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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

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

 

FOR THE QUARTERLY PERIOD ENDED: September 30, 2023

 

OR

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM __________ TO __________

 

COMMISSION FILE NUMBER 000-53497

 

VIVOS INC

(Exact name of registrant as specified in its charter)

 

Delaware   80-0138937

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

719 Jadwin Avenue,

Richland, WA 99352

(Address of principal executive offices, Zip Code)

 

(509) 222-9268

(Registrant’s telephone number, including area code)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

  Large accelerated filer ☐ Accelerated filer ☐  
       
  Non-accelerated filer ☒ Smaller reporting company ☒  
       
    Emerging growth company ☐  

 

If an emerging growth company, indicate by check mark if the company 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 ☒

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of Each Class   Trading Symbol   Name of Each Exchange on which registered
         

 

As of November 6, 2023, there were 370,994,857 shares of the registrant’s common stock outstanding, 2,071,007 shares of the registrant’s Series A Convertible Preferred Stock outstanding, 200,363 of the registrant’s Series B Convertible Preferred Stock outstanding and 385,302 of the registrant’s Series C Convertible Preferred Stock outstanding.

 

 

 

   

 

 

TABLE OF CONTENTS

 

      Page
  PART I – FINANCIAL INFORMATION    
       
Item 1. Condensed Financial Statements  
       
  Condensed Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022   1
       
  Condensed Statements of Operations for the Nine and Three Months ended September 30, 2023 and 2022 (unaudited)   2
       
  Condensed Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2023 and 2022 (unaudited)   3
       
  Condensed Statements of Cash Flow for the Nine Months ended September 30, 2023 and 2022 (unaudited)   4
       
  Notes to Condensed Financial Statements (unaudited)   5
       
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   21
       
Item 3. Quantitative and Qualitative Disclosures About Market Risk   36
       
Item 4. Controls and Procedures   36
       
  PART II – OTHER INFORMATION    
       
Item 1. Legal Proceedings   37
       
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   37
       
Item 6. Exhibits   37
       
SIGNATURES   38

 

 -i- 

 

 

PART I – FINANCIAL INFORMATION  

 

VIVOS INC

CONDENSED BALANCE SHEETS

SEPTEMBER 30, 2023 (UNAUDITED) AND DECEMBER 31, 2022

 

   SEPTEMBER 30,   DECEMBER 31, 
   2023   2022 
   (UNAUDITED)     
         
ASSETS        
Current Assets:          
Cash  $1,536,844   $1,706,065 
Accounts receivable   8,000    11,000 
Prepaid expenses   21,675    25,671 
           
Total Current Assets   1,566,519    1,742,736 
           
TOTAL ASSETS  $1,566,519   $1,742,736 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
LIABILITIES          
Current Liabilities:          
Accounts payable and accrued expenses  $97,369   $81,692 
Short-term advance - related party   10,000    - 
           
Total Current Liabilities   107,369    81,692 
           
Total Liabilities   107,369    81,692 
           
Commitments and contingencies   -    - 
           
STOCKHOLDERS’ EQUITY          
Preferred stock, par value, $0.001, 20,000,000 shares authorized,Series A Convertible Preferred, 5,000,000 shares authorized, 2,071,007 shares issued and outstanding, respectively   2,071    2,071 
Additional paid in capital - Series A Convertible preferred stock   8,842,458    8,842,458 
Series B Convertible Preferred, 5,000,000 shares authorized, 200,363 shares issued and outstanding, respectively   200    200 
Additional paid in capital - Series B Convertible preferred stock   290,956    290,956 
Series C Convertible Preferred, 5,000,000 shares authorized, 385,302 shares issued and outstanding, respectively   385    385 
Additional paid in capital - Series C Convertible preferred stock   500,507    500,507 
Common stock, par value, $0.001, 950,000,000 shares authorized, 370,541,528 and 362,541,528 issued and outstanding, respectively   370,541    362,541 
Additional paid in capital - common stock   72,826,594    71,217,954 
Accumulated deficit   (81,374,562)   (79,556,028)
           
Total Stockholders’ Equity   1,459,150    1,661,044 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $1,566,519   $1,742,736 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

1
 

 

VIVOS INC

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

   2023   2022   2023   2022 
   NINE MONTHS ENDED   THREE MONTHS ENDED 
   SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30, 
   2023   2022   2023   2022 
                 
Revenues, net  $19,500   $30,000   $7,000   $6,500 
Cost of Goods Sold   (16,536)   (18,053)   -    (13,035)
                     
Gross (loss) profit   2,964    11,947    7,000    (6,535)
                     
OPERATING EXPENSES                    
Professional fees, including stock-based compensation   1,205,819    1,191,807    512,856    93,300 
Payroll expenses   214,083    208,818    69,562    68,163 
Research and development   300,586    312,066    80,858    70,765 
General and administrative expenses   132,831    111,352    31,357    38,302 
                     
Total Operating Expenses   1,853,319    1,824,043    694,633    270,530 
                     
OPERATING LOSS   (1,850,355)   (1,812,096)   (687,633)   (277,065)
                     
NON-OPERATING INCOME (EXPENSE)                    
Interest income   31,821    -    19,943    - 
Gain on debt extinguishment   -    47,588    -    - 
                     
Total Non-Operating Income (Expenses)   31,821    47,588    19,943    - 
                     
NET LOSS BEFORE PROVISION FOR INCOME TAXES   (1,818,534)   (1,764,508)   (667,690)   (277,065)
                     
Provision for income taxes   -    -    -    - 
                     
NET LOSS  $(1,818,534)  $(1,764,508)  $(667,690)  $(277,065)
                     
                     
Net loss per share - basic and diluted  $(0.00)  $(0.01)  $(0.00)  $(0.00)
                     
Weighted average common shares outstanding   367,112,957    343,761,071    370,541,528    343,906,505 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

2
 

 

VIVOS INC

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

   Shares   Amount  

Preferred

   Shares   Amount  

Preferred

   Shares   Amount  

Preferred

   Shares   Amount   Common   Deficit   Total 
           Additional           Additional           Additional                    
           Paid-In           Paid-In           Paid-In       Additional         
  

Series A

Preferred

  

Capital -

Series A

  

Series B

Preferred

  

Capital -

Series B

  

Series C

Preferred

  

Capital -

Series C

   Common Stock  

Paid-In

Capital -

   Accumulated     
   Shares   Amount  

Preferred

   Shares   Amount  

Preferred

   Shares   Amount  

Preferred

   Shares   Amount   Common   Deficit   Total 
                                                         
Balance - December 31, 2021    2,071,007   $2,071   $8,842,458    200,363   $200   $290,956    385,302   $385   $500,507    343,530,678   $343,531   $68,573,142   $(77,085,867)  $1,467,383 
                                                                       
Stock issued for:                                                                      
 Services   -    -    -    -    -    -    -    -    -    76,250    76    4,804    -    4,880 
 Warrant exercises   -    -    -    -    -    -    -    -    -    299,577    300    (300)   -    - 
RSUs granted to consultants that have vested   -    -    -    -    -    -    -    -    -    -    -    450,000    -    450,000 
Net loss for the period   -    -    -    -    -    -    -    -    -    -    -    -    (699,905)   (699,905)
                                                                       
Balance - March 31, 2022   2,071,007    2,071    8,842,458    200,363    200    290,956    385,302    385    500,507    343,906,505    343,907    69,027,646    (77,785,772)   1,222,358 
                                                                       
RSUs granted to consultants that have vested   -    -    -    -    -    -    -    -    -    -    -    458,200    -    458,200 
Net loss for the period   -    -    -    -    -    -    -    -    -    -    -    -    (787,538)   (787,538)
                                                                       
Balance - June 30, 2022   2,071,007    2,071    8,842,458    200,363    200    290,956    385,302    385    500,507    343,906,505    343,907    69,485,846    (78,573,310)   893,020 
                                                                       
Stock issued for:                                                                      
 Cash   -    -    -    -    -    -    -    -    -    15,000,000    15,000    1,185,000    -    1,200,000 
 Accounts payable   -    -    -    -    -    -    -    -    -    984,840    984    48,258    -    49,242 
 Fractional adjustment   -    -    -    -    -    -    -    -    -    (90)   -    -    -    - 
Warrants purchased for cash   -    -    -    -    -    -    -    -    -    -    -    20,000    -    20,000 
RSUs granted to consultants that have vested   -    -    -    -    -    -    -    -    -    -    -    -    -    - 
Net loss for the period   -    -    -    -    -    -    -    -    -    -    -    -    (277,065)   (277,065)
                                                                       
Balance - September 30, 2022   2,071,007   $2,071   $8,842,458    200,363   $200   $290,956    385,302   $385   $500,507    359,891,255   $359,891   $70,739,104   $(78,850,375)  $1,885,197 
                                                                       
                                                                       
Balance - December 31, 2022   2,071,007   $2,071   $8,842,458    200,363   $200   $290,956    385,302   $385   $500,507    362,541,528   $362,541   $71,217,954   $(79,556,028)  $1,661,044 
                                                                       
Net loss for the period   -    -    -    -    -    -    -    -    -    -    -    -    (248,318)   (248,318)
                                                                       
Balance - March 31, 2023   2,071,007    2,071    8,842,458    200,363    200    290,956    385,302    385    500,507    362,541,528    362,541    71,217,954    (79,804,346)   1,412,726 
                                                                       
Stock issued for:                                                                      
 Cash   -    -    -    -    -    -    -    -    -    8,000,000    8,000    632,000    -    640,000 
Warrants purchased for cash   -    -    -    -    -    -    -    -    -    -    -    10,665    -    10,665 
RSUs granted to consultants that have vested   -    -    -    -    -    -    -    -    -    -    -    515,975    -    515,975 
Net loss for the period   -    -    -    -    -    -    -    -    -    -    -    -    (902,526)   (902,526)
                                                                       
Balance - June 30, 2023   2,071,007    2,071    8,842,458    200,363    200    290,956    385,302    385    500,507    370,541,528    370,541    72,376,594    (80,706,872)   1,676,840 
                                                                       
RSUs granted to consultants that have vested   -    -    -    -    -    -    -    -    -    -    -    450,000    -    450,000 
Net loss for the period   -    -    -    -    -    -    -    -    -    -    -    -    (667,690)   (667,690)
                                                                       
Balance - September 30, 2023   2,071,007   $2,071   $8,842,458    200,363   $200   $290,956    385,302   $385   $500,507    370,541,528   $370,541   $72,826,594   $(81,374,562)  $1,459,150 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

3
 

 

VIVOS INC

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

   2023   2022 
CASH FLOW FROM OPERTING ACTIVIITES          
Net loss  $(1,818,534)  $(1,764,508)
Adjustments to reconcile net loss to net cash used in operating activities          
Common stock, stock options and warrants for services   -    4,880 
RSUs issued for services   965,975    908,200 
(Gain) on conversion of debt   -    (47,588)
Changes in assets and liabilities          
Accounts receivable   3,000    (13,000)
Prepaid expenses and other assets   3,996    (17,243)
Accounts payable and accrued expenses   15,677    90,868 
Total adjustments   988,648    926,117 
           
Net cash used in operating activities   (829,886)   (838,391)
           
CASH FLOWS FROM FINANCING ACTIVITES          
Proceeds from short-term advances from related party   10,000    - 
Proceeds from common stock and warrants   650,665    1,220,000 
Net cash provided by financing activities   660,665    1,220,000 
           
NET (DECREASE) INCREASE IN CASH   (169,221)   381,609 
           
CASH - BEGINNING OF PERIOD   1,706,065    1,606,123 
           
CASH - END OF PERIOD  $1,536,844   $1,987,732 
           
CASH PAID DURING THE PERIOD FOR:          
Interest expense  $-   $- 
           
Income taxes  $-   $- 
           
SUPPLEMENTAL INFORMATION - NON-CASH INVESTING AND FINANCING ACTIVITIES:          
           
Common stock issued in cashless exercise of warrants  $-   $300 
Accounts payable converted into shares of common stock  $-   $49,242 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

4
 

 

Vivos Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying condensed financial statements of Vivos Inc. (the “Company”) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures required by accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These condensed financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations of the Company for the period presented. The results of operations for the nine and three months ended September 30, 2023, are not necessarily indicative of the results that may be expected for any future period or the fiscal year ending December 31, 2023 and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 1, 2023.

 

Business Overview

 

The Company was incorporated under the laws of Delaware on December 23, 1994 as Savage Mountain Sports Corporation (“SMSC”). On September 6, 2006, the Company changed its name to Advanced Medical Isotope Corporation, and on December 28, 2017, the Company began operating as Vivos Inc. The Company has authorized capital of 950,000,000 shares of common stock, $0.001 par value per share, and 20,000,000 shares of preferred stock, $0.001 par value per share.

 

Our principal place of business is located at 719 Jadwin Avenue, Richland, WA 99352. Our telephone number is (509) 736-4000. Our corporate website address is http://www.radiogel.com. Our common stock is currently quoted on the OTC Pink Marketplace under the symbol “RDGL.”

 

The Company is a radiation oncology medical device company engaged in the development of its yttrium-90 based brachytherapy device, RadioGel™, for the treatment of non-resectable tumors. A prominent team of radiochemists, scientists and engineers, collaborating with strategic partners, including national laboratories, universities and private corporations, lead the Company’s development efforts. The Company’s overall vision is to globally empower physicians, medical researchers and patients by providing them with new isotope technologies that offer safe and effective treatments for cancer.

 

In January 2018, the Center for Veterinary Medicine Product Classification Group ruled that RadioGel ™should be classified as a device for animal therapy of feline sarcomas and canine soft tissue sarcomas. Additionally, after a legal review, the Company believes that the device classification obtained from the Food and Drug Administration (“FDA”) Center for Veterinary Medicine is not limited to canine and feline sarcomas, but rather may be extended to a much broader population of veterinary cancers, including all or most solid tumors in animals. We expect the result of such classification and label review will be that no additional regulatory approvals are necessary for the use of IsoPet® for the treatment of solid tumors in animals. The FDA does not have premarket authority over devices with a veterinary classification, and the manufacturers are responsible for assuring that the product is safe, effective, properly labeled, and otherwise in compliance with all applicable laws and regulations.

 

5
 

 

Based on the FDA’s recommendation, RadioGel™ will be marketed as “IsoPet®” for use by veterinarians to avoid any confusion between animal and human therapy. The Company already has trademark protection for the “IsoPet®” name. IsoPet® and RadioGel™ are used synonymously throughout this document. The only distinction between IsoPet® and RadioGel™ is the FDA’s recommendation that we use “IsoPet®” for veterinarian usage, and reserve “RadioGel™” for human therapy. Based on these developments, the Company has shifted its primary focus to the development and marketing of Isopet® for animal therapy, through the Company’s IsoPet® Solutions division.

 

IsoPet Solutions

 

The Company’s IsoPet Solutions division was established in May 2016 to focus on the veterinary oncology market, namely engagement of university veterinarian hospital to develop the detailed therapy procedures to treat animal tumors and ultimately use of the technology in private clinics. The Company has worked with three different university veterinarian hospitals on IsoPet® testing and therapy. Washington State University treated five cats for feline sarcoma and served to develop the procedures which are incorporated in our label. They concluded that the product was safe and effective in killing cancer cells. Colorado State University demonstrated the CT and PET-CT imaging of IsoPet®. A contract was signed with University of Missouri to treat canine sarcomas and equine sarcoids starting in November 2017.

 

The dogs were treated for canine soft tissue sarcoma. Response evaluation criteria in solid tumors (“RECIST”) is a set of published rules that define when tumors in cancer patients improve (respond), stay the same (stabilize), or worsen (progress) during treatment. The criteria were published by an international collaboration including the European Organisation for Research and Treatment of Cancer (“EORTC”), National Cancer Institute of the United States, and the National Cancer Institute of Canada Clinical Trials Group.

 

The testing at the University of Missouri met its objective to demonstrate the safety of IsoPet®. Using its advanced CT and PET equipment it was able to demonstrate that the dose calculations were accurate and that the injections perfused into the cell interstices and did not stay concentrated in a bolus. This results in a more homogeneous dose distribution. There was insignificant spread of Y-90 outside the points of injection demonstrating the effectiveness of the particles and the gel to localize the radiation with no spreading to the blood or other organs nor to urine or fecal material. This confirms that IsoPet® is safe for same day therapy.

 

6
 

 

The effectiveness of IsoPet® for life extension was not the prime objective, but it resulted in valuable insights. Of the cases one is still cancer-free but the others eventually recurred since there was not a strong focus on treating the margins. The University of Missouri has agreed to become a regional center to administer IsoPet® therapy and will incorporate the improvements suggested by the testing program.

 

The Company anticipates that future profits, if any, will be derived from direct sales of RadioGel™ (under the name IsoPet®) and related services, and from licensing to private medical and veterinary clinics in the U.S. and internationally. The Company intends to report the results from the IsoPet® Solutions division as a separate operating segment in accordance with GAAP.

 

Commencing in July 2019, the Company recognized its first commercial sale of IsoPet®. A veterinarian from Alaska brought his cat with a re-occurrent spindle cell sarcoma tumor on his face. The cat had previously received external beam therapy, but now the tumor was growing rapidly. He was given a high dose of 400Gy with heavy therapy at the margins. This sale met the revenue recognition requirements under ASC 606 as the performance obligation was satisfied. The Company completed sales for an additional four animals that received the IsoPet® during 2019.

 

Our plan is to incorporate the data assembled from our work with Isopet® in animal therapy to support the Company’s efforts in the development of our RadioGel™ device candidate, including obtaining approval from the FDA to market and sell RadioGel™ as a Class II medical device. RadioGel™ is an injectable particle-gel for brachytherapy radiation treatment of cancerous tumors in people and animals. RadioGel™ is comprised of a hydrogel, or a substance that is liquid at room temperature and then gels when reaching body temperature after injection into a tumor. In the gel are small, less than two microns, yttrium-90 phosphate particles (“Y-90”). Once injected, these inert particles are locked in place inside the tumor by the gel, delivering a very high local radiation dose. The radiation is beta, consisting of high-speed electrons. These electrons only travel a short distance so the device can deliver high radiation to the tumor with minimal dose to the surrounding tissue. Optimally, patients can go home immediately following treatment without the risk of radiation exposure to family members. Since Y-90 has a half-life of 2.7 days, the radioactivity drops to 5% of its original value after ten days.

 

The Company modified its Indication for Use from skin cancel to cancerous tissue or solid tumors pathologically associated with locoregional papillary thyroid carcinoma and recurrent papillary thyroid carcinoma having discernable tumors associated with metastatic lymph nodes or extranodal disease in patients who are not surgical candidates or who have declined surgery, or patients who require post-surgical remnant ablation (for example, after prior incomplete radioiodine therapy). Papillary thyroid carcinoma belongs to the general class of head and neck tumors for which tumors are accessible by intraoperative direct needle injection. The Company’s Medical Advisory Board felt that demonstrating efficacy in clinical trials was much easier with this new indication.

 

Intellectual Property

 

Our original license with Battelle National Laboratory is reached its end of life in 2022. During the past several years, in anticipation of this we have expanded our proprietary knowledge, our trademark and patent protection.

 

Our RadioGel trademark protection is in 17 countries. We have expanded our trademark protection from RadioGel to now include IsoPet. We obtained the International Certificate of Registration for ISOPET, which is the first step to file in several countries.

 

The Company received the Patent Cooperation Treaty (“PCT”) International Search Report on our patent application (No.1811.191). Seven of our claims were immediately ruled as having novelty, inventive step and industrial applicability. This gives us the basis to extend for many years the patent protection for our proprietary Yttrium-90 phosphate particles utilized in Isopet® and Radiogel™.

 

7
 

 

Our patent team filed our particle patent in more than ten patent offices that collectively cover 63 countries throughout the world. We filed a continuation-in-part applications number 1774054 in the USA to expand the claims on our particle patent. The US Patent office recently gave us the Notice of Allowance for our patent to produce our yttrium phosphate microparticles, US Patent Application Serial No: 16-459,466. We also filed an amendment to correct the wording on our claims at make them consistent with the USE claims. Ref: 4207-0005; European Patent Application NO. 20 834 229.5; VIVOS INC; Our Ref: FS/53791.

 

We filed a hydrogel utility patent in the USA (16309:17/943,311) and internationally (16389:PCT/US22/4374) based on the last eighteen months of development work to optimize our hydrogel component. These include reducing the polymer production time and increasing the output by a factor of three. We have also further reduced the level of trace contaminants to be well below the FDA guidelines.

 

We filed a provisional patent (Serial Number 63436562) to protect our innovative improvements in our shipping container, our vial shield, our syringe shield, and our Peltier chiller. Our objectives were to reduce shipping costs, decrease radiation exposure, and enhance sterility. These devices will be preferentially used at Mayo Clinics for human clinical studies at and our IsoPet regional treatment centers.

 

We anticipate that Precison Radionuclide Therapy will become increasingly important in the future and expand to other isotope and other indications for use. Therefore, we filed an alternate particle utility patent (Serial number 18/152,137). Vivos Inc will focus its near-term effort on the Yttrium-90 therapy, which we believe is the best beta emitter; however, we leveraged our hydrogel utility patent to incorporate other promising isotopes and compounds for a range of future applications. This includes gamma and alpha particle emitters.

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered recurring losses and used significant cash in support of its operating activities and the Company’s cash position is not sufficient to support the Company’s operations. Research and development of the Company’s brachytherapy product line has been funded with proceeds from the sale of equity and debt securities as well as a series of grants. The Company requires funding of approximately $2.5 million annually to maintain current operating activities.

 

The Company completed its reverse stock split which was approved by FINRA and went effective on June 28, 2019.

 

The Company’s stock offering under Regulation A+ was qualified by the Securities and Exchange Commission (“SEC”) on June 3, 2020. A second Regulation A+ was qualified by the SEC on September 15, 2021 to raise capital for 50,000,000 shares at a price of $0.10 for a maximum of $5,000,000. The Company amended this and was able to raise $1,200,000 in July 2022 at $0.08 per share (15,000,000 shares) and sold 20,000,000 warrants for $20,000. An amended Regulation A+ was filed in October 2022 to raise the remaining $3,800,000 of the $5,000,000. In April 2023, $640,000 was raised in the issuance of 8,000,000 common shares, 2,665,000 Series A warrants and 8,000,000 Series B warrants along with $10,665 in the sale of the warrants. The Company amended their Reg A+ again in October 2023. There were no changes to the proceeds figures in the latest amendment.

 

The Company’s Regulation A+’s raised approximately $5,200,000 from the sale of shares and is using the proceeds generated as follows:

 

For the animal therapy market:

 

  ● Fund the effort to communicate the benefits of IsoPet® to the veterinary community and the pet parents.
  ● Conduct additional clinical studies to generate more data for the veterinary community
  ● Subsidize some IsoPet® therapies, if necessary, to ensure that all viable candidates are treated.
  ● Assist new regional clinics with their license and certification training.

 

8
 

 

For the human market:

 

  ● Enhance the pedigree of the Quality Management System.
  ● Complete the previously defined pre-clinical testing and additional testing on an animal model closely aligned with our revised indication for use. Report the results to the FDA in a pre-submission meeting.
  ● Use the feedback from that meeting to write the IDE (Investigational Device Exemption), which is required to initiate clinical trials.

 

Research and development of the Company’s brachytherapy product line has been funded with proceeds from the sale of equity and debt securities. The Company may require additional funding of approximately $2.5 million annually to maintain current operating activities. Over the next 12 to 48 months, the Company believes it will cost approximately $9 million to: (1) fund the FDA approval process to conduct human clinical trials, (2) conduct Phase I, pilot, clinical trials, (3) activate several regional clinics to administer IsoPet® across the county, (4) create an independent production center within the current production site to create a template for future international manufacturing, and (5) initiate regulatory approval processes outside of the United States. The proceeds to be raised from the recent qualified Regulation A+ will be used to continue to fund this development.

 

The continued deployment of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel. The principal variables in the timing and amount of spending for the brachytherapy products in the next 12 to 24 months will be the FDA’s classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company’s spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership agreements or from proceeds to be raised from the recent qualified Regulation A+.

 

Following receipt of required regulatory approvals and financing, in the U.S., the Company intends to outsource material aspects of manufacturing, distribution, sales and marketing. Outside of the U.S., the Company intends to pursue licensing arrangements and/or partnerships to facilitate its global commercialization strategy.

 

In the longer-term, subject to the Company receiving adequate funding, regulatory approval for RadioGel™ and other brachytherapy products, and thereafter being able to successfully commercialize its brachytherapy products, the Company intends to consider resuming research efforts with respect to other products and technologies intended to help improve the diagnosis and treatment of cancer and other illnesses.

 

Based on the Company’s financial history since inception, the Company’s independent registered public accounting firm has expressed substantial doubt as to the Company’s ability to continue as a going concern. The Company has limited revenue, nominal cash, and has accumulated deficits since inception. If the Company cannot obtain sufficient additional capital, the Company will be required to delay the implementation of its business strategy and may not be able to continue operations.

 

The Company has been impacted from the effects of COVID-19. The Company’s headquarters are in Northeast Washington however there focus of the animal therapy market has been the Northwestern sector of the United States. The Company continues their marketing to the animal therapy market and attempt to increase the exposure to their product and generate revenue accordingly.

 

As of September 30, 2023, the Company has $1,536,844 cash on hand. There are currently commitments to vendors for products and services purchased. To continue the development of the Company’s products, the current level of cash may not be enough to cover the fixed and variable obligations of the Company.

 

There is no guarantee that the Company will be able to raise additional funds or to do so at an advantageous price.

 

The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The Company plans to seek additional funding to maintain its operations through debt and equity financing and to improve operating performance through a focus on strategic products and increased efficiencies in business processes and improvements to the cost structure. There is no assurance that the Company will be successful in its efforts to raise additional working capital or achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

9
 

 

Use of Estimates

 

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates the Company considers include criteria for stock-based compensation expense, and valuation allowances on deferred tax assets. Actual results could differ from those estimates.

 

Financial Statement Reclassification

 

Certain account balances from prior periods have been reclassified in these financial statements so as to conform to current period classifications.

 

Cash Equivalents

 

For the purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

 

The Company occasionally maintains cash balances in excess of the FDIC insured limit. The Company does not consider this risk to be material.

 

Fair Value of Financial Instruments

 

Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of September 30, 2023 and December 31, 2022, the balances reported for cash, prepaid expenses, accounts receivable, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting Standards Codification (“ASC”) Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

 

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

 

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

 

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

The Company measures certain financial instruments including options and warrants issued during the period at fair value on a recurring basis.

 

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Patents and Intellectual Property

 

While patents are being developed or pending, they are not being amortized. Management has determined that the economic life of the patents to be ten years and amortization, over such 10-year period and on a straight-line basis will begin once the patents have been issued and the Company begins utilization of the patents through production and sales, resulting in revenues.

 

The Company evaluates the recoverability of intangible assets, including patents and intellectual property on a continual basis. Several factors are used to evaluate intangibles, including, but not limited to, management’s plans for future operations, recent operating results and projected and expected undiscounted future cash flows.

 

There have been no such capitalized costs in the nine months ended September 30, 2023 and 2022, respectively. However, a patent was filed on July 1, 2019 (No. 1811.191) filed by Michael Korenko and David Swanberg and assigned to the Company based on the Company’s proprietary particle manufacturing process. The timing of this filing was important given the Company’s plans to make IsoPet® commercially available, which it did on or about July 9, 2019. This additional patent protection will strengthen the Company’s competitive position. It is the Company’s intention to further extend this patent protection to several key countries within one year, as permitted under international patent laws and treaties.

 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the updated guidance effective January 1, 2018 using the full retrospective method.

 

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Under ASC 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to preform respective obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable. The adoption of ASC 606 did not have an impact on the Company’s operations or cash flows.

 

The Company recognized revenue as they (i) identified the contracts with each customer; (ii) identified the performance obligation in each contract; (iii) determined the transaction price in each contract; (iv) were able to allocate the transaction price to the performance obligations in the contract; and (v) recognized revenue upon the satisfaction of the performance obligation. Upon the sales of the product to complete the procedures on the animals, the Company recognized revenue as that was considered the performance obligation.

 

All revenue recognized in the nine months ended September 30, 2023 and 2022 relate to consulting income with respect to the IsoPet® therapies.

 

Loss Per Share

 

The Company accounts for its loss per common share by replacing primary and fully diluted earnings per share with basic and diluted earnings per share. Basic loss per share is computed by dividing loss available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period, and does not include the impact of any potentially dilutive common stock equivalents since the impact would be anti-dilutive. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued. For the given periods of loss, of the periods ended in the nine months ended September 30, 2023 and 2022, the basic earnings per share equals the diluted earnings per share.

 

The following represent common stock equivalents that could be dilutive in the future as of September 30, 2023 and December 31, 2022, which include the following:

    September 30, 2023     December 31, 2022  
Preferred stock     9,909,570       9,909,570  
Restricted stock units     2,175,000       25,362,500  
Common stock options     2,252,809       2,252,809  
Common stock warrants     25,665,000       26,737,500  
Total potential dilutive securities     40,002,379       64,762,379  

 

Research and Development Costs

 

Research and developments costs, including salaries, research materials, administrative expenses and contractor fees, are charged to operations as incurred. The cost of equipment used in research and development activities which has alternative uses is capitalized as part of fixed assets and not treated as an expense in the period acquired. Depreciation of capitalized equipment used to perform research and development is classified as research and development expense in the year computed.

 

The Company incurred $300,586 and $312,066 in research and development costs for the nine months ended September 30, 2023 and 2022, respectively, all of which were recorded in the Company’s operating expenses noted on the statements of operations for the periods then ended.

 

Advertising and Marketing Costs

 

Advertising and marketing costs are expensed as incurred except for the cost of tradeshows which are deferred until the tradeshow occurs. During the nine months ended September 30, 2023 and 2022, the Company incurred nominal advertising and marketing costs.

 

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Contingencies

 

In the ordinary course of business, the Company is involved in legal proceedings involving contractual and employment relationships, product liability claims, patent rights, and a variety of other matters. The Company records contingent liabilities resulting from asserted and unasserted claims against it, when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. The Company discloses contingent liabilities when there is a reasonable possibility that the ultimate loss will exceed the recorded liability. Estimated probable losses require analysis of multiple factors, in some cases including judgments about the potential actions of third-party claimants and courts. Therefore, actual losses in any future period are inherently uncertain. The Company has entered into various agreements that require them to pay certain fees to consultants and/or employees that have been fully accrued for as of September 30, 2023 and December 31, 2022.

 

Income Taxes

 

To address accounting for uncertainty in tax positions, the Company clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. The Company also provides guidance on de-recognition, measurement, classification, interest, and penalties, accounting in interim periods, disclosure and transition.

 

The Company files income tax returns in the U.S. federal jurisdiction. The Company did not have any tax expense for the nine months ended September 30, 2023 and 2022. The Company did not have any deferred tax liability or asset on its balance sheets on September 30, 2023 and December 31, 2022.

 

Interest costs and penalties related to income taxes, if any, will be classified as interest expense and general and administrative costs, respectively, in the Company’s financial statements. For the nine months ended September 30, 2023 and 2022, the Company did not recognize any interest or penalty expense related to income taxes. The Company believes that it is not reasonably possible for the amounts of unrecognized tax benefits to significantly increase or decrease within the next twelve months.

 

Stock-Based Compensation

 

The Company recognizes compensation costs under FASB ASC Topic 718, Compensation – Stock Compensation and ASU 2018-07. Companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

 

Recent Accounting Pronouncements

 

The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

 

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NOTE 2: RELATED PARTY TRANSACTIONS

 

Preferred and Common Shares Issued to Officers and Directors

 

In March 2022, the Chief Executive Officer exercised 75,000 warrants in a cashless exercise into 22,266 shares of common stock, and was issued 76,250 shares of common stock valued at $4,880 for services rendered.

 

In September 2023, the CEO advanced $10,000 to the Company which was repaid October 4, 2023.

 

NOTE 3: STOCKHOLDERS’ EQUITY

 

Common Stock

 

The Company has 950,000,000 shares of common stock authorized, with a par value of $0.001, and as of September 30, 2023 and December 31, 2022, the Company has 370,541,528 and 362,541,528 shares issued and outstanding, respectively.

 

Preferred Stock

 

As of September 30, 2023 and December 31, 2022, the Company has 20,000,000 shares of Preferred stock authorized with a par value of $0.001. The Company’s Board of Directors is authorized to provide for the issuance of shares of preferred stock in one or more series, fix or alter the designations, preferences, rights, qualifications, limitations or restrictions of the shares of each series, including the dividend rights, dividend rates, conversion rights, voting rights, term of redemption including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of such series without further vote or action by the shareholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of management without further action by the shareholders and may adversely affect the voting and other rights of the holders of common stock. The issuance of preferred stock with voting and conversion rights may adversely affect the voting power of the holders of common stock, including the loss of voting control to others.

 

On October 8, 2018 the Company created out of the shares of Preferred Stock, par value $0.001 per share, of the Company, as authorized in Article IV of the Company’s Certificate of Incorporation, a series of Preferred Stock of the Company, to be named “Series B Convertible Preferred Stock,” consisting of Five Million (5,000,000) shares.

 

On March 27, 2019 the Company created out of the shares of Preferred Stock, par value $0.001 per share, of the Company, as authorized in Article IV of the Company’s Certificate of Incorporation, a series of Preferred Stock of the Company, to be named “Series C Convertible Preferred Stock,” consisting of Five Million (5,000,000) shares.

 

Series A Convertible Preferred Stock (“Series A Convertible Preferred”)

 

In June 2015, the Series A Certificate of Designation was filed with the Delaware Secretary of State to designate 2.5 million shares of our preferred stock as Series A Convertible Preferred. Effective March 31, 2016, the Company amended the Certificate of Designations, Preferences and Rights of Series A Convertible Preferred of the Registrant, increasing the maximum number of shares of Series A Convertible Preferred from 2,500,000 shares to 5,000,000 shares. The following summarizes the current rights and preferences of the Series A Convertible Preferred:

 

Liquidation Preference. The Series A Convertible Preferred has a liquidation preference of $5.00 per share.

 

Dividends. Shares of Series A Convertible Preferred do not have any separate dividend rights.

 

Conversion. Subject to certain limitations set forth in the Series A Certificate of Designation, each share of Series A Convertible Preferred is convertible, at the option of the holder, into that number of shares of common stock (the “Series A Conversion Shares”) equal to the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series A Certificate of Designation), currently $4.00.

 

In the event the Company completes an equity or equity-based public offering, registered with the SEC, resulting in gross proceeds to the Company totaling at least $5.0 million, all issued and outstanding shares of Series A Convertible Preferred at that time will automatically convert into Series A Conversion Shares.

 

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Redemption. Subject to certain conditions set forth in the Series A Certificate of Designation, in the event of a Change of Control (defined in the Series A Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series A Convertible Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem all or a portion of the outstanding Series A Convertible Preferred in cash at a price per share of Series A Convertible Preferred equal to 100% of the Liquidation Preference.

 

Voting Rights. Holders of Series A Convertible Preferred are entitled to vote on all matters, together with the holders of common stock, and have the equivalent of five (5) votes for every Series A Conversion Share issuable upon conversion of such holder’s outstanding shares of Series A Convertible Preferred. However, the Series A Conversion Shares, when issued, will have all the same voting rights as other issued and outstanding common stock of the Company, and none of the rights of the Series A Convertible Preferred.

 

Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the holders of Series A Convertible Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation preference of the Series A Convertible Preferred before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series A Convertible Preferred shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

Certain Price and Share Adjustments.

 

a) Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of capital stock of the Company, then the conversion price shall be adjusted accordingly.

 

b) Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation or merger in which the Common Stock is converted into or exchanged for securities, cash or other property than each share of Series A Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number of shares of common stock issuable upon conversion of one share of Series A Convertible Preferred prior to any such merger or reorganization would have been entitled to receive pursuant to such transaction.

 

Series B Convertible Preferred Stock (“Series B Convertible Preferred”)

 

In October 2018, the Series B Certificate of Designation was filed with the Delaware Secretary of State to designate 5.0 million shares of our preferred stock as Series B Convertible Preferred. The following summarizes the current rights and preferences of the Series B Convertible Preferred:

 

Liquidation Preference. The Series B Convertible Preferred has a liquidation preference of $1.00 per share.

 

Dividends. Shares of Series B Convertible Preferred do not have any separate dividend rights.

 

Conversion. Subject to certain limitations set forth in the Series B Certificate of Designation, each share of Series B Convertible Preferred is convertible, at the option of the holder, into that number of shares of common stock (the “Series B Conversion Shares”) equal to the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series B Certificate of Designation), currently $0.08.

 

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Redemption. Subject to certain conditions set forth in the Series B Certificate of Designation, in the event of a Change of Control (defined in the Series B Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series B Convertible Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem all or a portion of the outstanding Series B Convertible Preferred in cash at a price per share of Series B Convertible Preferred equal to 100% of the Liquidation Preference.

 

Voting Rights. Holders of Series B Convertible Preferred are entitled to vote on all matters, together with the holders of common stock, and have the equivalent of two (2) votes for every Series B Conversion Share issuable upon conversion of such holder’s outstanding shares of Series B Convertible Preferred. However, the Series B Conversion Shares, when issued, will have all the same voting rights as other issued and outstanding common stock of the Company, and none of the rights of the Series A Convertible Preferred.

 

Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the holders of Series B Convertible Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation preference of the Series B Convertible Preferred before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series B Convertible Preferred shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

Certain Price and Share Adjustments.

 

a) Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of capital stock of the Company, then the conversion price shall be adjusted accordingly.

 

b) Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation or merger in which the Common Stock is converted into or exchanged for securities, cash or other property than each share of Series B Convertible Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number of shares of common stock issuable upon conversion of one share of Series B Convertible Preferred prior to any such merger or reorganization would have been entitled to receive pursuant to such transaction.

 

Series C Convertible Preferred Stock (“Series C Convertible Preferred”)

 

In March 2019, the Series C Certificate of Designation was filed with the Delaware Secretary of State to designate 5.0 million shares of our preferred stock as Series C Convertible Preferred. The following summarizes the current rights and preferences of the Series C Convertible Preferred:

 

Liquidation Preference. The Series C Convertible Preferred has a liquidation preference of $1.00 per share.

 

Dividends. Shares of Series C Convertible Preferred do not have any separate dividend rights.

 

Conversion. Subject to certain limitations set forth in the Series C Certificate of Designation, each share of Series C Convertible Preferred is convertible, at the option of the holder, into that number of shares of common stock (the “Series C Conversion Shares”) equal to the liquidation preference thereof, divided by Conversion Price (as such term is defined in the Series C Certificate of Designation), currently $0.08.

 

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The Series C Convertible Preferred will only be convertible at any time after the date that the Company shall have amended its Certificate of Incorporation to increase the number of shares of common stock authorized for issuance thereunder or effect a reverse stock split of the outstanding shares of common stock by a sufficient amount to permit the conversion of all Series C Convertible Preferred into shares of common stock (“Authorized Share Approval”) (such date, the “Initial Convertibility Date”), each share of Series C Convertible Preferred shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock on the terms and conditions set forth in the Series C Certificate of Designation under the definition “Conversion Rights”.

 

Redemption. Subject to certain conditions set forth in the Series C Certificate of Designation, in the event of a Change of Control (defined in the Series C Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series C Convertible Preferred shall have acquired, in one or a series of related transactions, equity securities of the Company representing more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem all or a portion of the outstanding Series C Convertible Preferred in cash at a price per share of Series C Convertible Preferred equal to 100% of the Liquidation Preference.

 

Voting Rights. Holders of Series C Convertible Preferred are entitled to vote on all matters, together with the holders of common stock, and have the equivalent of thirty-two (32) votes for every Series C Conversion Share issuable upon conversion of such holder’s outstanding shares of Series C Convertible Preferred. However, the Series C Conversion Shares, when issued, will have all the same voting rights as other issued and outstanding common stock of the Company, and none of the rights of the Series C Convertible Preferred.

 

Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the holders of Series C Convertible Preferred shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation preference of the Series C Convertible Preferred before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series C Convertible Preferred shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

Certain Price and Share Adjustments.

 

a) Stock Dividends and Stock Splits. If the Company (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of common stock on shares of common stock or any other common stock equivalents; (ii) subdivides outstanding shares of common stock into a larger number of shares; (iii) combines (including by way of a reverse stock split) outstanding shares of common stock into a smaller number of shares; or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of capital stock of the Company, then the conversion price shall be adjusted accordingly.

 

b) Merger or Reorganization. If the Company is involved in any reorganization, recapitalization, reclassification, consolidation or merger in which the Common Stock is converted into or exchanged for securities, cash or other property than each share of Series C Convertible Preferred shall be convertible into the kind and amount of securities, cash or other property that a holder of the number of shares of common stock issuable upon conversion of one share of Series C Convertible Preferred prior to any such merger or reorganization would have been entitled to receive pursuant to such transaction.

 

Common and Preferred Stock Issuances – 2023

 

In April 2023, the Company issued 8,000,000 shares of common stock, 2,665,000 Series A warrants and 8,000,000 Series B warrants in their Reg A+ for $640,000. The Company sold the warrants for $10,665.

 

Common and Preferred Stock Issuances - 2022

 

In March 2022, the Company issued 299,577 shares of common stock in the cashless exercise of 825,000 warrants and issued 76,250 shares of common stock to its CEO for services rendered valued at $4,880. In June 2022, there was a fractional adjustment recorded for 90 shares.

 

On July 7, 2022, the Company sold 15,000,000 shares under the Regulation A+ for cash proceeds of $1,200,000 for the common stock and sold 20,000,000 warrants for $20,000.

 

In September 2022, the Company issued 984,840 shares valued at $49,242 in settlement of accounts payable.

 

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NOTE 4: COMMON STOCK OPTIONS, WARRANTS AND RESTRICTED STOCK UNITS

 

Common Stock Options

 

The Company recognizes in the financial statements compensation related to all stock-based awards, including stock options and warrants, based on their estimated grant-date fair value. The Company has estimated expected forfeitures and is recognizing compensation expense only for those awards expected to vest. All compensation is recognized by the time the award vests.

 

The following schedule summarizes the changes in the Company’s stock options:

       Weighted       Weighted 
   Options Outstanding   Average       Average 
   Number Of Shares   Exercise
Price Per
Share		   Remaining
Contractual
Life		   Aggregate
Intrinsic
Value		   Exercise
Price Per
Share		 
Balance at December 31, 2021   2,252,809   $0.024-0.04    7.70 years   $83,992   $0.04 
                          
Options granted   -   $-    -        $- 
Options exercised   -   $-    -        $- 
Options expired/canceled   -   $-    -        $- 
                          
Balance at December 31, 2022   2,252,809   $0.024-0.04    6.70 years   $16,032   $0.04 
                          
Exercisable at December 31, 2022   2,252,809   $0.024-0.04    6.70 years   $16,032   $0.04 
                          
Balance at December 31, 2022   2,252,809   $0.024-0.04    6.70 years   $16,032   $0.04 
                          
Options granted   -   $-    -        $- 
Options exercised   -   $-    -        $- 
Options expired/canceled   -   $-    -        $- 
                          
Balance at September 30, 2023   2,252,809   $0.024-0.04    5.95 years   $65,819   $0.04 
                          
Exercisable at September 30, 2023   2,252,809   $0.024-0.04    5.95 years   $65,819   $0.04 

 

During the nine months ended September 30, 2023 and 2022, the Company recognized $0 and $0, respectively, worth of stock based compensation related to the vesting of it stock options.

 

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Common Stock Warrants

 

The following schedule summarizes the changes in the Company’s stock warrants:

 

   Warrants Outstanding   Weighted Average       Weighted Average 
   Number Of Shares   Exercise Price Per Share   Remaining Contractual Life   Aggregate Intrinsic Value   Exercise Price Per Share 
Balance at December 31, 2021    31,862,500   $ 0.04-0.10    1.02 years   $538,875   $0.07 
                          
Warrants granted    20,000,000   $ 0.01 – 0.08    2.50        $0.0725 
Warrants exercised    (4,158,333)  $-    -           $     
Warrants expired/cancelled    (20,966,667)  $-    -           $     
                          
Balance at December 31, 2022    26,737,500   $ 0.08-0.10    1.52 years   $-   $0.09 
                          
Exercisable at December 31, 2022    26,737,500   $0.06-