EMED 10-K & 10-Q changes, risk factors and insider trading
Electromedical Technologies, Inc · OTC · Surgical & Medical Instruments & Apparatus · CIK 1715819 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
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.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “January 1, 2023 through December 31,2023 Compared to January 1, 2022 through December 31, 2022”
New heading “Investing Activities”
Removed heading “January 1, 2022 through December 31,2022 Compared to January 1, 2021 through December 31, 2021”
Largest changes
“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. …”see in full comparison
“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. …”see in full comparison
“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.”see in full comparison
“As of the date of this filing, the note holders have agreed to temporarily waive the respective defaults, including principal, interest, default penalties, and default amounts, and to enter into negotiations to reform the respective outstanding convertible notes payable. Accordingly, no amounts were accrued as a result of the defaults.”see in full comparison
“During the year ended December 31, 2022, the Company issued convertible promissory notes to certain investors totaling $1,859,480 with net proceeds of $1,545,140. Original issue discount totaling $185,580, loan costs totaling $128,760 and the fair value of warrants issued or to be issued to third party advisors of $110,552 have been recorded as a discount on the notes. The notes accrue interest at 12% per annum and have initial conversion prices of $0.015-$0.025, with the exception of one note, subject to adjustment and mature nine months to one year from issuance. …”see in full comparison
“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. …”see in full comparison
Full comparison: every changed paragraph (48)
The statements contained in this report that are not statements of historical fact, includingincluding, without limitation, statements containing the words “believes,” “expects,” “anticipatesanticipates,” and similar words, constitute forward-looking statements that are subject to a number of risks and uncertainties. From time to timetime, 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.
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 on-goingongoing basis, we evaluate these estimates, including those related to useful lives of real estate assets, bad debts, impairment, contingenciescontingencies, 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.
Bioelectronics is a developing field of “electronic” medicine,medicine whichthat uses electrical impulses over the body’s neural circuitry to try to alleviate pain,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, frequencyfrequency, and vibration as an alternative to pharmaceuticals; andand, one day, read and modifiesmodify electrical signals passing along nerves in the body,body to restore long-term health.
Additionally, we have a corporate goal to offer the public effective alternatives to addictive pain relievingpain-relieving drugs, such as opiods.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 offor Disease Control and Prevention (CDC) has reported that, from 1999 through 2017, nearly 400,000 have died from overdoses from prescription or illicit opiods.opioids. It is our aim to offer effective alternatives to pain management.
Critical Accounting Policies and Estimates
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. The Company adopted ASC 606 effective January 1, 2019 using modified retrospective basis and the cumulative effect was immaterial to the financial statements.
Revenues are recognized in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers,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 whichthat is expected to be returned is recognized within other current assets on the balance sheets.
The Company values the warrants using a Black Scholes Merton and Monte Carlo pricing modelmodels 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.
January 1, 2023 through December 31,2023 Compared to January 1, 2022 through December 31, 2022
January 1, 2022 through December 31,2022 Compared to January 1, 2021 through December 31, 2021
Our sales totaled $1,348,808 for the year ended December 31, 2023 and $1,149,844 for the year ended December 31, 2022 and $907,362 for the year ended December 31, 2021.2022. The increase is primarily related to an increase in average selling price as well as additional units sold.
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.
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 $2,492,169 for the year ended December 31, 2022 and $4,508,391 for the year ended December 31, 2021, a decrease of $2,016,222 or about 45%. The change is primarily due to decreases in stock-based compensation expense of $2,120,541, research and development costs of $123,021 and marketing costs of $62,042, partially offset by non -stock-based compensation related increases in payroll related costs of $173,432 and other operating expenses of $79,923. Stock-based compensation expense for the year ended December 31, 2021, includes $963,428 related to third party agreements for financial and strategic advisory services, $604,890 related to shares of common stock issued to the Company’s CEO as compensation and $1,061,826 related to cashless warrants issued to the Company’s CEO and a key employee. 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.
The decrease in research and development costs reflects the initial development payment of approximately $122,000 made under contract in the 2021 period. Ongoing payments are made upon achievement of certain contractual milestones. The decrease in consulting and professional fees is the result of stock-based compensation recorded in conjunction with shares issued for investor relations and financial advisory services. The decrease in marketing expenses is due to the termination of various third- party arrangements.
The non -stock-basednon-stock-based compensation increase in payroll relatedpayroll-related costs consistsconsist primarily of additional employee headcount and ana $105,000 increase in bonusthe 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 $29,000. The non-stock-based compensation increase in other operating expenses relates primarily to costs associated public company insurance premiums and increased travel for sales and marketing efforts.$45,000.
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.
Other expense decreased by $2,814,914 primarily due to a decrease in interest expense of $2,522,780, and a decrease in gain in the change in fair market value of derivative liabilities of $1,415,685, partially offset by a loss on extinguishment of debt of $1,079,800. The decrease in interest expense reflects a decrease in the amortization of debt discount related to debt conversions and maturities that occurred since June 2021 as well as no day 1 derivative loss for newly incurred debt in the 2022 period, as compared to the 2021 period. All derivative liabilities were settled as of December 31, 2021.
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, compared to a net loss of $8,480,149 for year ended December 31, 2021.2022. The decrease in net loss is primarily attributed to the decrease in other expense,expense theand decreaseincreased gross profit, partially offset by an increase in selling, general and administrative expenses and increased gross profit.expenses.
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, toon our future financial condition and results of operations.
During the year ended December 31, 2022,2023, our cash and cash equivalents decreased by $14,745$280,721, reflecting cash used in operations of $773,337,$1,417,393, and netcash used in financing activities of $608,211, partially offset by proceeds from financing activities of $758,592.$1,744,883. At December 31, 2022,2023, the Company had a working capital deficit of $2,276,373$2,907,369 and cash on hand of $368,425.$87,704.
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.
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.
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:
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.
As of the date of this filing, the Company is currently in default with one its lenders, for non-payment of two matured convertible promissory notes issued on October 13, 2021, and February 11, 2022, with principal and interest due in the amounts of $78,495 and $95,410, respectively. Further, and as a result of the Company's sale of its real property on March 15, 2023, the Company is in default with its unmatured convertible promissory note issued to the lender on September 15, 2022. 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%.
Separately, and also as a result of the Company's sale of its real property on March 15, 2023, the Company is in default respecting unmatured convertible promissory notes issued to two lenders on February 11, 2022, and August 8, 2022, in the principal amounts of $307,500 and $176,000, respectively, each not including interest due. One convertible note included a cross-default provision which required the Company to remit full repayment of interest and principal due through the date of full repayment multiplied by 125%.
As of the date of this filing, the note holders have agreed to temporarily waive the respective defaults, including principal, interest, default penalties, and default amounts, and to enter into negotiations to reform the respective outstanding convertible notes payable. Accordingly, no amounts were accrued as a result of the defaults.
Cash flows used in operating activities totaled $773,337 for the year ended December 31, 2022 as compared to cash flows used of $1,193,688 for the year ended December 31, 2021. The decrease in cash flows used in operating activities is primarily the result of improved operating results, a decrease in inventory purchases and deposits and increased customer deposits, partially offset by an increase in accrued expenses and other current liabilities.
Cash flows provided by financing activities totaled $758,592 for the year ended December 31, 2022 as compared to $1,311,945 for the year ended December 31, 2021. 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. The cash flows provided in the 2021 period are primarily the result of $1,510,000 in net proceeds from convertible promissory notes partially offset by related party notes payable repayments totaling $158,875.
During the year ended December 31, 2022, the Company issued convertible promissory notes to certain investors totaling $1,859,480 with net proceeds of $1,545,140. Original issue discount totaling $185,580, loan costs totaling $128,760 and the fair value of warrants issued or to be issued to third party advisors of $110,552 have been recorded as a discount on the notes. The notes accrue interest at 12% per annum and have initial conversion prices of $0.015-$0.025, with the exception of one note, subject to adjustment and mature nine months to one year from issuance. One note is only convertible upon default and at a 25% discount to trading prices during the ten days prior to conversion election. As additional consideration for the financings, the Company issued the lenders three to five-year warrants to purchase a total of 21,000,000 shares of common stock at an initial price of $0.025 per share, and three to five-year trigger warrants to purchase a total of 173,000,000 shares of common stock at $0.015- $0.025 per share, subject to price adjustments for certain actions, including dilutive issuances. The relative fair value of the warrants totaling $385,422 has been recorded as a discount on the notes. The trigger warrants may only be exercised if the convertible promissory notes are not paid in full at the maturity dates. The warrants do not provide for registration rights. As of the date of this filing, warrants to purchase 25,000,000 shares of common stock have been triggered.
In January and February 2022, the Company sold 1,500,000 shares of common stock at prices ranging from $0.0259- $0.0353 under a stock purchase agreement with net proceeds totaling $42,766.
We follow FASB ASC subtopic 850-10, “Related Party TransactionsTransactions,”, for the identification of related parties and disclosure of related party transactions.
What changed in the latest 10-Q
Risk Factors
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “January 1, 2024 through September 30, 2024 Compared to January 1, 2023 through September 30, 2023”
Removed heading “April 1,2024 through June 30, 2024 Compared to April 1,2023 through June 30, 2023”
Largest changes
“Other income (expense) increased by $1,601,484 primarily due to reduction in accrued penalties of $422,624 for convertible notes payable in default, a decrease in interest expense of $226,186 and a decrease in the losses associated with derivative liabilities of $952,674. Accrued penalties were removed in conjunction with the settlement of certain convertible notes payable. The decrease in interest expense is primarily due to $210,000 of additional amortized debt discount in the 2023 period. All debt discount for notes issued prior to Jan 1,2024 has been fully amortized in 2023.”see in full comparison
“Other expense increased by $205,914 primarily due to reduction in accrued penalties of $53,251 for convertible notes payable in default, a decrease in interest expense of $107,207 and an increase in the losses associated with derivative liabilities of $366,642. Accrued penalties were removed in conjunction with the settlement of certain convertible notes payable. The decrease in interest expense is primarily related to the valuation of a trigger warrant in the 2023. period. All debt discount for notes issued prior to Jan 1,2024 has been fully amortized in 2023.”see in full comparison
“January 1, 2024 through September 30, 2024 Compared to January 1, 2023 through September 30, 2023”see in full comparison
“April 1,2024 through June 30, 2024 Compared to April 1,2023 through June 30, 2023”see in full comparison
see in full comparisonJanuaryJuly1,20241, 2024 throughJuneSeptember 30, 2024 Compared toJanuaryJuly 1, 2023 throughJuneSeptember 30, 2023
“Our sales totaled $570,415 for the nine months ended September 30, 2024 and $997,213 for the nine months ended September 30, 2023, a decrease of $426,798 or 43%. The decrease is primarily related to a decrease in units sold as well as a reduction in average selling price. Unit sales have decreased as the Company winds down the sale of its current product leading up to the introduction of the new Wellness Pro Infinity. In June 2024, the Company initiated its exchange program, allowing current customers to submit deposits for the new Wellness Pro Infinity. …”see in full comparison
Full comparison: every changed paragraph (41)
Since inception, the Company has incurred approximately $24.3$25.0 million of accumulated net losses. In addition, during the sixnine months ended JuneSeptember 30, 2024, the Company used $49,434 in operations and had a working capital deficit of $3,441,979.$3,787,034. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company expects to obtain funding through additional debt and equity placement offerings until it consistently achieves positive cash flows from operations. If the Company is unable to obtain additional funding, it may not be able to meet all of its obligations as they come due for the next 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.
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 JuneSeptember 30, 2024.
The following table sets forth the unaudited results of our operations for the three months ended JuneSeptember 30,
April 1,2024 through June 30, 2024 Compared to April 1,2023 through June 30, 2023
Our sales totaled $237,644 for the three months ended June 30, 2024 and $294,954 for the three months ended June 30, 2023, a decrease of $57,309 or 19%. The decrease is primarily related to a decrease in units sold as well as a decrease in average selling price. Unit sales have decreased as the Company winds down the sale of its current product leading up to the introduction of the new Wellness Pro Infinity. In June 2024, the Company initiated its exchange program, allowing current customers to submit deposits for the new Wellness Pro Infinity.
Cost of sales and gross margins for the three months ended June 30, 2024, and for the three months ended June 30, 2023 were $64,390 and 73% and $62,519 and 79%, 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 three months ended June 30:
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 $425,100 for the three months ended June 30, 2024 and $573,838 for the three months ended June 30, 2023, a decrease of $148,738 or about 26%. The change is primarily due to decreases in other operating expenses of $77,195, payroll related expenses of $31,700, marketing costs of $16,800 and commissions of $13,800.
The decrease in other operating expenses consists primarily of approximately $37,000 in reduced travel, $14,000 in rent as a result of the more favorable September 2023 lease, $11,300 in fees related to convertible note payable conversions and $10,900 related to outside services.
The decrease in payroll related expenses is primarily due to a reduced headcount and no CEO bonus in the 2024 period. The decrease in marketing costs relates to pared back efforts as the Company awaits the launch of its new product. The decrease in commissions reflects the reduction in sales including a larger percentage sold to distributors.
Other income (expense) increased by $1,601,484 primarily due to reduction in accrued penalties of $422,624 for convertible notes payable in default, a decrease in interest expense of $226,186 and a decrease in the losses associated with derivative liabilities of $952,674. Accrued penalties were removed in conjunction with the settlement of certain convertible notes payable. The decrease in interest expense is primarily due to $210,000 of additional amortized debt discount in the 2023 period. All debt discount for notes issued prior to Jan 1,2024 has been fully amortized in 2023.
As a result of the foregoing, we recorded net income of $231,236 for the three months ended June 30, 2024, compared to a net loss of $1,459,806 for the three months ended June 30, 2023. The increase in net income is primarily attributed to the increase in other income and the reduced loss from operations.
The following table sets forth the unaudited results of our operations for the six months ended June 30:
JanuaryJuly 1,20241, 2024 through JuneSeptember 30, 2024 Compared to JanuaryJuly 1, 2023 through JuneSeptember 30, 2023
Our sales totaled $527,889$42,526 for the sixthree months ended JuneSeptember 30, 2024 and $673,600$323,613 for the sixthree months ended JuneSeptember 30, 2023, a decrease of $145,711$281,087 or 22%.87%. The decrease is primarily related to a decrease in units sold as well as a reduction in average selling price.sold. Unit sales have decreased as the Company winds down the sale of its current product leading up to the introduction of the new Wellness Pro Infinity. In June 2024, the Company initiated its exchange program, allowing current customers to submit deposits for the new Wellness Pro Infinity. Deposits totaling $764,125 have been collected as of September 30, 2024 for the new product.
Cost of sales and gross margins for the sixthree months ended JuneSeptember 30, 20242024, and for the sixthree months ended JuneSeptember 30, 2023 were $137,247$11,881 and 74%72% and $150,215$72,437 and 78%78%, 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 sixthree months ended JuneSeptember 30:
The following table sets forth the stock- based compensation expense included in the above operating expenses for six months ended June 30:
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 $797,363$411,683 for the sixthree months ended JuneSeptember 30, 2024 and $2,126,326$490,205 for the sixthree months ended JuneSeptember 30, 2023, a decrease of $1,328,963$78,522 or about 63%.16%. The change is primarily due to decreases in other operating expenses of $59,662, commissions of $31,300, and payroll related expenses of $6,951, partially offset by an increase in consulting and professional fees of $19,866.
The decrease in other operating expenses consists primarily of approximately $21,000 in rent as a result of the more favorable September 2023 lease, and $27,000 related to insurance. The decrease in commissions reflects the decrease in sales and that sales were to distributors.
The decrease in payroll related expenses is primarily due to a reduced headcount.
The increase in consulting and professional fees is primarily related to increased legal fees and public company costs offset by reduced accounting fees.
Other expense increased by $205,914 primarily due to reduction in accrued penalties of $53,251 for convertible notes payable in default, a decrease in interest expense of $107,207 and an increase in the losses associated with derivative liabilities of $366,642. Accrued penalties were removed in conjunction with the settlement of certain convertible notes payable. The decrease in interest expense is primarily related to the valuation of a trigger warrant in the 2023. period. All debt discount for notes issued prior to Jan 1,2024 has been fully amortized in 2023.
As a result of the foregoing, we recorded a net loss of $724,643 for the three months ended September 30, 2024, compared to a net loss of $376,720 for the three months ended September 30, 2023. The decrease in net loss is primarily attributed to the increased loss from operations and the increase in other expense.
The following table sets forth the unaudited results of our operations for the nine months ended September 30:
January 1, 2024 through September 30, 2024 Compared to January 1, 2023 through September 30, 2023
Our sales totaled $570,415 for the nine months ended September 30, 2024 and $997,213 for the nine months ended September 30, 2023, a decrease of $426,798 or 43%. The decrease is primarily related to a decrease in units sold as well as a reduction in average selling price. Unit sales have decreased as the Company winds down the sale of its current product leading up to the introduction of the new Wellness Pro Infinity. In June 2024, the Company initiated its exchange program, allowing current customers to submit deposits for the new Wellness Pro Infinity. Deposits totaling $764,125 have been collected as of September 30, 2024 for the new product.
Cost of sales and gross margins for the nine months ended September 30, 2024 and for the nine months ended September 30, 2023 were $149,128 and 74% and $222,652 and 78% 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 nine months ended September 30:
The following table sets forth the stock- based compensation expense included in the above operating expenses for nine months ended September 30:
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 $1,209,046 for the nine months ended September 30, 2024 and $2,126,326 for the nine months ended September 30, 2023, a decrease of $1,407,485 or about 54%.
Stock-based compensation expense for the sixnine months ended JuneSeptember 30, 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.
The non-stock basednonstock-based compensation decrease in consulting and professional fees includes, $30,000 related to the resignation of one of the Company’s directors as of July 1, 2023, as well as reduced legal, accounting and other public company related expenses.
The decrease in research and development costs relates to payments made under its product development agreement as new milestones were met in the 2023 period and not in the 2024 period. The decrease in other operating expenses consists primarily of $48,000$46,000 in reduced travel, $30,000 related to insurance, $18,000 related to outside services, $8,000$10,000 in fees related to convertible note payable conversions and $12,000$42,000 related to property taxes and depreciationrent following the 2023 sale of the building. The decrease in commissions reflects the reduction in sales including a larger percentage sold to distributors.
Other expense decreasedincreased by $114,611$91,303 primarily due to a change in accrued penalties of $673,430$726,951 for convertible notes payable in default, and a decrease in interest expense of $555,067$662,274, partially offset by and aan decreaseincrease in the losses associated with derivative liabilities of about$286,852, $80,000, partially offsetand by the $1,193,676 gain from the 2023 sale of the building. Accrued penalties were removed in conjunction with the settlement of certain convertible notes payable. The decrease in interest expense is primarily due to $370,000 of additional amortized debt discount and $160,000$263,476 related to the valuation of certain trigger warrants for matured convertible notes payable in the 2023 period. All debt discount for notes issued prior to Jan 1,2024 has been fully amortized in 2023.
As a result of the foregoing, we recorded a net loss of $605,038$1,329,681 for the sixnine months ended JuneSeptember 30, 2024, compared to a net loss of $1,915,869$2,292,589 for the sixnine months ended JuneSeptember 30, 2023. The decrease in net loss is primarily attributed to a decreased loss from operations.
During the sixnine months ended JuneSeptember 30, 202430,2024 our cash and cash equivalents increaseddecreased by $29,227$52,895 reflecting cash used in operations of $49,434$80,263 and provided by financing activities of $78,661.$27,638. At JuneSeptember 30, 2024, the Company had a working capital deficit of $3,441,979$3,787,034 and cash on hand of $116,931.$34,809. During the sixnine months ended JuneSeptember 30, 2023 our cash and cash equivalents increaseddecreased by $47,831$229,948 reflecting cash used in operations of $1,088,666$1,366,445 and cash used in financing activities of $608,386, offset by cash provided from the sale of the Company’s building of $1,894,588. At JuneSeptember 30, 2023, the Company had a working capital deficit of $2,271,730$2,237,432 and cash on hand of $416,256.$138,477.
Cash flows used in operating activities totaled $49,434$80,263 for the sixnine months ended JuneSeptember 30, 2024 as compared to cash flows used of $1,088,666$1,366,445 or the sixnine months ended JuneSeptember 30, 2023. The change in cash flows used in operating activities is primarily the result of a a decrease in the loss from operations, excluding stock-based compensation expense, an increase in customer deposits and a decrease in accrued liabilities.
Cash provided by investing activities for the sixnine months ended JuneSeptember 30, 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 sixnine months ended JuneSeptember 30, 2023 also included capital expenditures totaling $149,705 for production tooling. There were no investing activities in the 2024 period.
Cash flows provided by financing activities totaled $78,661$27,638 for the sixnine months ended JuneSeptember 30, 2024 as compared to cash flows used in financing activities of $608,386 for the sixnine months ended JuneSeptember 30, 2023. The cash flows provided in the 2024 period relate to the net proceeds from a convertible debt financing. 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.
As of JuneSeptember 30, 2024, and separately, the Company is in default of a matured convertible promissory note, issued to a lender on August 8, 2022, with principal and interest due in the amounts of $105,500$93,000 and $45,640,$51,099, respectively. The convertible note 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 150%. The amount of approximately $76,000$72,000 in default penalties has been accrued and is recorded in the Company’s balance sheet as of JuneSeptember 30, 2024, for this lender. The Company is in negotiations with the lender to reform the note in default.
EMED insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding EMED (13F)
None of the 59 investors we track reported a position in their latest 13F.