirements. This certificate entitles the manufacturer to affix the CE Mark to its medical devices after having prepared and signed a related EC Declaration of Conformity.
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Sales and Marketing
Principal Products and Services
WellnessPro Plus
Our principal product, WellnessPro Plus, is an intelligent and effective bioelectronics therapy prescription deviceand is used by consumers and healthcare professionals to relieve chronic and acute pain. Research studies have shown the efficacy of bioelectronics therapy in the treatment of chronic pain from a variety of ailments, including arthritis, chronic low back pain, fibromyalgia, diabetic neuropathy, Lyme disease, osteoarthritis, and neuropathic pain. This medical device is classified by the FDA as a transcutaneous electrical nerve stimulation (“TENS”) device. We believe, based on consumer and professional testimonials from the past decade, that our device has been on the market, that the WellnessPro Plus treats pain conditions faster with longer-lasting relief, compared to lower-cost conventional TENS devices. We attribute this in part to our proprietary algorithm and technology that we call the “DeepPulse.” With the DeepPulse there are close to one million frequency ranges to choose from to help prevent accommodation. The device can also generate micro-current stimulation to mimic the body’s own electric signals.
The device sends a proprietary sequence of electrical signals that change at various times, preventing accommodation (where the body adapts to specific treatments, diminishing treatment effectiveness). Also, our proprietary DeepPulse pre-modulation technology allows signals to penetrate deeper into affected areas, which we believe produces faster, longer-lasting pain relief. Additionally, our micro-current mode delivers signals which naturally mimic the body’s signals, triggering the body’s own natural ability to relieve pain via “endorphin release” and accelerating the ION pump exchange. This allows for the reduction of pain, increased microcirculation, and oxygenation of red blood cells, which in turn helps the body de-stress from pain and trigger natural, healthy processes necessary for better health.
We are finalizing the development of an enhanced version of our Wellness Pro Plus that we intend to market under the name “Wellness Pro Plus Infinity.” This device will include expanded bioelectric modalities, safety, and efficacy. We expect that the Wellness Pro Plus Infinity will be ready for market in fiscal 2024.
WellnessPro POD and Wellness ION Pen
We are planning to bring two new products to market – extending the Wellness Product line: the WellnessPro POD, our first wearable product, and the Wellness ION Pen. We believe that the WellnessPro POD represents an exciting product line expansion as a “clinical-grade” wearable device that is intended to treat chronic pain, PTSD, anxiety, depression, and insomnia. We intend to sell this device over the counter; however, some modalities on this device may only be provided with a prescription. Our target market for the WellnessPro POD is chronic pain sufferers, which is estimated to be 100 million individuals in the United States alone. We intend to focus on various segments in this market, including veterans of the U.S. armed forces, which, according to the Census Bureau, as of 2014, consists of nearly 22 million individuals. Our goal is to educate the medical community of the benefits of “natural”, non-invasive, non-toxic pain relief and for the WellnessPro POD to be an initial choice for practitioners to prescribe separately or in conjunction with pain medication.
Both new products will integrate with the WellnessPro Plus to leverage the engineering breakthroughs and intellectual property found in the WellnessPro Plus, and yet will still function as standalone devices.
WellnessPro POD
| ● | The WellnessPro POD is a compact “clinical-grade” wearable intended to keep pace with the evolution in pain management across practice segments, which will expand the range of treated modalities from chronic and acute pain to include PTSD, anxiety, depression, and insomnia. |
Wellness ION Pen
| ● | The Wellness ION Pen is a unique interferential cold laser used to deliver targeted frequency stimulation. This therapeutic laser, which we intend to sell over the counter, will deliver expanded wavelengths relative to comparable lasers combined with micro-stimulation. We believe this will improve circulation and tissue healing and reduce inflammation and pain. The Wellness ION Pen will also have cosmetic applications for skin issues. |
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Market
The Wellness line of products is intended for anyone living with pain caused by various medical conditions or trauma, or who is battling pharmaceutical (e.g., opioid) dependency or addiction. The products can be purchased directly by consumers or used by healthcare practitioners, including:
| ● | Chiropractors; |
| ● | Physiotherapists; |
| ● | Pain management doctors and clinicians; |
| ● | Natural medicine doctors; |
| ● | Sports medicine doctors; and |
| ● | Athletic trainers. |
According to information provided by the American Academy of Pain Medicine, at least 100 million Americans suffer from chronic pain, not including acute pain for children. We believe that Electromedical represents a tested, proven solution for different segments of the population.
We plan to address these individuals directly as well as through their healthcare providers. There are approximately 77,000 chiropractors and 123,000 physiotherapists in the United States. Combined, over 200,000 healthcare practitioners focused on rehabilitation and pain relief – not to mention practitioners involved in sports medicine, natural medicine and pain management.
In addition, we believe there are certain niche markets that our products are well suited to address. As discussed above, we expect that veterans will be the first market for the WellnessPro POD as it addresses the various needs our veteran population is suffering from.
Further, we believe that our products can help provide a solution to the opioid problem. Our current product, WellnessPro Plus, assists with the recovery from opioid addiction. We believe that the WellnessPro POD will also be highly effective for pain management and relief and could be used as an alternative or can be prescribed in conjunction with pain medication to reduce the amount of deaths and addictions due to Opioid abuse and misuse.
Strategy
Electromedical Technologies, for the first fifteen years of its existence, has been fortunate to have grown “organically” without formal sales and marketing programs. We believe this is fundamental because of the product’s ability to deliver uncommon levels of pain relief, better quality of life, and wellness for thousands of customers. Customers subsequently shared their miraculous stories of recovery – some of which can be found on our website. We believe that those testimonials influenced thousands of people living with ailments and pain to turn to WellnessPro Plus for relief. These changes in with the additional capital we are planning to raise. In 2023 and beyond, Electromedical will engage in a comprehensive and fully integrated marketing program to increase sales and build the Electromedical brand. The integrated marketing program will include the following elements:
| ● | Website marketing |
o | Using sophisticated tools integrated with our website, such as marketing automation, we will automate the process of nurturing web visitors and increasing sales. |
| ● | Digital marketing. |
o | Using advanced approaches for improving the Company’s organic and paid search optimization results, we will increase traffic to and sales from our website. |
| ● | Social marketing and advertising. |
o | Using a comprehensive approach to marketing across the primary social channels (twitter, LinkedIn, Facebook, YouTube, Instagram), we will engage consumers and influencers (associations), elevate the brand and increase sales directly and indirectly. |
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o | Social marketing will also include the thoughtful use of Facebook ads and LinkedIn-sponsored posts to drive web traffic and increase sales. |
| ● | Content marketing. |
o | Using a thoughtful approach to newsletters and blog content, we will elevate the brand and increase sales directly and indirectly. |
| ● | Partner and association marketing. |
o | We will selectively identify associations and partners that can help elevate the brand and increase sales. Examples of associations that we intend to target include the American Chiropractic Association, which may provide an important opportunity to increase awareness, exercise thought leadership, and drive sales. |
| ● | Trade show marketing |
o | We will evaluate and participate in selective medical device and wellness trade shows, which elevate the brand and increase sales. |
In addition to a comprehensive marketing program, Electromedical will make strategic investments in sales staff, training, and support, all intended to expand distribution and sales.
| ● | Sales Staff: Electromedical intends to hire a Director of Business and Sales Development to further develop its business opportunities in various geographic areas. |
| ● | National Technical Training Manager: Electromedical intends to hire a National Technical Training Manager to develop and implement training programs. |
Research and Development
The Company has several products in various stages of research and development. We are finalizing development of an enhanced version of our Wellness Pro Plus that we intend to market under the name “Wellness Pro Plus Infinity.” This device will include expanded bioelectric modalities, safety, and efficacy. We expect that the Wellness Pro Plus Infinity will be ready for market in fiscal 2024.
We are also planning to bring two new products to market – extending the Wellness Product line: the WellnessPro POD, our first wearable product, and the Wellness ION Pen. We believe that the WellnessPro POD represents an exciting product line expansion as a “clinical-grade” wearable device that is intended to treat chronic pain, PTSD, anxiety, depression, and insomnia. We intend to sell this device over the counter; however, some modalities on this device may only be provided with a prescription. Our target market for the WellnessPro POD is chronic pain sufferers, which is estimated to be 100 million individuals in the United States alone. We intend to focus on various segments in this market, including veterans of the U.S. armed forces, which, according to the Census Bureau, as of 2014, consists of nearly 22 million individuals. Our goal is to educate the medical community about the benefits of “natural”, non-invasive, non-toxic pain relief and for the WellnessPro POD to be an initial choice for practitioners to prescribe separately or in conjunction with pain medication.
Both of these new products will integrate with the WellnessPro Plus to leverage the engineering breakthroughs and intellectual property found in the WellnessPro Plus, and yet will still function as standalone devices.
WellnessPro POD
| ● | The WellnessPro POD is a compact “clinical-grade” wearable intended to keep pace with the evolution in pain management across practice segments, which will expand the range of treated modalities from chronic and acute pain to include PTSD, anxiety, depression and insomnia. |
Wellness ION Pen
| ● | The Wellness ION Pen is a unique interferential cold laser used to deliver targeted frequency stimulation. This therapeutic laser, which we intend to sell over the counter, will deliver expanded wavelengths relative to comparable lasers combined with micro-stimulation. We believe this will improve circulation and tissue healing and reduce inflammation and pain. The Wellness ION Pen will also have cosmetic applications for skin issues. |
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Significant Customers
For both the years ended December 31, 2023 and 2022, the Company had two significant customers.
Intellectual Property
Electromedical Technologies has the rights to several trademarks concerning Wellness+Plus Pro®, WellnessPro POD™, IDNA Internative Dynamic Neuro Adaptation®Deep Pulse™, WellnessPro™, FaceSPA™ and Electromedical Technologies®. The Company has a provisional utility patent filed and a registered design patent for the Wellness Pro Infinity™.
Competition
We operate in the pain management, rehabilitation, and physical therapy market. We not only compete with other similar devices that treat pain and other medical ailments but also with traditional treatment approaches such as drug prescriptions and surgery and rehabilitation therapy and complementary medical practices such as acupuncture. Further, our competitors include several large, diversified companies that have more financial, marketing, and other resources, distribution networks, and greater name recognition than us. These competitors include Galvani Bioelectronics, Medtronic, and DJOGlobal-Chatanooga. Historically, Electromedical has competed in the “electromedical” and “bio-electrotherapy” device segment, including the crowded TENS market, which now includes inexpensive TENS devices such as the devices produced by “IcyHot.”
Employees
As of December 31, 2023, we have 6 full-time employees, 4 of whom are U.S based, primarily at our Scottsdale, Arizona headquarters. None of our U.S. employees are represented by a labor union.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
As of December 31, 2022, the Company owned the over 5,000 square foot office warehouse unit where its headquarters was located at, 16561 N. 92nd Street, Unit D101, Scottsdale, Arizona. On March 15, 2023, the Company entered into an agreement to sell the building of its principal offices at a purchase price of $2 million and net proceeds of $1,363,818 upon repayment in full of the Company’s bank debt. The Company simultaneously entered into a one-year lease agreement with the purchaser to lease the facilities for $9,000 a month. In September 2023, the Company entered into an operating lease for 3,300 square feet of office and warehouse space at 16413 N. 91st Street, Unit C140, Scottsdale, Arizona. The lease provides for a base rent of $5,280 per month through September 30, 2026. The lease may be renewed for a three-year period.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
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PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.MARKET INFORMATION AND HOLDERS
Our common stock trades on the OTC Markets under the ticker symbol “EMED.” As of December 31, 2023, there were 110 holders of record of our common stock. The following table sets forth, for the periods indicated, the high and low closing sales prices of our common stock:
For the Period Ending |
| High |
| Low | ||
Fourth Quarter, 2022 | $ | 0.025 | $ | 0.006 | ||
First Quarter, 2023 | $ | 0.011 | $ | 0.005 | ||
Second Quarter, 2023 | $ | 0.005 | $ | 0.001 | ||
Third Quarter, 2023 | $ | 0.001 | $ | 0.001 | ||
Fourth Quarter, 2023 | $ | 0.001 | $ | 0.001 | ||
DIVIDEND POLICY
We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on our common stock. Instead, we currently anticipate that we will retain all of our future earnings, if any, to fund the operation and expansion of our business and to use as working capital and for other general corporate purposes. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing law and conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our board of directors may deem relevant.
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 7. 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 these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates, including those related to useful lives of real estate assets, bad debts, impairment, contingencies, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurance that actual results will not differ from those estimates.
Background
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 that 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.
11
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 modify 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 for 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.
Critical Accounting Policies and Estimates
Revenue Recognition
The FASB issued Accounting Standards Update (“ASU”) No. 2014-09, codified as ASC 606: Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.
Revenues are recognized in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers when performance obligations are satisfied through the transfer of promised goods to the Company’s customers. Control transfers upon shipment of the product and when the title has been passed to the customers. This includes the transfer 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 that is expected to be returned is recognized within other current assets on the balance sheets.
Equity Issued with Convertible Debt
The Company is required to issue warrants in conjunction with certain convertible debt. 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 values the warrants using Black Scholes Merton and Monte Carlo pricing models and records the warrants as a reduction of the notes included in the debt discount balance.
Derivative Liabilities
The Company’s convertible promissory notes contain variable conversion provisions upon default. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion options are recorded as derivative liabilities on the default dates and at each reporting period.
Use of Estimates
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 based on the most current and best available information. However, actual results from the resolution of such estimates Critical accounting estimates and assumptions used that are significant to the financial statements, and areas involving a higher degree of judgement or complexity, include the valuation of equity instruments and derivative liabilities.
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Results of Operations
The following table sets forth the audited results of our operations for the years ended December 31:
| 2023 |
| 2022 | |||
Net sales | $ | 1,348,808 | $ | 1,149,844 | ||
Cost of sales: |
| 303,303 |
| 261,203 | ||
Gross profit |
| 1,045,505 |
| 888,641 | ||
Operating expenses |
| 3,110,446 |
| 2,492,169 | ||
Loss from operations |
| (2,064,941) |
| (1,603,528) | ||
Other expense |
| (576,305) |
| (1,864,972) | ||
Net loss | $ | (2,641,246) | $ | (3,468,500) | ||
January 1, 2023 through December 31,2023 Compared to January 1, 2022 through December 31, 2022
Our sales totaled $1,348,808 for the year ended December 31, 2023 and $1,149,844 for the year ended December 31, 2022. The increase is primarily related to an increase in average selling price as well as additional units sold.
Cost of sales and gross margins for the year ended December 31, 2023, and for the year ended December 31, 2022, were $303,303 and 78% and $261,203 and 77%, 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 years ended December 31:
| 2023 |
| 2022 |
| Change | ||||
Sales and marketing | $ | 33,291 | $ | 30,566 | $ | 2,725 | |||
Commissions |
| 158,398 |
| 220,567 |
| (62,169) | |||
Payroll related |
| 1,451,944 |
| 963,177 |
| 488,767 | |||
Consulting and professional fees |
| 799,400 |
| 940,954 |
| (141,554) | |||
Research and development |
| 231,434 |
| 92,299 |
| 139,135 | |||
Other operating expenses |
| 435,979 |
| 244,606 |
| 191,373 | |||
$ | 3,110,446 | $ | 2,492,169 | $ | 618,277 | ||||
The following table sets forth the stock- based compensation expense included in the above operating expenses for the years ended December 31:
| 2023 |
| 2022 |
| Change | ||||
Sales and marketing | $ | — | $ | 8,000 | $ | (8,000) | |||
Payroll related |
| 400,000 |
| 14,703 |
| 385,297 | |||
Consulting and professional fees |
| 315,000 |
| 486,900 |
| (171,900) | |||
$ | 715,000 | $ | 509,603 | $ | 205,397 | ||||
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 $3,110,446 for the year ended December 31, 2023 and $2,492,169 for the year ended December 31, 2022, an increase of $618,277 or about 25%.
The change is primarily due to a $488,767 increase in payroll-related costs of which $385,297 is stock-based compensation, increased research and development costs of $139,135 and other operating costs of $191,373 partially offset by a decrease in consulting and professional fees of $141,554, primarily stock- based compensation-related and commissions of $62,169.
The non-stock-based compensation increase in payroll-related costs consist primarily of additional employee headcount and a $105,000 increase in the salary paid to the Company’s CEO in conjunction with the January 2023 employment agreement, partially offset by a decrease in bonuses paid to the Company’s CEO and other employees of approximately $45,000.
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The increase in research and development costs relates to payments made under its product development agreement as new milestones were met. The increase in other operating expenses consists primarily of rent expense and moving costs after the sale of the building, an increase in insurance related to D&O insurance and travel and entertainment and trade show costs reflecting expanded sales and marketing efforts.
Stock-based compensation expense for the year ended December 31, 2023, includes $315,000 related to a consulting agreement with an advisor and director and $400,000 related to the issuance of a share of Series B Preferred stock to the Company’s CEO. Stock-based compensation expense for the year ended December 31, 2022, includes $461,900 related to third-party agreements for financial and strategic advisory services, $25,000 for director’s fees, and $10,000 for shares of Series A preferred stock issued to the Company’s CEO as compensation.
Other expense decreased by $1,288,667 primarily due to the 2023 gain on the sale of the Company’s building of $1,193,676 and 2022 loss on extinguishment of debt of $1,079,800, partially offset by an increase in interest expense of $102,083, accrued penalties of $409,000 for convertible notes payable in default and losses associated with derivative liabilities of $355,597. The increase in interest expense reflects $263,476 related to the valuation of certain trigger warrants for matured convertible notes payable.
As a result of the foregoing, we recorded a net loss of $2,641,246 for the year ended December 31, 2023, compared to a net loss of $3,468,500 for the year ended December 31, 2022. The decrease in net loss is primarily attributed to the decrease in other expense and increased gross profit, partially offset by an increase in selling, general and administrative expenses.
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, on our future financial condition and results of operations.
Liquidity and Capital Resources
During the year ended December 31, 2023, our cash and cash equivalents decreased by $280,721, reflecting cash used in operations of $1,417,393, and cash used in financing activities of $608,211, partially offset by proceeds from financing activities of $1,744,883. At December 31, 2023, the Company had a working capital deficit of $2,907,369 and cash on hand of $87,704.
Operating Activities
Cash flows used in operating activities totaled $1,417,393 for the year ended December 31, 2023, as compared to cash flows used of $773,337 for the year ended December 31, 2022. The change in cash flows used in operating activities is primarily the result of an increase in inventory purchases and accrued liabilities, decreases in accounts payable and customer deposits, as well as an increase in the loss from operations.
Investing Activities
Cash provided by investing activities for the year ended December 31, 2023 totaled $1,744,883 related to $1,894,588 of gross proceeds from the sale of the Company’s building before payment of the outstanding long-term bank debt secured by the building. Investing activities for the year ended December 31,2023 also included capital expenditures totaling $149,705 for production tooling. There were no investing activities in the 2022 period.
Financing Activities
Cash flows used in financing activities totaled $608,211 for the year ended December 31, 2023, as compared to cash flows provided by financing activities of $758,592 for the year ended December 31, 2022. The cash flows used in the 2023 period are primarily the result of the $522,401 repayment of the long-term bank debt related to the building as part of the March 2023 sale and convertible notes payable payments totaling $85,985.
14
The cash flows provided in the 2022 period reflect $1,545,140 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 $803,959.
As of December 31, 2023, the Company is currently in default with one its lenders for non-payment of three matured convertible promissory notes issued on October 13, 2021, February 11, 2022, and September 15, 2022, with a principal of $932,600 and interest of $93,700 due as of December 31, 2023. The convertible promissory notes issued to the lender all contain provisions for default amounts equal to the principal amounts, plus accrued interest and default interest, through the date of repayment, multiplied by 125% as well as terms that could impact the conversion price of the instruments. Default penalties totaling $257,000 have been accrued and recorded as other expense in the statement of operations for the year ended December 31, 2023. On March 25, 2024, the Company entered into a settlement agreement with this lender.
As of December 31, 2023, and separately, the Company is in default of two matured convertible promissory notes including defaults resulting from the Company’s sale of its real property on March 15, 2023, issued to two lenders on March 10, 2022, and August 8, 2022, with principal and interest due in the amounts of $329,887 and $139,567, respectively. The convertible notes included a cross-default and a cross-default, provision which required the Company to remit payment of principal, accrued interest, default interest and legal fees, multiplied by 125% and 150%, respectively. The amount of $152,000 in default penalties has been accrued and recorded as other expense in the statement of operations for the year ended December 31, 2023, for these lenders. On April 3, 2024, the Company entered into a settlement agreement with one of the lenders. The Company is in negotiations with the other lender to reform the note in default.
During the year - ended December 31, 2023, the note holders have applied default conversion rates to outstanding principal, interest, and default amounts under the notes.
As of April 30, 2024, the Company entered into settlement agreements with two of the above lenders for amounts in default under various convertible promissory notes. Principal of $1,238,101 and accrued interest of $165,734 are covered by the agreements and subject to the following settlement terms:
| ● | Any and all outstanding warrants are to be cancelled without consideration. |
| ● | The maturity dates have been extended to September 25, 2025. |
| ● | Interest rate is capped at 12% per annum. |
| ● | Default penalties accrued up to the settlement date and from the effective date forward are amended to 115% from 125%. |
| ● | All payments will be applied first to outstanding principal and will include the note holders’ pro-rata share of $600 per unit from futures sales of the Company’s Wellness ProPlus Infinity units. |
| ● | Conversions of outstanding principal are limited to $30,000 per calendar month through December 31, 2024 and may be waived under certain conditions and after such date. |
In March 2024, the Company borrowed $149,500 in conjunction with an unsecured promissory note with an investor. Proceeds of $130,000 include an original issue discount of $19,500. An up - front interest charge at twelve percent (12)% of the principal will be added to the principal balance for an outstanding balance of $167,440 to be paid in nine monthly payments of $18,604 beginning April 15, 2024. The note matures on December 15, 2024. At any time following an event of default, the investor shall have the right, to convert all or any part of the outstanding and unpaid amount of the note into fully paid and non - assessable shares of common stock. The note may be converted at a 35% discount to trading prices during the 10 days prior to conversion.
In March and April 2024, holders of convertible promissory notes converted $44,883 of principal into 44,002,186 shares of common stock at $0.00102 per share.
The Company requires additional capital to service its working capital deficit and fund future operations. 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 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. Our Independent Registered Public Accounting Firm included an explanatory paragraph regarding substantial doubt about the Company’s ability to continue as a going concern.
15
Related Party Transactions
We follow FASB ASC subtopic 850-10, “Related Party Transactions,” for the identification of related parties and disclosure of related party transactions.
Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
Material related party transactions are required to be disclosed in the financial statements, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Off Balance Sheet Arrangements
As of December 31, 2023, and 2022, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting Company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and
Stockholders of Electromedical Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Electromedical Technologies, Inc. (the “Company”) as of December 31, 2023 and 2022, and the related statements of operations, stockholders’ deficit, and cash flows, for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a negative working capital balance, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ |
|
PCAOB # | |
We have served as the Company’s auditor since 2018. |
|
| |
April 30, 2024 |
|
18
ELECTROMEDICAL TECHNOLOGIES, INC.
BALANCE SHEETS
DECEMBER 31,
| 2023 |
| 2022 | |||
ASSETS | ||||||
Current assets: |
|
|
|
| ||
Cash and cash equivalents | $ | | $ | | ||
Accounts receivable |
| |
| | ||
Inventories |
| |
| | ||
Prepaid inventories and other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Right of use asset | | — | ||||
Property and equipment, net |
| |
| | ||
Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
| ||
Current liabilities: |
|
|
|
| ||
Accounts payable | $ | | $ | | ||
Credit cards payable |
| |
| | ||
Accrued expenses and other current liabilities |
| |
| | ||
Customer deposits |
| |
| | ||
Convertible promissory notes, net of discount of $ |
| |
| | ||
Long term debt, current portion |
| — |
| | ||
Lease liabilities, current portion | | — | ||||
Derivative liabilities |
| |
| — | ||
Total current liabilities |
| |
| | ||
Bank debt, net of current portion |
| — |
| | ||
Government debt, net of current portion |
| |
| | ||
Lease liabilities, net of current portion |
| |
| — | ||
Other liabilities |
| |
| | ||
Total liabilities |
| |
| | ||
Commitments and contingencies (Note 10) |
|
| ||||
Stockholders’ deficit |
|
|
|
| ||
Series A Preferred Stock, |
| |
| | ||
Series B Preferred Stock, | | — | ||||
Common stock, $ |
| |
| | ||
Additional paid-in-capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Total stockholders’ deficit |
| ( |
| ( | ||
Total liabilities and stockholders’ deficit | $ | | $ | | ||
The accompanying notes are an integral part of these financial statements
19
ELECTROMEDICAL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
THE YEARS ENDED DECEMBER 31,
| 2023 |
| 2022 | |||
Net sales |
| $ | | $ | | |
| ||||||
Cost of sales |
|
| | | ||
| ||||||
Gross profit |
|
| | | ||
| ||||||
Selling, general and administrative expenses |
|
| | | ||
| ||||||
Loss from operations |
|
| ( | ( | ||
| ||||||
Other income (expense) |
|
|
| |||
Interest expense |
|
| ( | ( | ||
Gain on sale of fixed asset | | — | ||||
Change in fair market value of derivative liabilities |
|
| ( | — | ||
Loss on derivative liabilities | ( | — | ||||
Other expense |
|
| ( | — | ||
Forgiveness of debt |
|
| — | | ||
Gain (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
20
ELECTROMEDICAL TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Series A Preferred | Series B Preferred | Additional | Total | |||||||||||||||||||||
Stock | Stock | Common Stock | Paid in | Accumulated | Stockholders’ | |||||||||||||||||||
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Capital |
| Deficit |
| Deficit | |||||||
Balance, December 31, 2021 | $ | |
| | $ | — | — | $ | |
| | $ | | $ | ( | $ | ( | |||||||
Adoption of ASU2020-06 |
| — |
| — | - | — |
| — |
| — |
| ( |
| |
| ( | ||||||||
Issuance of common stock for cash |
| — |
| — | - | — |
| |
| |
| |
| — |
| | ||||||||
Shares issued for consulting services and director’s fees |
| — |
| — | — | — |
| |
| |
| |
| — |
| | ||||||||
Shares issued in conjunction with forbearance of convertible promissory notes |
| — |
| — | — | — |
| |
| |
| |
| — |
| | ||||||||
Shares issued in conjunction with convertible promissory notes settlement |
| — |
| — | — | — |
| |
| |
| |
| — |
| | ||||||||
Warrants issued in conjunction with debt settlement |
| — |
| — | — | — |
| — |
| — |
| |
| — |
| | ||||||||
Warrants issued in conjunction with convertible promissory notes |
| — |
| — | — | — |
| — |
| — |
| |
| — |
| | ||||||||
Warrants reset in conjunction with convertible promissory notes |
| — |
| — | — | — |
| — |
| — |
| |
| ( |
| — | ||||||||
Conversion of convertible promissory notes |
| — |
| — | — | — |
| |
| |
| |
| — |
| | ||||||||
Stock-based compensation |
| |
| | — | — |
| — |
| — |
| |
| — |
| | ||||||||
Cashless warrant exercises |
| — |
| — | — | — |
| |
| |
| ( |
| — |
| — | ||||||||
Net loss |
| — |
| — | — | — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
Balance, December 31, 2022 | $ | |
| | $ | — | — | $ | |
| | $ | | $ | ( | $ | ( | |||||||
Conversion of convertible promissory notes, accrued interest and derivative liabilities | — |
| — | — | — |
| |
| | | — | | ||||||||||||
Shares issued for consulting services | — | — | — | — | | | | — | | |||||||||||||||
Share issued as CEO compensation | — | — | | | — | — | — | — | | |||||||||||||||
Shares issued in conjunction with settlement reset | — | — | — | — | | | | — | | |||||||||||||||
Settlement of stock-based compensation liabilities | — | — | — | — | | | | — | | |||||||||||||||
Conversion true-up | — | — | — | — | | | ( | — | — | |||||||||||||||
Exercise of warrants for cash | — | — | — | — | | | | — | | |||||||||||||||
Cashless warrant exercises | — | — | — | — | | | ( | — | — | |||||||||||||||
Warrant reset | — | — | — | — | — | — | | ( | — | |||||||||||||||
Valuation of trigger warrants | — | — | — | — | — | — | | — | | |||||||||||||||
Cancellation of shares | — | — | — | — | ( | ( | ( | — | ( | |||||||||||||||
Net loss | — | — | — | — | — | — | — | ( | ( | |||||||||||||||
Balance, December 31, 2023 | $ | |
| | $ | | | |
| | | ( | ( | |||||||||||
The accompanying notes are an integral part of these financial statements
21
ELECTROMEDICAL TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
| 2023 |
| 2022 | |||
Cash flows from operating activities: |
|
|
|
| ||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
| ||||
Stock-based compensation expense |
| |
| | ||
Provision for allowance for doubtful accounts | | — | ||||
Depreciation and amortization |
| |
| | ||
Amortization of right of use asset | | — | ||||
Forgiveness of debt | — | ( | ||||
(Gain) loss on extinguishment of debt |
| ( |
| | ||
Amortization of debt discount and warrant expense |
| |
| | ||
Change in fair value of derivative liabilities- |
| |
| — | ||
Loss on derivatives | | — | ||||
Gain on sale of property and equipment | ( | — | ||||
Other |
| |
| — | ||
Change in operating assets and liabilities: |
|
| ||||
Accounts receivable |
| |
| | ||
Inventories |
| ( |
| | ||
Prepaid inventories and other current assets |
| ( |
| ( | ||
Accounts payable |
| ( |
| | ||
Credit cards payable |
| ( |
| | ||
Accrued expenses and other current liabilities |
| |
| | ||
Customer deposits |
| ( |
| | ||
Lease liability | ( | — | ||||
Other liabilities |
| ( |
| | ||
Net cash used in operating activities | ( |
| ( | |||
Cash flows from investing activities: | ||||||
Purchase of property and equipment | ( | — | ||||
Sale of property and equipment | | — | ||||
Net cash provided by investing activities | | — | ||||
|
| |||||
Cash flows from financing activities: |
|
| ||||
Repayments on bank debt |
| ( |
| ( | ||
Related party notes payable-net |
| — |
| ( | ||
Issuance of convertible promissory notes |
| — |
| | ||
Repayments on convertible promissory notes | ( | ( | ||||
Exercise of warrants for cash | | — | ||||
Issuance of common stock for cash- net |
| — |
| | ||
Net cash provided by (used in) financing activities |
| ( |
| | ||
Net decrease in cash and cash equivalents | ( | ( | ||||
Cash and cash equivalents, beginning of year |
| |
| | ||
|
| |||||
Cash and cash equivalents, end of year | $ | | $ | | ||
Supplemental disclosures of cash flow information: | ||||||
Cash paid during the year for: |
|
|
|
| ||
Interest | $ | | $ | | ||
Income taxes | $ | — | $ | — | ||
Non-cash investing and financing activities: | ||||||
January 1, 2022 adoption of ASU2020-06 | $ | — | $ | | ||
Settlement of stock-based compensation liabilities | $ | | $ | — | ||
Warrants, common stock and beneficial conversion feature issued in conjunction with convertible promissory notes | $ | — | $ | | ||
Conversion of convertible promissory notes, derivatives and accrued interest into shares of common stock | $ | | $ | | ||
Right of use asset and lease liability | $ | | $ | — | ||
The accompanying notes are an integral part of these financial statements
22
ELECTROMEDICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023 AND 2022
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS
Electro Medical 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 Company maintains its accounting records on an accrual method in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).
Use of Estimates
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 based on 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 about 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 as at December 31, 2023.
Revenue Recognition
Revenues are recognized in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers 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 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 that is expected to be returned is recognized within other current assets on the balance sheets. The Company generally allows a
23
Certain larger customers pay in advance for future shipments. These advance payments totaled $
At the completion of the initial
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
Accounts Receivable
Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts, and the Company generally does not require collateral. As a general policy, the Company determines an allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and industry as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts.
The Company recorded an allowance for doubtful accounts of $
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:
| YEAR ENDED DEC 31, |
| |||
2023 |
| 2022 | |||
Customer A |
| | % | | % |
Customer B |
| | % | | % |
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, including inventory deposits, as a percentage of total inventory purchases are as follows:
| YEAR ENDED DEC 31, |
| |||
2023 |
| 2022 | |||
Supplier A | | % | | % | |
Supplier D | | % | — |
| |
There were
24
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.
Disclosure of Fair Value
The disclosure requirements within Accounting Standards Codification (ASC) Topic 820-10, Fair Value Measurement, require disclosure of estimated fair values of certain financial instruments. For financial instruments recognized at fair value in the Company’s statements of operations, the disclosure requirements of ASC Topic 820-10 also apply. The methods and assumptions are set forth below:
| ● | Cash and cash equivalents are carried at cost, which approximates fair value. |
| ● | The carrying amounts of receivables approximate fair value due to their short-term maturities. |
| ● | The carrying amounts of payables approximate fair value due to their short-term maturities. |
Asset and liabilities measured and reported at fair value are classified and disclosed in one of the following categories based on inputs:
Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 — Pricing inputs include significant unobservable inputs used in determining the fair value of investments. The types of investments, which would generally be included in this category include equity securities issued by private entities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.
The following table presents changes during the year ended December 31, 2023 in Level 3 liabilities measured at fair value on a recurring basis:
Fair value- December 31, 2022 |
| $ | — |
Derivative liabilities in conjunction with convertible promissory note defaults |
| | |
Conversion of convertible promissory notes |
| ( | |
| | ||
Fair value- December 31, 2023 | $ | |
There were no Level 3 liabilities in 2022.
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 December 31, 2023, and 2022, the Company believes there are no excess and obsolete inventories and accordingly, did not record an inventory reserve. Inventories consist of purchased finished goods.
25
Property and Equipment
Property and equipment are recorded at cost and is comprised of a building, tooling and office furniture and equipment. The building, which was sold in March 2023, was depreciated using the straight-line method over the estimated useful life of
Betterments, renewals, and extraordinary repairs that materially extend the useful life of the asset are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation applicable to assets retired are removed from the accounts, and the gain or loss on disposition, if any, is recognized in the accompanying statements of operations.
Impairment of Long-Lived Assets
In accordance with FASB ASC Topic 360, Property, Plant and Equipment, long-lived assets such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized on long-lived assets when indicators of impairment are present and the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of the assets. In such cases, the carrying value of these assets are adjusted to their estimated fair values and assets held for sale are adjusted to their estimated fair values less selling expenses.
Equity Issued with Convertible Debt
The Company is required to issue warrants in conjunction with certain convertible debt. 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 values the warrants using a Black Scholes Merton and Monte Carlo pricing models and records the warrants as a reduction of the notes included in the debt discount balance.
Income Taxes
The Company, which was formed as a Limited liability Company in Arizona, previously filed an Entity Classification Election, commonly known as a check-the-box-election, to be classified as a corporation for tax purposes. The Company also made an election to be treated for income tax purposes as an S corporation. Under U.S. and Arizona law, the taxable income or loss of an S corporation is included in the shareholder’s income tax returns. In August 2017, the Company converted to a Delaware Corporation. The conversion was tax-free under Internal Revenue Code Section 368(a)(1)(F) and is referred to as an F-reorganization, which is typically defined as a mere change in identity, form or place of organization. Management elected to terminate the S corporation election effective January 1, 2018 and the Company will operate for tax purposes as a C corporation from that date forward.
The Company follows the provisions of uncertain tax positions as addressed in FASB ASC Subtopic 740-10-65-1, Income Taxes. The Company has no such tax positions as of both December 31, 2023 and 2022, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in selling, general and administrative expenses. No such interest or penalties were recognized during the periods presented. The Company had
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed. There are no examinations currently pending.
The Company’s tax provision for 2023 related to deferred tax charges consisting of accrued liabilities, customer deposits and accounts payable, for which the Company will receive the benefit from when paid and the net operating loss incurred during 2023. During the year ended December 31, 2023, the Company evaluated its deferred tax assets of $
26
The Company’s tax provision for 2022 related to deferred tax charges consisting of accrued liabilities and accounts payable, for which the Company will receive the benefit from when paid and the net operating loss incurred during 2022. During the year ended December 31, 2022, the Company evaluated its deferred tax assets of $
For the years ended December 31, 2023 and 2022 the Company’s net operating loss carry forward was increased by $
Sales Taxes
Sales taxes for the years ended December 31, 2023 and 2022 were recorded on a net basis. Included in accrued expenses at both December 31, 2023 and 2022 is approximately $
Shipping and Handling Costs
The Company included shipping and handling costs in cost of sales on the accompanying statements of operations for the years ended December 31, 2023 and 2022.
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
Variable lease payments not dependent on a rate or index associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed as probable. Variable lease payments are presented as operating expenses in the Company’s statement of operations in the same line as expense arising from fixed lease payments. As of December 31, 2023, management determined that there were
Research and Development Costs
Research and development costs are expensed as incurred. Total research and development costs amounted to $
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 December 31, 2023 and 2022, diluted net loss per share is the same as basic net loss per share for each year. Warrants, accrued liabilities to be converted to common stock and convertible promissory notes with underlying shares totaling
27
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 10, 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 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 June 2016, the FASB issued guidance (FASB ASC 326) which significantly changed how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. Under the standard, disclosures are required to provide users of the financial statements with useful information in analyzing an entity’s exposure to credit risk and the measurement of credit losses. Financial assets held by the company that are subject to the guidance in FASB ASC 326 were trade accounts receivable. We adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements and primarily resulted in new/enhanced disclosures only.
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 December 31:
| 2023 |
| 2022 | |||
Building | $ | — | $ | | ||
Tooling | | — | ||||
Furniture and equipment |
| |
| | ||
| |
| | |||
Less: accumulated depreciation and amortization |
| ( |
| ( | ||
$ | | $ | | |||
On March 15, 2023, the Company entered into an agreement to sell the building of its principal offices at a purchase price of $
Depreciation and amortization expense related to property and equipment was $
NOTE 4. NOTES PAYABLE
Convertible Promissory Notes
The aggregate of convertible promissory notes is as follows:
| December 31, |
| December 31, | |||
Convertible promissory notes |
| 2023 |
| 2022 | ||
Principal balance | $ | | $ | | ||
Debt discount balance |
| — |
| ( | ||
Net Notes balance | $ | | $ | | ||
28
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 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 $
If, upon the one-year anniversary of the effective date of the June 2022 settlement agreement, the lender and its designees have beneficial ownership over the settlement payment shares, and the closing price of the Company’s common stock as reported on the OTC Markets is less than $
On July 6, 2022, the Company borrowed $
29
During the year ended December 31, 2022, the Company issued convertible promissory notes, including the note discussed above, to certain investors totaling $
During the year ended December 31, 2022, the subsequent issuance of convertible promissory notes with warrant exercises and stock issuances triggered a conversion price reset on certain convertible promissory notes to $
During the year ended December 31, 2023, holders of convertible promissory notes converted $
As of December 31, 2023, the Company is currently in default with one its lenders for non-payment of three matured convertible promissory notes issued on October 13, 2021, and February 11, 2022, and September 15, 2022, with principal of $
As of December 31, 2023, and separately, the Company is in default of two matured convertible promissory notes including defaults resulting from the Company’s sale of its real property on March 15, 2023, issued to two lenders on March 10, 2022, and August 8, 2022, with principal and interest due in the amounts of $
During the year - ended December 31, 2023, the note holders have applied default conversion rates to outstanding principal, interest, and default amounts under the notes.
The Net Notes balance at December 31, 2023 is comprised of the following:
| Principal |
| Debt Discount |
| Net | ||||
Pre 2020 | $ | | $ | — | $ | | |||
October 2021 |
| |
| — |
| | |||
February 2022 |
| |
| — |
| | |||
March 2022 |
| |
| — |
| | |||
August 2022 |
| |
| — |
| | |||
September 2022 |
| |
| — |
| | |||
$ | | $ | — | $ | | ||||
30
The Net Notes balance at December 31, 2022 is comprised of the following:
| Principal |
| Debt Discount |
| Net | ||||
Pre 2020 | $ | | $ | — | $ | | |||
October 2021 |
| |
| — |
| | |||
February 2022 |
| |
| ( |
| | |||
March 2022 |
| |
| ( |
| | |||
July 2022 |
| |
| ( |
| | |||
August 2022 |
| |
| ( |
| | |||
September 2022 |
| |
| ( |
| | |||
$ | | $ | ( | $ | | ||||
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 $
On March 15, 2023, the Company entered into an agreement to sell the building of its principal offices at a purchase price of $
Future annual aggregate maturities of long-term debt, are as follows:
For the Years Ending December 31: |
|
|
|
2024 | $ | — | |
2025 |
|
| — |
2026 |
|
| — |
2027 |
|
| |
2028 |
|
| |
Thereafter |
|
| |
$ | |
31
NOTE 6. DERIVATIVE LIABILITIES
The Company’s convertible promissory notes contain variable conversion provisions upon default, Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion options and shares to be issued were recorded as derivative liabilities on the default dates.
Based on the various convertible promissory notes described in Note 4, the fair value of applicable derivative liabilities on notes and the change in fair value of derivative liabilities are as follows for the year ended December 31, 2023:
Fair value- December 31, 2022 |
| $ | — |
Derivative liabilities in conjunction with convertible promissory note defaults |
| | |
Conversion of convertible promissory notes |
| ( | |
| | ||
Fair value- December 31, 2023 | $ | |
The fair value of the derivative liabilities – convertible promissory notes is estimated using a Lattice pricing model with the following assumptions:
| 2023 |
| ||
Market value of common stock | $ | |||
Expected volatility |
| % | ||
Expected term (in years) |
| |||
Risk-free interest rate |
| % | ||
There were not derivative liabilities as of December 31, 2022.
NOTE 7. RELATED PARTY TRANSACTIONS
In June 2022, the Company entered into a one-year independent director agreement in conjunction with the appointment of a new member to its Board of Directors. The agreement requires the Company to issue the director $
In December 2022, the Company appointed
Compensation totaling $
In January 2023, the Company amended the CEO’s employment agreement to include the following:
| ● | Increased annual salary to $ |
32
| ● | An annual bonus of |
| ● | Instituted a bonus plan that provides for monthly and quarterly cash bonuses based on certain growth requirements |
| ● | A bonus of |
| ● | Issuance of the authorized Series “B” Preferred stock. |
In the event of a change of control of the Company, a cash payment of at least $
In January 2023, the Company issued
In September 2022, the Company issued
The Company’s CEO earned bonuses as a result of meeting certain financial milestones for the year ended December 31, 2023. The CEO earned a cash bonus of $
Effective July 15, 2023, the Company’s board of directors executed a resolution whereby the CEO’s salary shall be reduced from $
In June 2023, the Company entered into a licensing agreement with the Company’s CEO, whereby the CEO is the owner and licensor of certain intellectual property (IP). Under the agreement, the CEO grants the Company an exclusive contingent, non-transferable license to use the IP Rights solely for the purposes of conducting its business in bioelectronics product development, manufacturing, and marketing. In the event the CEO’s employment with the Company is terminated for any reason, this license shall revert all IP rights to the CEO, and the CEO grants the Company a non-exclusive license to use the IP and shall pay a royalty fee of
NOTE 8. STOCKHOLDERS’ DEFICIT
In January 2023, 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 from
In January 2023, the Company issued
In February 2023,
In February 2023, the Company issued
33
In February 2023, the Company entered into a
In March 2023, the Company issued
On May 8, 2023, the Company issued
Trigger warrants to purchase a total of
During the year ended December 31, 2023, holders of convertible promissory notes converted $
In January and February 2022, the Company sold
In June 2022, the Company entered into a settlement agreement with a lender to convert the outstanding convertible notes payable of $
During the year ended December 31, 2022, the Company issued
In addition, the Company issued a member of its board of directors
During the year ended December 31, 2022, certain lenders exercised
Series A Preferred Stock
On November 1, 2019, the Company’s board of directors and a majority of shareholders eligible to vote adopted a resolution designating a new Series A Preferred Stock. One Million (
Series B Preferred Stock
In September 2021, the Company’s board of directors and a majority of shareholders eligible to vote adopted a resolution designating a new Series B Preferred Stock. One (1) share was authorized. The Series B Preferred Stock shall rank: senior to all of the Common Stock, par value $
34
The Holder of the Series B Preferred Stock shall be entitled to vote on all matters subject to a vote or written consent of the holders of the Company’s Common Stock, and on all such matters, the share of Series B Preferred Stock shall be entitled to that number of votes equal to the total number of eligible votes of issued and outstanding shares of Common Stock, and all other securities of the Company, plus one hundred thousand (
See Note 9 for activity related to warrants.
NOTE 9. STOCK OPTIONS AND WARRANTS
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
All options have expired as of December 31, 2022.
Warrants
During the year ended December 31, 2023, 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 trigger dates and classified as equity.
The underlying notes matured prior to the trigger dates. The Company valued the warrants using Black Scholes Merton and Monte Carlo pricing models and recorded the warrants as interest expense in the accompanying statement of operations. 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 fair value of the warrants of $
During the year ended December 31,2023, subsequent 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 $
Retroactive application of a 2022 exercise resulted in the issuance of an additional
As of April 15, 2024,
35
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, 2023:
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 | |||
August 10, 2022, 2022 | $ | |
| | August 10, 2027 | ||
September 29, 2022, 2022 | $ | |
| | September 29,2027 | ||
February 11, 2023 | $ | | | February 11, 2028 | |||
March 10, 2023 | $ | | | March 10, 2028 | |||
September 15, 2023 | $ | |
| | September 15, 2026 | ||
|
|
| |
| |||
During the year ended December 31, 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 third-party financial advisors. In accordance with the terms of the advisory agreements, 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.
36
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 |
| % |
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, 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 | ||
August 10, 2022 | $ | |
| | August 10, 2027 | ||
September 15, 2022 | $ | | | September 15, 2025 | |||
September 29, 2022 | $ | |
| | September 29, 2027 | ||
| | ||||||
During the year ended December 31, 2022, certain transactions 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 10. COMMITMENTS AND CONTINGENCIES
Commitments
The Company has entered into a product development agreement with remaining payments totaling approximately $
In September 2023, the Company entered into an operating lease for its office location. The lease provides for a base rent of $
The following outlines the maturities of our operating lease liabilities as of December 31, 2023:
2024 |
| $ | |
2025 | $ | | |
2026 | $ | | |
Total lease payments | $ | | |
Less imputed interest | $ | ( | |
$ | |
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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.
As of December 31, 2023, the Company is currently in default with one its lenders for non-payment of three matured convertible promissory notes issued on October 13, 2021, February 11, 2022, and September 15, 2022, with a principal of $
As of December 31, 2023, and separately, the Company is in default of two matured convertible promissory notes, including defaults resulting from the Company’s sale of its real property on March 15, 2023, issued to two lenders on March 10, 2022, and August 8, 2022, with principal and interest due in the amounts of $
NOTE 11. SUBSEQUENT EVENTS
As of April 15, 2024, the Company entered into settlement agreements with two of its lenders for amounts in default under various convertible promissory notes. Principal of $
| ● | Any and all outstanding warrants are to be cancelled without consideration. |
| ● | The maturity date has been extended to |
| ● | Interest rate is capped at |
| ● | Default penalties accrued up to the settlement date and from the effective date forward are amended to |
| ● | All payments will be applied first to outstanding principal and will include the note holders’ pro-rata share of $ |
| ● | Conversions of outstanding principal are limited to $ |
In March 2024, the Company borrowed $
In March and April 2024, holders of convertible promissory notes converted $
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SUPPLEMENTARY DATA
The Company is a smaller reporting Company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023, the end of the period covered by this Report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses discussed below.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by the Board, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
o | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets. |
o | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures of are being made only in accordance with authorizations of our management and directors; and, |
o | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
Because of our inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management identified the following material weaknesses:
o | we do not have an Audit Committee – While not being legally obligated to have an Audit Committee, it is the management’s view that such a committee, including a financial expert board member, is an utmost important entity level control of the Company’s financial statements. Currently, the Board of Directors acts in the capacity of the Audit Committee and does not include a member that is considered to be independent of management to assist in providing the necessary oversight over management’s activities. |
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o | we have not performed a risk assessment and mapped our processes to control objectives. |
o | we have not implemented comprehensive entity-level internal controls. |
o | we have not implemented adequate system and manual controls; and |
o | we do not have sufficient segregation of duties. |
Our management assessed the effectiveness of internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organization of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on management’s assessment, management concluded that the above material weaknesses have not been remediated and, accordingly, our internal control over financial reporting is not effective as of December 31, 2023.
Remediation of Material Weaknesses
Management understands that in order to remediate the material weaknesses, additional segregation of duties, changes in personnel and technologies are necessary. We will not consider these material weaknesses fully remediated until management has implemented and tested those internal controls and found them to be operating effectively.
This Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to such attestation pursuant to rules of the Securities and Exchange Commission that permits us to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
We implemented no changes to our internal control over financial reporting during the year ended December 31, 2023.
ITEM 9B. OTHER INFORMATION
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PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our Board of Directors and Executive Officers
The following table sets forth the names and ages of our current directors and executive officers, the principal offices and positions held by each person, and the date such person became a director or executive officer. Our executive officers are appointed by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Unless described below, there are no family relationships among any of the directors and officers.
The following table presents information with respect to our officers and directors as of December 31, 2023:
Name |
| Age |
| Position |
Matthew Wolfson |
| 52 |
| Chief Executive Officer, President, Chief Financial Officer, Secretary, Treasurer |
Robert Hymers (1) | 40 | Director | ||
Petar Gajic (2) | 52 | Employee Director |
| (1) | Appointed by the Board of Directors on December 20, 2022, Mr Hymers resigned from the Board on July 1, 2023 |
| (2) | Appointed by the Board of Directors on December 20, 2022 and subsequently renewed until December 2024. |
Biographical Information Regarding Officers and Directors
Matthew Wolfson
Mr. Wolfson has been our sole officer and director from inception until the appointment of Lee Benson, Robert Hymers and Petar Gajic in 2022. Mr. Wolfson is a Phoenix based entrepreneur with a keen interest in technology and design. He is the founder of Electromedical Technologies, Inc. and has been the CEO and has worked full-time for the Company since he began researching and developing the WellnessPro in 2003.
As an entrepreneur he has been involved in several successful companies, in the early 90’s, Matthew Wolfson co-founded Globalcom 2000 and entered into the prepaid phone card business, which at that time was an almost unknown market. Globalcom 2000 became one of the largest phone card companies in the United States.
In 1994, he developed an interest in the telecom “International Callback” business and co-founded One World Communications. He subsequently travelled the world, opening up over 150 training centers and helped create the world’s largest International global sales force selling telecom services.
Robert Hymers
Robert Hymers was the past president and CEO of Everlert, Inc. (OTC: EVLI) and director and CFO of Cannabis Global, Inc. (OTC: CBGL). Mr. Hymers is a licensed CPA in the state of California. During his career as a tax professional at Ernst & Young, LLP, Mr. Hymers provided tax services to several prominent entertainment and real estate companies. His extensive experience with Entertainment and Private Equity industries and his prolonged involvement with public companies in different roles make him a key asset to the Company. Mr. Hymers has also served as the CFO of Global Hemp Group (OTC: GBHPF) and is the Managing Partner of Pinnacle Tax Services, LLC. Mr. Hymers holds a Master of Science in Taxation and a Bachelor of Science in Accountancy from
Petar Gajic
Mr. Gajic joined the Company in 2010. As a General Manager (GM), his responsibilities include formulating overall strategy, managing people and establishing policies.
In addition to his GM responsibilities, Mr. Gajic is a management representative (MR), and is responsible for the quality policy, objectives and management reviews. He is in charge of maintaining the Company’s QMS. (Quality management system - ISO 13485:2016). Currently, Mr. Gajic is overseeing development of the new products, as well as day-to-day operations.
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Mr. Gajic is a Microsoft System Engineer (MCSE) with over 25 years of experience with a range of computer systems and networks. In the past he was a director of engineering/network advisor for SHARP Electronic regional distribution office.
Term of Office
Matthew Wolfson has been appointed for a three-year term, renewable for successive one-year terms. Robert Hymers was appointed for a six-month term, until July 1, 2023. Petar Gajic has been appointed for a one-year term, which was subsequently renewed until December 2024. All of our directors are appointed for designated terms to hold office, or until the next annual meeting of stockholders, or until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. Executive officers serve at the discretion of the Board of Directors, and are elected or appointed to serve until the next Board of Directors meeting following the annual meeting of stockholders.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who beneficially own more than 10% of our common stock to file initial reports of beneficial ownership and reports of changes in beneficial ownership with the SEC. Such persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms filed by such persons.
Based solely on our review of such forms furnished to us, and written representations from certain reporting persons, we believe that all filing requirements applicable to our executive officers, directors and greater than 10% stockholders during the fiscal year ended December 31, 2023 were satisfied.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past five years, none of the following occurred with respect to a present director (or person nominated to become director), executive officer, founder, promoter or control person: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. To the knowledge of the Company, there have been no reported violations of the Code of Ethics.
Whistleblower Procedures Policy
In accordance with the requirements of Section 301 of the Sarbanes-Oxley Act of 2002, the Board of Directors of the Company has adopted a Whistleblower Procedures Policy, stating that all employees of the Company are strongly encouraged to report any evidence of financial irregularities which they may become aware of, including those with respect to internal controls, accounting or auditing matters. Under the Whistleblower Procedures Policy, the management of the Company shall promptly and periodically communicate to all employees with access to accounting, payroll and financial information the means by which they may report any such irregularities. In the event an employee is uncomfortable for any reason reporting irregularities to his or her supervisor or other management of the Company, employees may report directly to any member of the Board of Directors of the Company. The identity of any employee reporting under these procedures will be maintained as confidential at the request of the employee,or may be made on an anonymous basis. Notice must be provided to all of the Company’s employees with access to accounting, payroll and financial information in respect of these procedures.
The Company does not have any Committees of the Board
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CORPORATE GOVERNANCE
Director Independence
We are not listed on a major U.S. securities exchange and, therefore, are not subject to the corporate governance requirements of any such exchange, including those related to the independence of directors. Upon our listing on any national securities exchange or any inter-dealer quotation system, we will elect such independent directors as is necessary under the rules of any such securities exchange.
Board Leadership Structure
We currently have three Directors, one of whom is also an executive officer. Our Board has reviewed the Company’s current Board leadership structure. In light of the Company’s size, nature of the Company’s business, regulatory framework under which the Company operates, stockholder base, the Company’s peer group and other relevant factors, the Company has determined that this structure is currently the most appropriate Board leadership structure for our company. Nevertheless, the Board intends to carefully evaluate from time to time whether our current structure should be modified based on what the Board believes is best for the Company and our stockholders.
Board Role in Risk Oversight
Risk is inherent in every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including strategic risks, enterprise risks, financial risks, and regulatory risks. While our management is responsible for day to day management of various risks we face, the Board, as a whole, is responsible for evaluating our exposure to risk and to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. The Board reviews and discusses policies with respect to risk assessment and risk management. The Board also has oversight responsibility with respect to the integrity of the Company’s financial reporting process and systems of internal control regarding finance and accounting, as well as its financial statements.
Audit Committee
The Board does not currently have a standing Audit Committee. The full Board performs the principal functions of the Audit Committee. The full Board monitors our financial reporting process and internal control system and reviews and appraises the audit efforts of our independent accountants.
Compensation Committee
At December 31, 2023, the Company had no standing Compensation Committee. The Board establishes overall compensation policies and reviews and approves compensation recommendations by management. On February 1, 2023 the Board established a Compensation Committee, consisting of its independent director, Mr. Robert Hymers. Mr Hymers resigned from the Board as of July 1, 2023.
Nominating Committee
The Board does not currently have a standing Nominating Committee. We do not maintain a policy for considering nominees. Our Bylaws provides that the number of Directors shall be fixed from time to time by the Board, but in no event shall be less than the minimum required by law. The Board of Directors shall be large enough to maintain our required expertise but not too large to function efficiently. Director nominees are recommended, reviewed and approved by the entire Board. The Board believes that this process is appropriate due to the relatively small number of directors on the Board and the opportunity to benefit from a variety of opinions and perspectives in determining director nominees by involving the full Board.
While the Board is solely responsible for the selection and nomination of directors, the Board may consider nominees recommended by stockholders as it deems appropriate. The Board evaluates each potential nominee in the same manner regardless of the source of the potential nominee’s recommendation. Although we do not have a policy regarding diversity, the Board does take into consideration the value of diversity among Board members in background, experience, education and perspective in considering potential nominees for recommendation to the Board for selection. Stockholders who wish to recommend a nominee should send nominations to our President, Matthew Wolfson, 16413 North 91st Street, Suite C140, Scottsdale, AZ 85260, that includes all information relating to such person that is required to be disclosed in solicitations of proxies for the election of directors. The recommendation must be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected.
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Compensation Consultants
We have not historically relied upon the advice of compensation consultants in determining Named Executive Officer compensation. Instead, the full Board reviews compensation levels and makes adjustments based on their personal knowledge of competition in the marketplace, publicly available information and informal surveys of human resource professionals.
Stockholder Communications
Stockholders who wish to communicate with the Board may do so by addressing their correspondence to the Board at Electromedical Technologies, Inc., Attention: Mathew Wolfson, 16413 North 91stStreet, Suite C140, Scottsdale, AZ 85260. The Board shall review and respond to all correspondence received, as appropriate.
ITEM 11. EXECUTIVE COMPENSATION
Matthew Wolfson, is our chief executive officer, president, chief financial officer, chairman, secretary and treasurer.
Mr. Wolfson receives no compensation for serving as the Chairman and a Director of the Company. During the Director’s term, the Company reimburses the Director for all reasonable out-of-pocket expenses incurred by the Director in attending any in-person meetings, provided that the Director complies with the generally applicable policies, practices and procedures of the Company for submission of expense reports, receipts or similar documentation of such expenses.
Executive Compensation Table
Nonqualified | |||||||||||||||||||||||||||
Nonequity | deferred | ||||||||||||||||||||||||||
Stock | Option | incentive plan | compensation | All other | |||||||||||||||||||||||
Name and principal | Salary | Bonus | awards | awards | compensation | earnings | compensation | Total | |||||||||||||||||||
position |
| Year |
| ($) |
| ($) |
| ($) |
| ($) |
| ($) |
| ($) |
| ($) |
| ($) |
| ||||||||
Matthew Wolfson(2) | 2023 | $ | 365,000 | $ | 60,000 | $ | 439,000 | $ | 864,000 | (2) | |||||||||||||||||
Matthew Wolfson(1) |
| 2022 | $ | 260,000 | $ | 133,751 | $ | 10,000 |
| — | — | — | — | $ | 403,751 | (1) | |||||||||||
| (1) | In September 2022, the Company issued 500,000 shares of its Series A Preferred Stock to the Company’s CEO as compensation at $0.02 per share or $10,000. The Company paid the Company’s CEO an additional bonus of $133,751 during the year ended December 31, 2022. |
| (2) | In January 2023, the Company amended the CEO’s employment agreement to include the following: |
| ● | Increased annual salary to $365,000 |
| ● | An annual bonus of 25 million shares of common stock for an increase in gross revenue of 10% or more over the previous years and additional shares for incremental growth over the 10% increase |
| ● | Instituted a bonus plan that provides for monthly and quarterly cash bonuses based on certain growth requirements |
| ● | A bonus of 10 million shares of common stock upon uplisting to a senior stock exchange or successful reverse stock split |
| ● | Issuance of the authorized Series “B” Preferred stock. |
In the event of a change of control of the Company, a cash payment of at least $1.5 million, subject to increase or change by the disinterested board will be paid to the CEO.
In January 2023, the Company issued one share of Series B Preferred stock to the Company’s CEO as compensation totaling $400,000.
The Company’s CEO earned bonuses as a result of meeting certain financial milestones for the year ended December 31, 2023. The CEO earned a cash bonus of $60,000, of which $20,500 has been paid in 2023, with the remainder accrued and available to be converted at any time into shares of the Company’s common stock at the market value on the date of conversion. A bonus of 39,000,000 shares of common stock was also earned and recorded as accrued compensation of $39,000 or $0.001 per share.
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Effective July 15, 2023, the Company’s board of directors executed a resolution whereby the CEO’s salary shall be reduced from $365,000 to $265,000 per year, with unpaid sums being accrued on the books of the Company and subject to an option in favor of the CEO to elect to convert the unpaid sums into shares of Company common stock. Accrued salary totaling $39,154 has been recorded as of December 31, 2023 and may be converted at any time into shares of the Company’s common stock at a discount of 25% of the market value on the date of conversion.
In June 2023, the Company entered into a licensing agreement with the Company’s CEO, whereby the CEO is the owner and licensor of certain intellectual property (IP). Under the agreement, the CEO grants the Company an exclusive contingent, non-transferable license to use the IP Rights solely for the purposes of conducting its business in bioelectronics product development, manufacturing, and marketing. In the event the CEO’s employment with the Company is terminated for any reason, this license shall revert all IP rights to the CEO, and the CEO grants the Company a non-exclusive license to use the IP and shall pay a royalty fee of 8% of net sales derived from the use of the IP Rights.
Director Compensation Table
Monthly |
| ||||||
Directors |
| Title |
| Compensation |
| ||
Matthew Wolfson |
| Employee Director | $ | — | (1) | ||
Petar Gajic | Employee Director | $ | 5,000 | ||||
Robert Hymers | Director | $ | 5,000 | (2) | |||
| (1) | See Executive Compensation Table above. |
| (2) | During the years ended December 31, 2023 and 2022, the Company issued 35,000,000 and 7,500,000 shares of common stock, respectively, at prices ranging from $0.01 to $0.035 per share, in conjunction with a consulting agreement for financial and strategic advisory services, with Mr. Hymers. Mr Hymers resigned as of July 1, 2023. |
Retirement Benefits
We do not currently provide our named executive officers with supplemental or other retirement benefits.
Equity Awards at December 31, 2023
In January 2023, the Company issued one share of Series B Preferred stock to the Company’s CEO as compensation totaling $400,000. For the year ended December 31, 2023, a bonus of 39,000,000 shares of common stock was earned by the Company’s CEO and recorded as accrued compensation of $39,000 or $0.001 per share. The shares were not issued as of December 31, 2023.
In February 2023, the Company entered into a one-year consulting agreement under the Company’s Employee and Consultant Stock Ownership Plan, with Mr. Hymers in exchange for compensation of 35,000,000 shares of common stock at $0.01 per share for a total of $315,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
As of the date hereof, here is information with respect to the securities holdings of (i) our officers and directors, and (ii) all persons (currently none) which, pursuant to filings with the SEC and our stock transfer records, we have reason to believe may be deemed the beneficial owner of more than five percent (5%) of the shares of Common Stock.
The securities “beneficially owned” by an individual are determined in accordance with the definition of “beneficial ownership” set forth in the regulations promulgated under the Exchange Act and, accordingly, may include securities owned by or for, among others, the spouse and/or minor children of an individual and any other relative who resides in the same home as such individual, as well as
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other securities as to which the individual has or shares voting or investment power or which each person has the right to acquire within 60 days through the exercise of options or otherwise. Beneficial ownership may be disclaimed as to certain of the securities.
The following table is based on the number of shares outstanding totaling 463,286,208 as of December 31, 2023.
The following table sets forth certain information as of December 31, 2023 by (i) all persons who are known by us to beneficially own more than 5% of our outstanding shares of common stock; and (ii) each director, director nominee, and Named Executive Officer. The footnotes below pertain to total shares, voting rights and conversion shares, and provide other explanations.
Common | Warrants and | ||||||||||||||
Shares | Percent of | Series A | Series A | Accrued | Voting | Voting | |||||||||
Name of Beneficial Owner |
| Owned |
| Common(1) |
| Owned |
| Votes(2) |
| Compensation(4) |
| Shares(3)(4) |
| Power(3) | (4) |
Matthew Wolfson 7460 E Tuckey Ln Scottsdale, AZ 85250 |
| 15,406,250 |
| 3.32 | % | 1,000,000 |
| 100,000,000 |
| 44,000,000 | 115,406,250 | 24.9 | % | ||
Petar Gajic |
| 500,000 |
| 0.1 | % | — |
| — |
| 4,000,000 | 500,000 | 0.1 | % |
| 1) | Based on 463,286,208 common shares outstanding December 31, 2023. |
| 2) | Based on 100 votes of common share equivalents for each Series A Preferred held. |
| 3) | Based on combined voting power of Mr. Wolfson’s common shares and common shares equivalent rights as a holder of Series A Preferred Shares. Excludes voting power of Series B Preferred Shares. The Holder of the Series B Preferred Stock shall be entitled to vote on all matters subject to a vote or written consent of the holders of the Company’s Common Stock, and on all such matters, the share of Series B Preferred Stock shall be entitled to that number of votes equal to the total number of eligible votes of issued and outstanding shares of Common Stock, and all other securities of the Company, plus one hundred thousand (100,000) votes on a fully diluted basis, it being the intention of the Company that the Holder of the Series B Preferred Stock shall have effective voting control of the Corporation, on a fully diluted basis. The Holder of the Series B Preferred Stock shall vote together with the holders of Common Stock as a single class. |
| 4) | Includes 5,000,000 outstanding warrants for Mr Wolfson and 4,000,000 outstanding warrants for Mr. Gajic, with an exercise price of $0.25 per share and which expire On October 1, 2026. Also includes 39,000,000 million shares of common stock earned by Mr. Wolfson as bonus for the year ended December 31,2023 which have been accrued and not yet issued. These amounts have been excluded from voting shares and voting power as of December 31, 2023. |
Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership, voting power and investment power with respect to the shares of Company preferred stock and common stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS, AND DIRECTOR INDEPENDENCE
As of December 31, 2019, the Company entered into various promissory notes totaling $318,000 with a related party, Donald Steinberg the sole member and manager of Blue Ridge Enterprises, LLC (“Blue Ridge”), a California limited liability company. The Company entered into additional promissory notes with the related party for $84,500 and repaid $70,000 of promissory notes during the year ended December 31, 2020, for a total of $332,500 outstanding. On December 1, 2021, the Company entered into a settlement agreement with the related party to repay the then remaining balance of $231,500 plus $18,370 in accrued interest. Under the terms of the agreement, the total is to be settled in cash of $125,620 divided into two payments and 2,000,000 shares of Company stock at a conversion price of $0.062 per share. Cash payments totaling of $158,875, were made in 2021, with the remaining principal balance of $57,875 paid in January 2022. Interest expense totaled $0 and $18,590 for the years ended December 31, 2022 and 2021, respectively.
On September 23, 2020, the related party converted the remaining shares of 7,156,497 under the KISS liability-related party at a value of $1,452,575, which was reclassed to additional paid-in-capital.
In July 2017, the Company entered into a $250,000 promissory note with its CEO, Matthew Wolfson. Mr. Wolfson is considered a Related Party since he is the Company’s Principal Executive Officer. The proceeds were used for operations and Regulation A+ offering
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costs. The promissory note began accruing interest on the interest commencement date of October 1,2018 at 2% per annum, compounded monthly. The note payable and accrued interest of $3,775 are deemed paid in full as of December 31, 2019.
In October 2019, the Company entered into an employment agreement with the Company’s CEO. The terms of the agreement include an annual base salary of $240,000 and a signing bonus of $500,000, as well as discretionary annual bonuses and participation in long-term incentive plans. The signing bonus may be paid in shares of the Company’s common stock. The agreement remains in effect until the earlier of the discharge or resignation of the CEO. In conjunction with the agreement, the $500,000 signing bonus has been accrued and included in selling, general and administrative expenses in the accompanying statement of operations during the year ended December 31, 2019. On November 1, 2019, the Company’s board of directors and the majority of shareholders awarded CEO, Matthew Wolfson, 500,000 shares of Series A Preferred stock, which was valued at $355,000 or $.71 per share. The shares were issued as partial payment for the $500,000 signing bonus, for which $145,000 remained payable at December 31, 2019. During the year ended December 31,2020, the Company paid the Company’s CEO $124,022 and towards the balance of the 2019 signing bonus. Total amount outstanding at December 31, 2021 and 2020 is $0 and $20,978, respectively.
The Company paid Matthew Wolfson a bonus of $105,042 during the year ended December 31, 2021.
In February 2021, the Company issued 1,100,000 shares of common stock as registered on Form S-8 to Matthew Wolfson as compensation at $0.5499 per share.
In October 2021, the Company issued Matthew Wolfson 5,000,000 cashless warrants at $0.025 per share.
In June 2022, the Company entered into a one-year independent director agreement in conjunction with the appointment of a new member to its Board of Directors. The agreement requires the Company to issue the director $5,000 worth of registered shares for each month of service as compensation. Compensation expense totaling $31.935 has been recorded for the year ended December 31, 2022. On November 2, 2022, the Company issued 1,658,999 shares as payment for $25,000 in director compensation with the remaining $6,935 accrued to be settled upon issuance of shares Company of common stock. The agreement was mutually terminated in December 2022, upon the director’s resignation. The Company previously entered into a consulting agreement with this director for $60,000. During the year ended December 31, 2022, the Company settled the $60,000 liability by issuing 6,000,000 shares of its common stock. In addition, the Company issued the director 800,000 shares as payment for certain marketing funds advanced totaling $8,000.
In September 2022, the Company issued 500,000 shares of its Series A Preferred Stock to Matthew Wolfson as compensation at $0.02 per share or $10,000.
In January 2023, the Company amended the CEO’s employment agreement to include the following:
| ● | Increased annual salary to $365,000 |
| ● | An annual bonus of 25 million shares of common stock for an increase in gross revenue of 10% or more over the previous years and additional shares for incremental growth over the 10% increase |
| ● | Instituted a bonus plan that provides for monthly and quarterly cash bonuses based on certain growth requirements |
| ● | A bonus of 10 million shares of common stock upon uplisting to a senior stock exchange or successful reverse stock split |
| ● | Issuance of the authorized Series “B” Preferred stock. |
In the event of a change of control of the Company, a cash payment of at least $1.5 million, subject to increase or change by the disinterested board will be paid to the CEO.
In January 2023, the Company issued one share of Series B Preferred stock to the Company’s CEO as compensation totaling $400,000.
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The Company’s CEO earned bonuses as a result of meeting certain financial milestones for the year ended December 31, 2023. The CEO earned a cash bonus of $60,000, of which $20,500 has been paid in 2023, with the remainder accrued and available to be converted at any time into shares of the Company’s common stock at the market value on the date of conversion. A bonus of 39,000,000 shares of common stock was also earned and recorded as accrued compensation of $39,000 or $0.001 per share.
Effective July 15, 2023, the Company’s board of directors executed a resolution whereby the CEO’s salary shall be reduced from $365,000 to $265,000 per year, with unpaid sums being accrued on the books of the Company and subject to an option in favor of the CEO to elect to convert the unpaid sums into shares of Company common stock. Accrued salary totaling $39,154 has been recorded as of December 31, 2023 and may be converted at any time into shares of the Company’s common stock at a discount of 25% of the market value on the date of conversion.
In June 2023, the Company entered into a licensing agreement with the Company’s CEO, whereby the CEO is the owner and licensor of certain intellectual property (IP). Under the agreement, the CEO grants the Company an exclusive contingent, non-transferable license to use the IP Rights solely for the purposes of conducting its business in bioelectronics product development, manufacturing, and marketing. In the event the CEO’s employment with the Company is terminated for any reason, this license shall revert all IP rights to the CEO, and the CEO grants the Company a non-exclusive license to use the IP and shall pay a royalty fee of 8% of net sales derived from the use of the IP Rights.
In February 2023, the Company entered into a one-year consulting agreement under the Company’s Employee and Consultant Stock Ownership Plan, with an advisor and director in exchange for compensation of 35 million shares of common stock. The agreement includes a registration requirement. The director resigned from the Board effective July 1, 2023.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth the aggregate fees billed to us for the fiscal years ended December 31,:
Year Ended | Year Ended | |||||
December 31, | December 31, | |||||
| 2023 | 2022 | ||||
Audit fees (1) | $ | 73,000 | $ | 74,388 | ||
Audit-related fees (2) | $ | — | $ | — | ||
Tax fees (3) | $ | — | $ | — | ||
All other fees (4) | $ | — | $ | — | ||
| (1) | Audit fees consist of fees billed for professional services rendered for the audit of our annual financial statements, the review of the interim financial statements included in quarterly reports and services that are normally provided by dbbmckennon in connection with statutory and regulatory filings or engagements, consultations in connection with acquisitions and issuances of auditor consents and comfort letters in connection with SEC registration statements and related SEC and non-SEC securities offerings. |
As of the date of this Annual Report, the Company did not have a standing audit committee serving, and as a result our board of directors performs the duties of an audit committee. Our board of directors will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. We do not rely on pre-approval policies and procedures.
| (2) | Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit fees” by dbbmckennon. |
| (3) | Tax fees consist of fees billed for professional services rendered for tax compliance, tax advice and tax planning (domestic and international). These services include assistance regarding federal, state and international tax compliance, acquisitions and international tax planning. |
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| (4) | All other fees consist of fees for products and services other than the services reported above. |
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
The following consolidated financial statements of Electromedical Technologies, Inc. are included in “Item 8. Financial Statements and Supplementary Data.”
18 | |
19 | |
20 | |
21 | |
22 | |
23 |
(a)(2) Financial Statement Schedules
None.
* In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections.
Exhibit No. |
| Description of Exhibit |
| Location |
3(i) | Incorporated by reference from the Company’s Form S-1/A-4 filed on July 20, 2020. | |||
3(i) | Incorporated by reference from the Company’s Form S-1/A-4 filed on July 20, 2020. | |||
3(i) | Incorporated by reference from the Company’s Form S-1/A-4 filed on July 20, 2020. | |||
3(i) | Incorporated by reference from the Company’s Form S-1/A-4 filed on July 20, 2020. | |||
3(i) | Incorporated by reference from the Company’s Form 8-K filed December 3, 2020. | |||
3(i) | Incorporated by reference from the Company’s 8-K filed October 14, 2021. | |||
3(i) | Incorporated by reference from the Company’s 8-K filed September 19, 2022. | |||
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3(i) | Incorporated by reference from the Company’s 8-K filed January 26, 2023 . | |||
3(ii) | Incorporated by reference from the Company’s Form S-1/A-4 filed on July 20, 2020. | |||
4(vi) | Incorporated by reference from the Company’s Form 8a-12g filed August 5, 2020. | |||
10.1 | Incorporated by reference from the Company’s Form 8-K filed October 21, 2021. | |||
10.2 | 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. | ||
10.3 | November 10, 2021 Registration Rights Agreement, White Lion Capital, LLC | Incorporated by reference from the Company’s Form 10-Q filed November 15, 2021. | ||
10.4 | Incorporated by reference from the Company’s Form 10 - K filed March 31, 2023. | |||
10.5 | Incorporated by reference from the Company’s Form 10 - K filed March 31, 2023. | |||
10.6 | February 11, 2022, Securities Purchase Agreement, Mast Hill Fund, LP | Incorporated by reference from the Company’s Form 10 - K filed March 31, 2023. | ||
10.7 | Incorporated by reference from the Company’s Form 10 - K filed March 31, 2023. | |||
10.8 | Incorporated by reference from the Company’s Form 10-K filed March 31, 2023. | |||
10.9 | March 3, 2022, Stock Purchase Agreement, Blue Lake Partners, LLP | Incorporated by reference from the Company’s Form 10 - K filed March 31, 2023. | ||
10.10 | Incorporated by reference from the Company’s Form 10 - K filed March 31, 2023. | |||
10.11 | Incorporated by reference from the Company’s Form 10 - K filed March 31, 2023. | |||
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10.12 | Incorporated by reference from the Company’s Form 10 - K filed March 31, 2023. | |||
10.13 | June 21, 2022 Settlement Agreement, JR-HD Enterprises III, LLC | Incorporated by reference from the Company’s Form 10-K filed March 31, 2023. | ||
10.14 | March 25, 2024 Mutual Settlement and Release Agreement, Mast Hill Fund, LP | Incorporated by reference from the Company’s Form 8-K filed April 2, 2024. | ||
10.15 | April 3, 2024 Mutual Settlement and Release Agreement, Blue Lake Partners, LLC | Filed herewith. | ||
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a). | Filed herewith. | ||
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a). | Filed herewith. | ||
32.1 | Filed herewith. | |||
101.1NS | XBRL Instance Document | |||
101.SCH | XBRL Taxonomy Extension Schema Document | |||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |||
101.DEF | XBRL Taxonomy Extension Definitions Linkbase Document | |||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |||
104 | Cover Page Interactive Data File (formatted as Inline XBRL as contained in Exhibit 101) |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 30, 2024 | ||
By: | /s/Matthew Wolfson | |
Matthew Wolfson | ||
Chief Executive Officer, Chief | ||
Financial Officer |
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Matthew Wolfson, with full power of substitution and re-substitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature |
| Title |
| Date |
/S/ Matthew Wolfson | Chief Executive Officer, Chief Financial Officer and Director | April 30, 2024 | ||
Matthew Wolfson |
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