EDGAR 10-K Filing

Company CIK: 1528172
Filing Year: 2021
Filename: 1528172_10-K_2021_0001493152-21-008661.json

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ITEM 1. BUSINESS
Item 1. Business.
Overview
Endonovo Therapeutics, Inc. (Endonovo or the “Company”) is an innovative biotechnology company that has developed a bio-electronic approach to regenerative medicine.
The Company develops, manufactures and distributes evolutionary medical devices focused on the rapid healing of wounds and reduction of pain, edema and inflammation on and in the human body. The Company’s non-invasive bioelectric medical devices are designed to target inflammation, cardiovascular diseases, chronic kidney disease, and central nervous system disorders (“CNS” disorders).
Endonovo’s core mission is to transform the field of medicine by developing safe, wearable, non-invasive bioelectric medical devices that deliver the Company’s Electroceutical® Therapy. Endonovo’s bioelectric Electroceutical® devices harnesses bioelectricity to restore key electrochemical processes that initiate anti-inflammatory processes and growth factors in the body necessary for healing to rapidly occur.
Corporate History
Our predecessor company, Hanover Asset Management, Inc. was incorporated in November 2008 in California. For the purpose of reincorporating in Delaware, we merged with a newly incorporated successor company, Hanover Portfolio Acquisitions, Inc., in July 2011 under which we continue to operate.
IP Resources International, Inc. began operations on September 1, 2011 and was formally incorporated on October 17, 2011.
Reverse Acquisition
On March 14, 2012, we entered into a Share Exchange Agreement (“Agreement”) with IPR and certain of its shareholders. Under the Agreement, each participating IPR shareholder exchanged all of their issued and outstanding IPR common shares totaling 33,234,294, free and clear of all liens, and $155,000 for Company common shares equal to 1.2342 times the number of IPR shares being transferred to the Company for a total of 410 of our shares. The $155,000 was not paid at closing. The Company recorded the $155,000 as acquisition payable. IPR agreed to make payments of up to 25% of the proceeds from any private placement or gross profits earned by IPR until the obligation is satisfied. The percentage of the proceeds to be paid is at the sole discretion of IPR’s Chief Executive Officer and the ex-Chief Executive Officer of the Company based on the liquidity of the Company.
As a result of the Agreement, the former shareholders of IPR, immediately post acquisition owned approximately 89% of the Company and its officers and directors constituted the majority of the officers and directors of the Company. Since the shareholders, officers and directors of IPR have control of the Company, the acquisition constitutes a reverse acquisition, so IPR was the accounting acquirer and we were the accounting acquiree. For legal purposes, we are the legal parent and IPR is the legal subsidiary.
Acquisition of Aviva Companies Corporation
On April 2, 2013, the Company entered into an Acquisition Agreement (the “Acquisition Agreement”) with (i) The Aviva Companies Corporation (“Aviva”) and (ii) all of the shareholders of Aviva (the “Shareholders”) pursuant to which the Company acquired all of the outstanding shares of Aviva in exchange for the issuance of 60 shares of our common stock (60,000 pre-reverse split), par value $0.0001 per share to the Shareholders (the “Share Exchange”). As a result of the Share Exchange, Aviva became a wholly-owned subsidiary of the Company.
Other than in respect to the transaction, there is no material relationship among Aviva’s stockholders and any of the Company’s affiliates, directors or officers. We are not currently actively pursuing the development of the Aviva Companies Corporation.
Acquisition of WeHealAnimals, Inc.
On November 16, 2013, the Company entered into an Acquisition Agreement (the “Acquisition Agreement”) with (i) WeHealAnimals, Inc. (“WHA”) and (ii) the sole shareholder of WHA (the “Shareholder”) pursuant to which the Company acquired all of the outstanding shares of WHA in exchange for the issuance of 3 shares of our common stock (3,000 shares pre- reverse split), par value $0.0001 per share and $96,000 to the Shareholder (the “Share Exchange”). As a result of the Share Exchange, WHA became a wholly owned subsidiary of the Company and all of the equity of WHA including its and its sole shareholder’s intellectual property became the property of the Company. This obligation was fully paid on December 15, 2015 through the issuance of 350 shares of stock (350,000 pre-reverse split) to Shareholder. WHA is a Nevada corporation with intellectual property in the fields of bio-technology, including its biologics and time-varying electromagnetic frequencies with potential applications on people and animals that management believes can be developed to the benefit of the Company and its shareholders. WHA’s sole shareholder was formerly Chairman and Chief Scientist of Regenetech, Inc. Regenetech was acquired by a company that wanted its technology, biomolecules grown in microgravity, for use in cosmetics. WHA’s sole shareholder left Regenetech with exclusive rights to this proprietary square wave form technology and stem cell technologies, including the patents and patent applications relating thereto.
Other than in respect to the transaction, there is no material relationship between WHA’s sole stockholder and any of the Company’s affiliates, directors or officers.
Acquisition of Rio Grande Assets
On December 22, 2017, we acquired intellectual property and other assets (the “RGN Assets”) from Rio Grande Neurosciences, Inc. (RGN). The price was $4,500,000 of which we paid $3,000,000 in cash and delivered a $1,500,000 secured promissory note due November 30, 2018 and security agreement. Before such note was due, the note was assigned to Eagle Equities, LLC (“Eagle”) its due date was extended to November 30, 2019, and it was made convertible into our common stock at a price related to our common stock’s market price at the time of conversion. The maturity date was then extended to December 31, 2021. The RGN Assets relate to RGN’s PEMF portfolio of intellectual property, including 27 issued patents with foreign patent protection covering the therapeutic use of PEMF as well as the treatment of various central nervous system disorders. We intend to initiate and fund future clinical trials to evaluate the further use of PEMF in the treatment of central nervous system disorders, including traumatic brain injury, post-concussion syndrome, stroke and multiple sclerosis. However, no assurance can be given that we will be successful in these endeavors or that the results of any tests will indicate further development of the RGN Assets.
The PEMF assets acquired include SofPulse®, a portable, disposable PEMF device with a CE Mark and an FDA 510(k) clearance for the treatment of post-surgical pain and edema in addition to medical reimbursement for the treatment of chronic wounds. Endonovo Therapeutics has begun the commercialization of the PEMF assets through marketing and the creation of various sales channels and distribution agreements.
Present Development Plans
We now are a biotechnology company developing bioelectronic devices and cell therapies for regenerative medicine and a commercial-stage developer of non-invasive wearable Electroceuticals™ therapeutic devices.
The Company’s current portfolio of commercial and clinical-stage wearable Electroceuticals™ therapeutic devices addresses wound healing, pain, post-surgical pain and edema, cardiovascular disease, chronic kidney disease, and Central Nervous System (CNS) Disorders, including traumatic brain injury (TBI), acute concussions, post- concussion syndrome and multiple sclerosis. The Company’s non-invasive Electroceutical™ therapeutic device, SofPulse®, using pulsed short-wave radiofrequency at 27.12 MHz has been FDA-Cleared and CE Marked for the palliative treatment of soft tissue injuries and post-operative pain and edema, and has CMS National Coverage for the treatment of chronic wounds. The Company’s current portfolio of pre-clinical stage Electroceuticals™ therapeutic devices address chronic kidney disease, liver disease non-alcoholic steatohepatitis (NASH), cardiovascular and peripheral artery disease (PAD), and ischemic stroke. The Company’s non-invasive, wearable Electroceuticals™ therapeutic devices work by restoring key electrochemical processes that initiate anti-inflammatory and growth factor cascades necessary for healing to occur.
These bioelectronics devices are also commonly referred to as “electroceuticals.” These products are part of an emerging field termed “Bioelectronic Medicine,” that seeks to harness electrical signals in nerves and cells to alter the course of diseases and conditions. Whereas our competitors are primarily using implantable electrical nerve stimulators, we are developing devices that are not implantable and use electromagnetic pulses to deliver electrical stimulation to cells and tissues. We are developing these bioelectronic devices for the treatment of inflammatory conditions in tissues and vital organs with a concentration on vascular diseases and ischemia/reperfusion injuries.
Intellectual Property:
SofPulse: We have 29 issued patents with foreign patent protection covering the therapeutic use of tPEMF as well as the treatment of various central nervous system disorders. Additionally to date, we have filed seven patent applications in the U.S. through the U.S. Patent and Trademark Office (USPTO) and four international patent applications in the E.U., China, South Korea and Japan covering our Time-Varying Electromagnetic Field (TVEMF) technology, the production of biomolecules, the creation of an allogeneic mesenchymal stem cell product a treatment for chemical and radiation injuries, production of stem cell secretome and a method of treating tissues and organs using our TVEMF technology. To date, we have been granted one U.S. Patent (U.S. Patent No. 9,410,143) issued on August 9, 2017 covering the production of human biomolecules using our TVEMF technology. We will continue to seek to strengthen our portfolio of intellectual property by filing additional patents around uses of our core technologies.
Our business strategy is aimed at building value by positioning each of our technologies and therapies to treat specific diseases that lack effective treatment, post-operative pain and edema, or whose current standard of treatment involves invasive procedures and/or potentially harmful side effects. We anticipate updating and refining the business strategy as new medical and/or clinical advancements are made as a result of extensive research and development. In general, the component functions of the business model are to:
● Commercialize our FDA cleared technology through direct sales, distributors and licensees;
● License our technologies;
● Develop additional medical indications for our medical devices;
● Develop additional non-invasive, medical technologies;
● Conduct pre-clinical and clinical human studies for FDA Approval of our medical devices and cell therapies;
● Acquire subsidiaries under the parent company, Endonovo Therapeutics, to assist in the development and distribution of medical technologies;
● Incrementally invest, market, and refine acquired and developed medical technologies and therapies.
Industry Overview
Bioelectrical Medicine within the Healthcare Industry
The healthcare industry is one of the world’s largest and fastest-growing industries. Consuming over 10 percent of Gross Domestic Product (GDP) of most developed nations, health care can form an enormous part of a country’s economy.
As of 2016, 91.1% of residents had health protection in the United States, either through their employer or bought individually. During 2016, healthcare costs reached $3.3 trillion, or $10,348 per person. The share of U.S. GDP devoted to healthcare was 17.9% of U.S. Gross Domestic Product (GDP), the largest of any country in the world. Specifically, the cost of pharmaceuticals in the United States is the highest on the planet. It is expected that Healthcare’s share of U.S. GDP will continue its upward trend, reaching 20 percent of U.S. GDP by 2025. Globally, by 2040, Healthcare spending is expected to exceed $18 Trillion annually.
Bio-Electrical Medicine is a $17.2 Billion sector of the Healthcare Industry growing at more than a 11% CAGR estimated to exceed $35.5 Billion by 2025, according to Grand View Research. Get me a copy of this Bioelectric medicine is at the forefront of technological revolution in medical sciences. As opposed to the pharmaceutical industry, bioelectric medicine has a different treatment therapy that is based on electrical pulses instead of drugs to trigger the body’s recovery capabilities. Bioelectric medicine develops nerve stimulating and sensors activation technologies to regulate biological functions and treat diseases by combining bioengineering, neuroscience, molecular medicines and electronics. These technologies may change the future of therapies for wide range of diseases.
On the basis of type of device, the global Electroceuticals®/Bioelectrical Medicine Market is classified into two major classes:
Implantable Electroceuticals® Devices, and
Non-Invasive Electroceuticals® Devices.
BioElectric Medicine vs. Drug Therapies
Over the past 15 years, long-acting and extended-release opioids have been used to treat open wounds, post-operative wounds and chronic pain. These opioids are normally administered at high doses and over long treatment durations particularly in the United States, resulting in a drastic increase in the number opioid-tolerant individuals and a prescription opioid abuse epidemic. Endonovo offers an alternative, non-opioid treatment through its Electroceuticals® systems: The Company’s SofPulse® system is a medical device/designed to rapidly reduce post-operative swelling/edema, pain and to treat and accelerate the recovery of chronic wounds through the use of tPEMF. Chronic pain therapy via tPEMF works by relieving the underlying cause of pain - inflammation.
Drug therapies remain the standard of care for a broad range of medical conditions, including high blood pressure, chronic pain, autoimmune diseases, and psychiatric disorders. Management believes that bioelectronic medicine has developed as a viable alternative for the treatment of many disorders.
Normally, our nervous systems send signals to our tissues and organs to suppress inflammation, a phenomenon known as the inflammatory reflex. But sometimes, this system does not work properly, with malfunctions resulting in diseases like rheumatoid arthritis and inflammatory bowel disease. Traditionally, doctors have treated these diseases using drugs designed to suppress inflammation, such as infliximab (trade name Remicade) or adalimumab (Humira). But these drugs are expensive. Plus, they don’t work for everyone, often come with nasty side effects, and in some rare cases, they can even kill.
Current Product Being Sold - SofPulse®
In clinical trials, the SofPulse® device has proven to reduce mean pain scores by nearly 300% and inflammation by 275% thereby improving and reducing recovery time. Additionally, active patients have experienced a 2.2-fold reduction in narcotic use. The SofPulse® delivers tPEMF to enhance post-surgical recovery, naturally. Since the SofPulse® is non-invasive and non-pharmacologic, there are no known side effects and no potential for overdose or dependency AND no effects on healthy tissue.
How the SofPulse® Works
SofPulse® delivers low intensity microcurrents of energy directly to the procedure site, to enhance recovery, by increasing the amount of naturally occurring Vascular Endothelial Growth Factor (VEGF), thereby increasing the physiological process through which new blood vessels form from pre-existing vessels (Angiogenesis). Within hours/days, the Fibroblast Growth Factor (FGF) enhances, thereby increasing the production of Collagen/Granulation (within days) and Transforming Growth Factor (TGF-β) accelerating Remodeling in the body within days/weeks. This device reduces inflammation and speeds/improves the healing process. The natural healing process allows patients to get back to life faster with lowered use of narcotics. A surgeon places and activates SofPulse® immediately after a procedure. The SofPulse® can be placed over a surgical dressing or clothing and can easily be applied and/or removed in many cases by the patient themselves. The length of time the device is used will vary depending on the type of procedure.
The SofPulse® allows patients to get back to an active life faster with less use of narcotics.
Immediately Usable and Effective - Single use patient device applied immediately after surgery.
Easy to Use - SofPulse® can easily be applied and or removed, including in many cases by the patient themselves.
Automated Dosing - Device is activated automatically or can be used as needed.
Versatile - The product comes as a single device or dual device to accommodate different surgical procedures.
Manufacturing
Our SofPulse® device is manufactured for us by ADM Tronics, Inc. in an FDA approved facility in Northvale, New Jersey.
Sales & Marketing
Endonovo’s strategy is to establish relationships with third parties, such as sales organizations, distributors and marketing coordinators, that assist us in developing, marketing, selling and implementing our products.
We believe that strategic and technology-based relationships with medical facilities are fundamental to our success. We have forged numerous relationships with medical device distributors to enhance our combined capabilities. This approach enhances our ability to accelerate market penetration, accelerate the pace of our sales growth and solidify relationships.
We have a variety of marketing programs designed to create brand awareness and market recognition for our product offerings and for sales lead generation. Our marketing efforts include attending and presenting at healthcare related conferences, advertising, content development and distribution, public relations, social media publication of technical and informative articles in industry journals and sales training.
In addition, our strategic partners augment our marketing and sales campaigns through seminars, trade shows and joint public relations and advertising campaigns. Our customers and strategic partners provide references and recommendations that we often feature in external marketing activities.
Endonovo also is utilizing Key Opinion Leaders (KOLs) and Scientific Advisory Board Members (SABs) within the medical community to develop a sales-channel recommendation to other physicians/surgeons.
Competition
The pain management market is intensely competitive, highly fragmented and characterized by rapidly changing technology and drugs. We currently compete with other medical device manufacturers as well as pharmaceutical companies that have developed drugs many which are considered addictive.
Employees
The Company does not have any employees. However, we have retained approximately 12 individuals as independent contractors that are involved in business development and sales, research & development and administrative functions.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Not applicable because we are a smaller reporting company.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
Not applicable because we are a smaller reporting company.

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ITEM 2. PROPERTIES
Item 2. Properties.
We have one office located in Southern California. We believe such office is adequate for our present needs.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
We are a defendant in a case entitled Auctus Fund, LLC v. Endonovo Therapeutics, Inc. et.al 20-cv-11286-PBS filed in the Federal District Court in Massachusetts in July 2020. The complaint seeks damages related to a variable rate dated in August 2019 in the original amount of $275,250 and alleges various counts of State and Federal securities laws violations, breach of contract, fraud, consumer fraud and other claimed theories of damages while claiming damages in excess of $500,000, other unspecified damages and attorney fees. The Company is vigorously defending the action and as filed an answer with counterclaims. While the matter is in its early stages and there are always uncertainties in litigation, management does not believe that the litigation will result in a finding significantly averse to the Company. Otherwise, we are not party to any material legal proceeding. Due to the nature of our business, we may become active in litigation relating to the defense or assertion of our patent rights or other corporate matters. Refer to Note 9 Commitments and Contingencies for further discussion.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock trades on the OTCQB under the symbol “ENDV”. The OTCQB is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (“OTC”) equity securities. An OTCQB equity security generally is any equity that is not listed or traded on a national securities exchange. Our stock is thinly traded, and a robust, active trading market may never develop. The market for the Company’s common stock has been limited, volatile, and sporadic.
Price Range of Common Stock
The following table shows, for the periods indicated, the high and low closing prices per share of our common stock as reported by the OTCQB quotation service.
Closing Price
High Low
Year Ended December, 2019
First Quarter $ 39.50 $ 16.50
Second Quarter $ 21.70 $ 10.00
Third Quarter $ 18.66 $ 6.20
Fourth Quarter $ 10.70 $ 1.30
Year Ended December, 2020
First Quarter $ 0.11 $ 3.90
Second Quarter $ 0.01 $ 0.38
Third Quarter $ 0.08 $ 0.15
Fourth Quarter $ 0.02 $ 0.10
Approximate Number of Equity Security Holders
As of April 8, 2021, there were approximately 423 stockholders of record. Because shares of our common stock are held by depositaries, brokers and other nominees, the number of beneficial holders of our shares is substantially larger than the number of stockholders of record.
Dividends
Holders of our common stock are entitled to receive dividends if, as and when declared by the Board of Directors out of funds legally available therefore. We have never declared or paid any dividends on our common stock. We intend to retain any future earnings for use in the operation and expansion of our business. Consequently, we do not anticipate paying any cash dividends on our common stock to our stockholders for the foreseeable future.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data.
Not applicable because we are a smaller reporting company.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. The information and financial data discussed below is only a summary and should be read in conjunction with the historical financial statements and related notes contained elsewhere in this 10-K. The financial statements contained elsewhere in this 10-K fully represent the Company’s financial condition and operations; however, they are not indicative of the Company’s future performance. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this 10-K.
Cautionary Notice Regarding Forward Looking Statements
The information contained in Item 2 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.
Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks discussed in prior filings, in press releases and in other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss further below.
Impairment of Other Intangible and Long-Lived Assets
The Company accounts for its intangible assets under the provisions of ASC 350, “Intangibles - Goodwill and Other”. In accordance with ASC 350, intangible assets with a definite life are analyzed for impairment under ASC 360-10-05 “Property, Plant and Equipment” and intangible assets with an indefinite life are analyzed for impairment under ASC 360 annually, or more often if circumstances dictate. The Company performs its annual simplified impairment test in the fourth quarter of each year. The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. If impairment is indicated, the asset is written down to its estimated fair value.
Use of estimates
Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. The significant estimates were made for the fair value of common stock issued for services, with notes payable arrangements, in connection with note extension agreements, and as repayment for outstanding debt, in estimating the useful life used for depreciation and amortization of our long-lived assets, in the valuation of the derivative liability, and the valuation of deferred income tax assets. Actual results and outcomes may differ from management’s estimates and assumptions.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in “Leases (Topic 840)” and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. The Company has adopted ASU 2016-02 on January 1, 2019. The adoption of ASU 2016-02 did not have a significant impact on the Company’s consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company has early adopted ASU 2018-07 and the adoption did not have a significant impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. Effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. Any entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. The Company adopted ASU 2018-13 as of January 1, 2020 and ASU 2018-13 has not had a material impact on the consolidated financial statements.
In August 2020, the FASB issued “ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)” which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard. Update No. 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted no earlier than the fiscal year beginning after December 15, 2020. The Company is currently evaluating the potential impact on its consolidated financial statements.
Results of Operations
Results of Operations Year Ended December 31, 2020 vs. Year Ended December 31, 2019
Year Ended December 31, Favorable
(Unfavorable) %
Revenue $ 165,796 $ 310,164 (144,368 ) (46.5 )
Cost of revenue 65,369 93,385 28,016 30.0
Gross profit 100,427 216,779 (116,352 ) (53.7 )
Operating expenses 3,012,625 4,025,851 1,013,226 25.2
Loss from operations (2,912,198 ) (3,809,072 ) 896,874 23.5
Other income (expense) 2,516,614 (13,505,432 ) 16,022,046 118.6
Net loss $ (395,584 ) $ (17,314,504 ) $ 16,918,920 97.7
Revenue
Revenue of the Company’s SofPulse® product during the current year decreased by $144,368 or 46.5% compared to the previous year.
Revenues for our SofPulse® product is typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations. Revenue has been negatively impacted by the COVID-19 contagious disease outbreak in March 2020. We anticipate that revenue will increase in future periods as the roll out of the SofPulse® product continues.
In connection with offering products and services provided to the end user by third-party vendors, we review the relationship between us, the vendor and the end user to assess whether revenue should be reported on a gross or net basis. In asserting whether revenue should be reported on a gross or net basis, we consider whether we act as a principal in the transaction and control the goods and services used to fulfill the performance obligation(s) associated with the transaction.
Cost of Revenue
Cost of revenue decreased by $28,016 or 30.0% from the previous year to $65,369 during the current year compared to $93,385 during the previous year. Cost of revenue is recognized on those sales recorded as gross for which we are the principal in the transaction as opposed to net sales which reflect no cost of revenue.
It is anticipated that cost of revenue will increase in future periods as the roll out of the SofPulse® product continues.
Operating Expenses
Our operating expenses decreased by $1,013,226 or 25.2% to $3,012,625 in 2020 compared to $4,025,851 for 2019. The operating expenses were comprised primarily of consulting and professional fees for the development of our intellectual property, research and development, expenses related to being a public company and depreciation and amortization expenses. This change was due primarily to a decrease in consulting fees of approximately $0.5 million, a decrease in professional fees of approximately $0.4 million and a decrease in research of development of $0.1 million.
Depreciation and Amortization
We incur depreciation and amortization expense for costs related to our assets, including our patents, information technology and software. Our depreciation and amortization was $651,247 in 2020 compared to $650,315 in 2019. There were no equipment purchases or sales during 2020.
Other Income / Expense
Other Income was $2,516,614 in 2020 compared to expense of $13,505,432 in 2019. The decrease in other expense during our fiscal year 2020 was primarily the result of re-valuations to reflect liability accounting for convertible notes issued with variable conversion rates. This change was due primarily to a decrease in interest expense and the amortization of debt issuance costs and amortization of approximately $4.0 million and a change in valuation of our derivative liabilities of approximately $13.1 million.
Liquidity and Capital Resources
As of December 31, Increase
(Decrease)
Working Capital
Current assets $ 46,187 $ 62,555 $ (16,368 )
Current liabilities 16,825,821 23,623,470 (6,797,649 )
Working capital deficit $ (16,779,634 ) $ (23,560,915 ) $ 6,781,281
Long-term debt $ 155,000 $ 155,000 $ -
Stockholders’ deficit $ (14,373,786 ) $ (20,503,820 ) $ 6,130,034
For Year Ended December 31, Increase
(Decrease)
Statements of Cash Flows Select Information
Net cash provided (used) by:
Operating activities $ (741,590 ) $ (2,541,007 ) $ 1,799,417
Investing activities $ - $ (2,594 ) $ 2,594
Financing activities $ 736,117 $ 2,183,343 $ (1,447,226 )
As of December 31, Increase
(Decrease)
Balance Sheet Select Information
Cash $ 13,420 $ 18,893 $ (5,473 )
Accounts payable and accrued expenses $ 5,989,185 $ 4,348,219 $ (1,640,966 )
Since inception and through December 31, 2020, the Company has raised approximately $16.9 million in equity and debt transactions. These funds have been used to advance the operations of the Company, build its bio-medical platform, patent work and general corporate development. Our accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these consolidated financial statements. However, the Company has incurred substantial losses. Our current liabilities exceed our current assets and available cash is not sufficient to fund the expected future operations. The Company is raising additional capital through debt and equity securities in order to continue the funding of its operations. However, there is no assurance that the Company can raise enough funds or generate sufficient revenues to pay its obligations as they become due, which raises substantial doubt about our ability to continue as a going concern. To reduce the risk of not being able to continue as a going concern, management has implemented its business plan to materialize revenues from sales and future license agreements and has also initiated an equity line of credit offering to raise capital through the sale of its common stock and has engaged an Investment Banker to raise additional capital. Although, uncertainty exists as to whether the Company will be able generate enough cash from operations to fund the Company’s working capital needs or raise sufficient capital to meet the Company’s obligations as they become due, no adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty. Our cash on hand at December 31, 2020 was $13,420. This will not be sufficient to fund operations if additional capital is not raised. The Company raised an aggregate of $0.3 million through the sale of equity and debt securities since December 31, 2020 through the date of this report.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, obligations under any guarantee contracts or contingent obligations. We also have no other commitments, other than the costs of being a public company that will increase our operating costs or cash requirements in the future.
Seasonality
Management does not believe that our current business segment is seasonal to any material extent.
Securities Authorized for Issuance under Equity Compensation Plans
We do not have in effect any compensation plans under which our equity securities are authorized for issuance.
Unregistered Sales of Equity Securities
During the year ended December 31, 2020, we issued the following unregistered equity securities:
Number of
Common Shares Source of
Issued Payment Amount
2,813,250 Conversion of Preferred Series C $ 1,400,934
14,557,343 Conversion of notes $ 3,339,109
1,500,000 Exchange of options for restricted shares $ 165,000
1,206,398 Services $ 109,800
1,264,000 Note modification inducement $ 137,995
771,926 Commitment shares $ 97,920
1,234,568 Issuance for cash $ 100,000
The above issuances of were exempt from registration pursuant to Section 4(2), and/or Regulation D promulgated under the Securities Act. These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these stockholders had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a Smaller Reporting Company and are not required to provide the information under this item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
EDONOVO THERAPEUTICS, INC.
AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets for December 31, 2020 and 2019
Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019
Consolidated Statement of Stockholders’ Deficit for the Years Ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019
Notes to Consolidated Financial Statements for the Years Ended December 31, 2020 and 2019
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Endonovo Therapeutics, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Endonovo Therapeutics, Inc. and Subsidiaries (the Company) as of December 31, 2020 and 2019, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes to the consolidated financial statements (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph - Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has continued to incur significant operating losses and negative cash flows from operations, during the year ended December 31, 2020 and has negative working capital at December 31, 2020. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Instruments with Embedded Conversion Features
Description of the Matter
As discussed in Note 1 to the Consolidated Financial Statements, the Company issues instruments with embedded conversion features. These embedded conversion features result in a derivative liability that is measured at fair value.
Auditing derivative liability is complex and highly judgmental due to the variability and uncertainty associated with the Company’s assessment of estimates used in calculating the value of the derivative liability. Changes in these estimates would have a significant effect on the valuation of the derivative liability and the related change in fair value of derivative liability.
How We Addressed the Matter in Our Audit
To test the derivative liability, our audit procedures included, among others, evaluating the appropriateness of the Company’s accounting policy for instruments with embedded conversion features and the estimates and assumptions used in calculating the fair value of the derivative liability. We evaluated whether the methods used to calculate the fair value of the derivative liability were applied consistently. We also tested the completeness and accuracy of the underlying data used for the fair value measurement.
/s/ Rose, Snyder & Jacobs LLP
We have served as the Company’s auditor since 2008.
Encino, California
April 13, 2021
Endonovo Therapeutics, Inc. and Subsidiaries
Consolidated Balance Sheets
As of December 31,
ASSETS
Current assets:
Cash $ 13,420 $ 18,893
Accounts receivable, net of allowance for doubtful accounts of $0 22,742
Prepaid expenses and other current assets 31,825 20,920
Total current assets 46,187 62,555
Property Plant and Equipment, net 1,580 5,915
Patents, net 2,559,268 3,206,180
Total assets $ 2,607,035 $ 3,274,650
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable $ 700,932 $ 599,470
Accrued interest 1,904,136 1,317,376
Deferred compensation 3,384,117 2,431,373
Notes payable, net of discounts of $201,157 as of December 31, 2020 and $12,649 as of December 31, 2019 6,491,039 6,697,146
Notes payable - former related party 143,000 165,000
Derivative liability 4,202,597 10,599,690
Series C preferred stock liability, net of discounts of $766 at December 31, 2019 - 1,813,415
Total current liabilities 16,825,821 23,623,470
Acquisition payable 155,000 155,000
Total liabilities 16,980,821 23,778,470
COMMITMENTS AND CONTINGENCIES, note 9
Shareholders’ deficit
Super AA super voting preferred stock, $0.001 par value; 1,000,000 authorized and 25,000 issued and outstanding at December 31, 2020 and December 31, 2019
Series B convertible preferred stock, $0.0001 par value; 50,000 shares authorized and 600 issued and outstanding at December 31, 2020 and December 31, 2019
Series C convertible preferred stock, 8,000 shares authorized, 763 and 1,814 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively -
-
Series D convertible preferred stock, $0.0001 par value; 20,000 shares authorized and 305 and 255 issued and outstanding at December 31, 2020 and December 31, 2019, respectively - -
Common stock, $0.0001 par value; 2,500,000,000 shares authorized; and 24,536,689 and 1,189,204 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively 2,453
Additional paid-in capital 38,963,827 32,432,392
Stock subscriptions (1,570 ) (1,570 )
Accumulated deficit (53,338,522 ) (52,934,786 )
Total shareholders’ deficit (14,373,786 ) (20,503,820 )
Total liabilities and shareholders’ deficit $ 2,607,035 $ 3,274,650
See accompanying summary of accounting policies and notes to consolidated financial statements.
Endonovo Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31,
2019(*)
Revenue $ 165,796 $ 310,164
Cost of revenue 65,369 93,385
Gross profit 100,427 216,779
Operating expenses 3,012,625 4,025,851
Loss from operations (2,912,198 ) (3,809,072 )
Other income (expense)
Change in fair value of derivative liability 5,607,213 (7,488,690 )
Gain (loss) on extinguishment of debt (555,430 ) 73,503
Other expense, net (452,095 ) -
Interest expense, net (2,083,074 ) (6,090,245 )
Total other income (expense) 2,516,614 (13,505,432 )
Loss before income taxes (395,584 ) (17,314,504 )
Provision for income taxes - -
Net loss $ (395,584 ) $ (17,314,504 )
Basic and diluted loss per share $ (0.03 ) $ (24.83 )
Weighted average common share outstanding:
Basic and diluted 12,215,844 697,305
See accompanying summary of accounting policies and notes to consolidated financial statements.
(*) The consolidated financial statements have been retroactively restated to reflect the 1,000-for-1-reverse stock split that occurred on December 20, 2019.
Endonovo Therapeutics, Inc. and Subsidiaries
Consolidated Statement of Stockholders Deficit
For the Years Ended December 31, 2020 and 2019
Series AA Series B Convertible Series D Convertible
Additional
Total
Preferred Stock Preferred Stock Preferred Stock Common Stock Paid-in Subscription Retained Shareholder’s
Shares Amount Shares Amount Shares Amount Shares Amount Capital Receivable Earnings Deficit
Balance December 31, 2018 25,000 $ 25 $ 1 - $ - 431,063 $ 43 $ 24,229,945 $ (1,570 ) $ (35,620,282 ) $ (11,391,838 )
Shares issued for cash (*) - - - - - - 17,900 168,342 - - 168,343
Shares issued for services (*) - - - - - - 10,340 159,849 - - 159,850
Shares issued with lock-up agreements (*) - - - - - - - 3,788 - - 3,788
Shares issued for conversion of notes payable and accrued interest (*) - - - - - - 728,057 7,533,245 - - 7,533,318
Shares issued for Preferred Series D - - - - - - - 255,000 - - 255,000
Valuation of stock issued with notes payable (*) - - - - - - 1,091 - 26,545 - - 26,545
Valuation of warrants issued with Preferred Series C - - - - - - - - 16,333 - - 16,333
Valuation of warrant and stock options issued for services - - - - - - - - 31,012 - - 31,012
Valuation of common stock issued for extension of notes (*) - - - - - - - 8,333 - - 8,333
Net loss for the year ended December 31, 2019 - - - - - - - -
- (17,314,504 ) (17,314,504 )
Balance December 31, 2019 25,000 255 - 1,189,204 32,432,392 (1,570 ) (52,934,786 ) (20,503,820 )
(*) The consolidated financial statements have been retroactively restated to reflect the 1,000-for-1-reverse stock split that occurred on December 20, 2019.
Endonovo Therapeutics, Inc. and Subsidiaries
Consolidated Statement of Stockholders Deficit
For the Years Ended December 31, 2020 and 2019
Series AA Series B Convertible Series D Convertible Series C
Convertible
Additional
Total
Preferred Stock Preferred Stock Preferred Stock Preferred Stock Common Stock Paid-in Subscription Retained Shareholder’s
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Receivable Earnings Deficit
Balance December 31, 2019 25,000 $ 25 $ 1 $ - - - 1,189,204 $ 118 $ 32,432,392 $ (1,570 ) $ (52,934,786 ) $ (20,503,820 )
Reclassification Preferred Series C - - - - - - 1,814 - - - 2,418,269 - - 2,418,269
Shares issued for Preferred Series D - - - - - - - - - 50,000 - - 50,000
Shares issued for conversion of notes payable and accrued interest - - - - - - - - 14,557,343 1,456 3,337,653 - - 3,339,109
Shares issued for conversion of Preferred Series C to common share - - - - - - (1,051 ) - 2,754,822 (151 ) - -
Valuation of stock options issued for services - - - - - - - - - - 57,400 - - 57,400
Shares issued for exchange of stock options - - - - - - - - 1,500,000 164,850 - - 165,000
Shares issued as inducement to note holder - - - - - - - - 855,000 79,055 - - 79,140
Common stock issued for services - - - - - - - - 1,206,398 109,680 -
109,800
Restricted shares issued as inducement to Series C - - - - - - - - 58,428 8,146 - (8,152 ) -
Common stock issued with exchange of convertible notes - - - - - - - - 409,000 58,814 - - 58,855
Commitment shares - - - - - - - - 771,926 97,842 -
97,920
Common stock issued for cash
1,234,568 99,877 - - 100,000
Beneficial conversion feature on convertible note - - - - - - - - - - 50,000 - - 50,000
Net loss for the year ended December 31, 2020 - - - - - - - - - - - - (395,584 ) (395,584 )
Balance December 31, 2020 25,000 305 - - 24,536,689 2,453 38,963,827 (1,570 ) (53,338,522 ) (14,373,786 )
See accompanying summary of accounting policies and notes to consolidated financial statements.
Endonovo Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2020 and 2019
Operating activities:
Net loss $ (395,584 ) $ (17,314,504 )
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization expense 651,247 650,315
Amortization of discount on Series C Preferred stock liability 196,269
Non-cash increase to convertible notes principal (included in interest expense) 452,095 -
Non-cash interest and fees 1,032,358 2,654,071
Stock compensation expense 456,519 194,652
Amortization of note discount and original issue discount 225,171 2,044,940
Change in fair value of derivative liability (5,607,213 ) 7,488,690
Loss (gain) on extinguishment of debt 555,430 (73,503 )
Changes in assets and liabilities:
Accounts receivable 21,800 (19,397 )
Prepaid expenses and other current assets (10,905 ) (20,920 )
Accounts payable 94,202 442,082
Accrued interest 830,298 1,030,682
Deferred compensation 952,744 185,616
Net cash used in operating activities (741,590 ) (2,541,007 )
Investing activities:
Acquisition of property and equipment - (2,594 )
Net cash used in investing activities - (2,594 )
Financing activities:
Proceeds from the issuance of notes payable 608,117 1,995,000
Repayments on former related party advances (22,000 ) (105,000 )
Proceeds from issuance of common stock 100,000 168,343
Payment on notes payable - (130,000 )
Proceeds from issuance of preferred shares 50,000 255,000
Net cash provided by financing activities 736,117 2,183,343
Net decrease in cash (5,473 ) (360,258 )
Cash, beginning of year 18,893 379,151
Cash, end of year $ 13,420 $ 18,893
Supplemental disclosure of cash flow information:
Cash paid for interest $ 25,747 $ 17,000
Cash paid for income taxes $ - $ -
Cash paid for Preferred C dividends $ - $ 115,115
Non-Cash Investing and Financing Activities:
Conversion of notes payable and accrued interest
to common stock $ 1,493,413 $ 3,645,956
Conversion of Preferred C stock to common stock 1,400,934 -
Value of derivative liability from transfer to equity upon conversion of notes payable and accrued interest $ 1,879,398 $ 3,960,864
Exchange of note and accrued interest to new convertible note 316,494 -
Issuance of common stock to Preferred C Stock inducement $ 8,152 $ -
Conversion of notes payable to redeemable preferred stock $ - $ 94,000
See accompanying summary of accounting policies and notes to consolidated financial statements.
Endonovo Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
Note 1 - Nature of Business and Summary of Significant Accounting Policies
Endonovo Therapeutics, Inc. (Endonovo or the “Company”) is an innovative biotechnology company that has developed a bio-electronic approach to regenerative medicine. Endonovo is a growth stage company whose stock is publicly traded (OTCQB: ENDV).
The Company develops, manufactures and distributes evolutionary medical devices focused on the rapid healing of wounds and reduction of inflammation on and in the human body. The Company’s non-invasive bioelectric medical devices are designed to target inflammation, cardiovascular diseases, chronic kidney disease, and central nervous system disorders (“CNS” disorders).
Endonovo’s core mission is to transform the field of medicine by developing safe, wearable, non-invasive bioelectric medical devices that deliver the Company’s Electroceutical® Therapy. Endonovo’s bioelectric Electroceutical® devices harnesses bioelectricity to restore key electrochemical processes that initiate anti-inflammatory processes and growth factors in the body necessary for healing to rapidly occur.
On January 22, 2014, Hanover Portfolio Acquisitions, Inc. (the “Company”) received written consents in lieu of a meeting of stockholders from holders of a majority of the shares of Common Stock representing in excess of 50% of the total issued and outstanding voting power of the Company approving an amendment to the Company’s Certificate of Incorporation to change the name of the Company from “Hanover Portfolio Acquisitions, Inc.” to “Endonovo Therapeutics, Inc.” The name change was affected pursuant to a Certificate of Amendment (the “Certificate of Amendment”), filed with the Secretary of State of Delaware on January 24, 2014.
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company include the accounts of ETI, IP Resources International, Inc., Aviva Companies Corporation, and WeHealAnimals, Inc. All significant intercompany accounts and transactions are eliminated in consolidation.
Going Concern
These accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for a period following the date of these consolidated financial statements. The Company has recurring net losses, negative cash flows from operations and working capital deficits. The Company has raised approximately $ 0.7 million in debt and equity financing for the year ended December 31, 2020. The Company is raising additional capital through debt and equity securities in order to continue the funding of its operations. However, there is no assurance that the Company can raise enough funds or generate sufficient revenues to pay its obligations as they become due, which raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty. To reduce the risk of not being able to continue as a going concern, management has implemented its business plan to materialize revenues from potential, future, license agreements, has initiated an equity line of credit offering to raise capital through the sale of its common stock, has engaged a broker/dealer to raise additional capital.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Reverse Split
In October 2019, the Company’s Board of Directors and stockholders approved an amendment to the Company’s amended and restated certificate of incorporation to effect a 1,000-for-1 reverse split of the Company’s common stock, which was effected on December 20, 2019. The par value of the common stock was not adjusted as a result of the reverse stock split. Accordingly, all common stock, stock options, warrants and related per share amounts have been retroactively adjusted to give effect to the reverse split for the year ended December 31, 2019.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Critical estimates include the value of shares issued for services, in connection with notes payable agreements, in connection with note extension agreements, and as repayment for outstanding debt, the useful lives of property and equipment, the valuation of the derivative liability, and the valuation of deferred income tax assets. Management uses its historical records and knowledge of its business in making these estimates. Actual results could differ from these estimates.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Financial instruments that potentially subject us to a concentration of credit risk consist of cash and cash equivalents. Cash is deposited with what we believe are highly credited, quality institutions. The deposited cash may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits. At December 31, 2020, the Company does not hold any cash in excess of FDIC limits.
Accounts Receivable
The Company uses the specific identification method for recording the provision for doubtful accounts, which was $0 at December 31, 2020 and 2019. Accounts receivable are written off when all collection attempts have failed.
Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range between five and seven years. Repairs and maintenance are charged to expense as incurred while improvements are capitalized. Upon the sale, retirement or disposal of fixed assets, the accounts are relieved of the cost and the related accumulated depreciation with any gain or loss recorded to the consolidated statements of operations.
Impairment of Long-lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. If impairment is indicated, the asset is written down to its estimated fair value.
Equity-Based Compensation
The Company measures equity-based compensation cost at the grant date based on the fair value of the award and recognizes it as expense, net of forfeitures which are recognized as they occur, over the vesting or service period, as applicable, of the stock award using the straight-line method.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The Company measured equity-based compensation using the Black-Scholes option valuation model using the following assumptions:
For Year Ending December 31,
Expected term 1.38 years 4 years
Exercise price $ 0.15 $ 11.60
Expected volatility 231.10 % 349.60 %
Expected dividends None None
Risk-free interest rate 0.14 % 2.28 %
Forfeitures None None
Income Taxes
The Company records a tax provision for the anticipated tax consequences of its reported results of operations. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and income tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.
The Company has adopted ASC Topic 740, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC Topic 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition. The Company has determined that the adoption did not result in the recognition of any liability for unrecognized tax benefits and that there are no unrecognized tax benefits that would, if recognized, affect the Company’s effective tax rate.
Net Loss per Share
Basic net loss per share is calculated based on the net loss attributable to common shareholders divided by the weighted average number of shares outstanding for the period excluding any dilutive effects of options, warrants, unvested share awards and convertible securities. Diluted net loss per common share assumes the conversion of all dilutive securities using the if-converted method and assumes the exercise or vesting of other dilutive securities, such as options, common shares issuable under convertible debt, warrants and restricted stock using the treasury stock method when dilutive.
Research and Development
Costs relating to the development of new products are expensed as research and development as incurred in accordance with FASB Accounting Standards Codification (“ASC”) 730-10, Research and Development. Research and development costs amounted to $3,283 and $153,126 for the years ended December 31, 2020 and 2019, respectively, and are included in operating expenses in the consolidated statements of operations.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Fair Value of Financial Instruments
Accounting guidance on fair value measurements and disclosures defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system, and defines required disclosures. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts business.
The Company’s balance sheet contains derivative liability that is recorded at fair value on a recurring basis. The three-level valuation hierarchy for disclosure of fair value is as follows:
Level 1: uses quoted market prices in active markets for identical assets or liabilities.
Level 2: uses observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: uses unobservable inputs that are not corroborated by market data.
The fair value of the Company’s recorded derivative liability is determined based on unobservable inputs that are not corroborated by market data, which require a Level 3 classification. A Black-Sholes option valuation model was used to determine the fair value. The Company records derivative liability on the condensed consolidated balance sheets at fair value with changes in fair value recorded in the condensed consolidated statements of operation.
The following table presents changes in the liabilities with significant unobservable inputs (Level 3) for the years ended December 31, 2020 and 2019:
Fair Value Measurements at December 31, 2020 Using
Quoted Prices in Active Markets for Significant Other Observable Significant Unobservable
Identical Assets Inputs Inputs
(Level 1) (Level 2) (Level 3) Total
Derivative liability $ - $ - $ 4,202,597 $ 4,202,597
Total $ - $ - $ 4,202,597 $ 4,202,597
Fair Value Measurements at December 31, 2019 Using
Quoted Prices in
Active Markets for Significant Other
Observable Significant
Unobservable
Identical Assets Inputs Inputs
(Level 1) (Level 2) (Level 3) Total
Derivative liability $ - $ - $ 10,599,690 $ 10,599,690
Total $ - $ - $ 10,599,690 $ 10,599,690
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The following table presents changes in the liabilities with significant unobservable inputs (Level 3) for the years ended December 31, 2020 and 2019:
Derivative
Liability
Balance December 31, 2018 $ 4,426,026
Issuance of convertible debt 2,645,838
Settlements by debt extinguishment (3,960,864 )
Change in estimated fair value 7,488,690
Balance December 31, 2019 $ 10,599,690
Issuance of convertible debt 1,244,898
Extinguishment following note exchange (177,422 )
Settlements by debt extinguishment (1,857,356 )
Change in estimated fair value (5,607,213 )
Balance December 31, 2020 $ 4,202,597
Derivative Liability
The Company issued Variable Debentures during the years ended December 31, 2020 and 2019, which contained variable conversion rates based on unknown future prices of the Company’s common stock. This resulted in a derivative liability. The Company measures the derivative liability using the Black-Scholes option valuation model using the following assumptions:
For Year Ending December 31,
Expected term
- 6 months
month-1 year
Exercise price
$0.01-$0.76
$0.65-$12.87
Expected volatility
110.04%-248.90%
133.50%-166.00%
Expected dividends
None
None
Risk-free interest rate
0.03%-1.54%
1.51%-2.87%
Forfeitures
None
None
The assumptions used in determining fair value represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change, including changes in the market value of the Company’s common stock, managements’ assessment or significant fluctuations in the volatility of the trading market for the Company’s common stock, the Company’s fair value estimates could be materially different in the future.
The Company computes the fair value of the derivative liability at each reporting period and the change in the fair value is recorded as non-cash expense or non-cash income. The key component in the value of the derivative liability is the Company’s stock price, which is subject to significant fluctuation and is not under its control, and the assessment of volatility. The resulting effect on net loss is therefore subject to significant fluctuation and will continue to be so until the Company’s Variable Debentures, which the convertible feature is associated with, are converted into common stock or paid in full with cash. Assuming all other fair value inputs remain constant, the Company will record non-cash expense when its stock price increases and non-cash income when its stock price decreases.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Preferred Stock
The Company elects to accrete the difference between the redemption value and carrying value of outstanding preferred stock over the period from the date of issuance to the earliest redemption date using the effective interest method.
Recent Accounting Standard Updates
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in “Leases (Topic 840)” and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. The Company has adopted ASU 2016-02 on January 1, 2019. The adoption of ASU 2016-02 did not have a significant impact on the Company’s consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company has early adopted ASU 2018-07 and the adoption did not have a significant impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. Effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. Any entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. The Company has not yet selected a transition method, nor has it determined the effect of the standard on its ongoing financial reporting.
In August 2020, the FASB issued “ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)” which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard. Update No. 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted no earlier than the fiscal year beginning after December 15, 2020. The Company is currently evaluating the potential impact on its consolidated financial statements.
The Company has evaluated all the recent accounting pronouncements and determined that there are no other accounting pronouncements that will have a material effect on the Company’s financial statements.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note 2 - Revenue Recognition
Contracts with Customers
We have adopted ASC 606, Revenue from Contracts with Customers effective January 1, 2018 using the modified retrospective method applied to those contracts which were not substantially completed as of January 1, 2018. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
We routinely plan on entering into contracts with customers that include general commercial terms and conditions, notification requirements for price increases, shipping terms and in most cases prices for the products and services that we offer. Our performance obligations are established when a customer submits a purchase order notification (in writing, electronically or verbally) for goods and services, and we accept the order. We identify performance obligations as the delivery of the requested product or service in appropriate quantities and to the location specified in the customer’s contract and/or purchase order. We generally recognize revenue upon the satisfaction of these criteria when control of the product or service has been transferred to the customer at which time, we have an unconditional right to receive payment. Our sales and sale prices are final and our prices are not affected by contingent events that could impact the transaction price.
Revenues for our SofPulse® product is typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations.
In connection with offering products and services provided to the end user by third-party vendors, we review the relationship between us, the vendor and the end user to assess whether revenue should be reported on a gross or net basis. In asserting whether revenue should be reported on a gross or net basis, we consider whether we act as a principal in the transaction and control the goods and services used to fulfill the performance obligation(s) associated with the transaction.
During the year ended December 31, 2020, we recognized gross revenue of $165,796 from products we sold as a principal in the transaction.
Sources of Revenue
We have identified the following revenues disaggregated by revenue source:
1. Plastic Surgeons
2. Wound Care Facilities
3. Hospitals
4. Other Physicians
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
As of December 31, 2020, and 2019 the sources of revenue were as follows:
Year Ended
December 31,
Direct sales- Plastic surgeons, gross 165,796 310,164
Total sources of revenue $ 165,796 $ 310,164
Warranty
Our general product warranties do not extend beyond an assurance that the product delivered will be consistent with stated specifications and do not include separate performance obligations.
Significant Judgments in the Application of the Guidance in ASC 606
There are no significant judgments associated with the satisfaction of our performance obligations. We generally satisfy performance obligations upon delivery of the product to the customer. This is consistent with the time in which the customer obtains control of the products. Performance obligations are also generally settled quickly after the purchase order acceptance, therefore the value of unsatisfied performance obligations at the end of any reporting period is generally immaterial.
We consider variable consideration in establishing the transaction price. Forms of variable consideration applicable to our arrangements include sales returns, rebates, volume-based bonuses, and prompt pay discounts. We use historical information along with an analysis of the expected value to properly calculate and to consider the need to constrain estimates of variable consideration. Such amounts are included as a reduction to revenue from the sale of products in the periods in which the related revenue is recognized and adjusted in future periods as necessary.
Practical Expedients
Our payment terms for sales direct to distributors, End Users, Hospitals and Doctors are substantially less than the one-year collection period that falls within the practical expedient in determination of whether a significant financing component exists.
Effective Date and Transition Disclosures
Adoption of the new standards related to revenue recognition did not have a material impact on our consolidated financial statements.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note 3- Property and Equipment
The following is a summary of equipment, at cost, less accumulated depreciation at December 31, 2020 and 2019:
As of December 31,
Autos $ 64,458 $ 64,458
Medical equipment 13,969 13,969
Other equipment 11,367 11,367
89,794 89,794
Less accumulated depreciation 88,214 83,879
$ 1,580 $ 5,915
Depreciation expense for the years ended December 31, 2020 and 2019 was $4,335 and $3,405, respectively.
Note 4 - Patents
In December 2017, we acquired from RGN a patent portfolio for $4,500,000. The earliest patent expires in 2024. The following is a summary of patents less accumulated amortization at December 31, 2020 and 2019:
December 31,
Patents $ 4,500,000 $ 4,500,000
Less accumulated amortization 1,940,732 1,293,820
$ 2,559,268 $ 3,206,180
Amortization expense for the years ended December 31, 2020 and 2019 was $646,912 and $646,910, respectively.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The estimated future amortization expense related to patents as of December 31, 2020 is as follows:
Year Ended December 31. Amount
$ 646,910
646,910
646,910
618,538
Total $ 2,559,268
Note 5 - Notes payable
Notes Payable
In October 2013, July 2014, October 2014 and August 2015, the Company initiated a series ofprivate placements for up to $500,000, each, of financing by the issuance of notes payable at a minimum of $25,000, one unit. The notes bear interest at 10% per annum and were due and payable with accrued interest one year from issuance. During the years ended December 31, 2020 and 2019, the Company did not issue notes in connection with these private placements and did not repay any of these notes. As of December 31, 2020, and 2019, notes payable outstanding under these private placements are $624,903, all of which are past maturity.
During the year ended December 31, 2020, the Company issued nine fixed rate promissory notes totaling $1,485,000 for funding of $608,117 with original terms of two to twelve months and interest rates of 8% to 15%. If the notes are not paid at maturity, the fixed rate promissory notes bear a default interest of 10% to 24%. As of December 31, 2020, five of the nine newly issued promissory notes became variable rate notes, which triggered the recognition of $301,727 new derivative liability for the embedded conversion feature. As of December 31, 2020, all of the notes remain outstanding with balance of $1,212,167.
During the year ended December 31, 2020, the Company converted seven (7) previous fixed rate notes into variable rate notes (including the five newly issued fixed rate promissory notes) in an accumulated amount of $1,136,000 as a result of the notes not being paid at maturity and, therefore, triggering a conversion option for the noteholder. For four of the variable rate notes, the conversion rate is between 70% and 75% of the Company’s common stock based on the terms included in the variable rate notes. For three of the variable rate notes, the conversion rate is 100% of the Company’s common stock based on the terms included in the variable rate notes. As of December 31, 2020, the Company exchanged one of the variable notes with $316,494 unamortized principal and accrued interest into one fixed rate promissory notes for $525,000 due in twelve months from issuance date and convertible upon an event of default. The Company recorded the exchange in accordance with ASC 470-50 Debt-Modifications and Extinguishments and recorded $151,496 as gain from debt extinguishment in the condensed consolidated statements of operations.
On May 20, 2020, the Company entered into modification and forbearance agreements (the “agreements”) with three investors as a condition for the execution of the equity line purchase agreement (see note 6), collectively totaling $4,397,000 in principal and approximately $1,080,000 in accrued interest. As long as the Equity Line Purchase Agreement is in effect and its terms are being complied with, the terms of the forbearance agreements include the extension of the maturity date, elimination of the conversion feature attached to the hybrid instrument and a 12.5% premium for future cash redemption.
On July 16, 2020, the Securities and Exchange Commission declared effective the registration statement on Form S-1, for the registration of the shares under the Equity Line Purchase Agreements, which was filed on June 23, 2020 and amended on July 10, 2020. Management reviewed the guidance per ASC 470-60 Troubled debt restructurings and ASC 470-50 Debt-Modifications and Extinguishments and concluded that the terms of the agreements were not substantially different as of December 31, 2020 and accounted for the transaction as a debt modification.
Notes payable to a former related party in the aggregate amount of $143,000 were outstanding at December 31, 2020 which are past maturity date. The notes bear interest between 10% and 12% per annum. During the year ended December 31, 2020, the Company paid $22,000 principal to this former related party.
As of December 31, 2020, fixed rate notes payable outstanding totaled $1,409,903, of which $624,903 is past maturity.
During the year ended December 31, 2019, the Company issued eight fixed rate promissory notes totaling $2,192,250 for funding of $1,995,000 with original terms of two to six months and interest rates of 10% to 12%, default rates of 10% to 24% and for three of the notes, if the notes are not paid at maturity, an additional 2% per month for the next three months. On November 1, 2019, the Company entered into debt modification agreements with two of the notes holders and extend the maturity date to November 1, 2020. Management reviewed the guidance in ASC 470-60 Troubled Debt Restructurings and ASC 470-50 Debt Modifications and Extinguishments and concluded that the changes to the terms of its debts qualified for debt modification, which did not result in any gain or loss in the Company’s statement of operation. As of December 31, 2019, the balance on these notes amounts to $894,250 and none of the notes is past maturity.
During the year ended December 31, 2019, the Company converted two previous fixed rate notes into variable rate notes in an accumulated amount of $1,650,000 as a result of the notes not being paid at maturity and, therefore, triggering conditional conversion options to the benefit of the noteholders. The conversion rate is 68% of the Company’s common stock based on the terms included in the variable rate notes.
During October 2019, the Company entered into an agreement to receive a license, data delivery and ancillary marketing services in exchange for a note of $352,500 at 8% annual interest and a conversion rate of the lower of $9.00 or 82% of the lowest bid price during the five trading days prior to conversion. The note will become effective when the license period and the services start, and the data is delivered. As of December 31, 2020, the data and license have not been delivered.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The gross amount of all convertible notes with variable conversion rates outstanding at December 31, 2020 and December 31, 2019, is $5,282,293, of which $2,613,246 are past maturity, and $5,090,642, of which $5,090,642 were past maturity, respectively.
Notes payable to a former related party in the aggregate amount of $143,000 were outstanding at December 31, 2020. The notes bear interest at 12% per annum. During the year ended December 31, 2020, the Company paid $22,000 principal and $0 interest to this related party.
Notes payable to a former related party in the aggregate amount of $165,000 were outstanding at December 31, 2019. The notes bear interest at 12% per annum. During the year ended December 31, 2019, the Company paid $105,000 principal and $17,000 interest to this related party. On September 29, 2019, the Company extended the maturity on all outstanding notes to December 31, 2019.
The Company recorded a derivative liability as a result of the conversion feature. The derivative liability was allocated between a note discount, up to the value of the Variable Debenture, and interest expense for the excess, and the note discount is being amortized over the life of the Variable Debenture through interest expense. During the years ended December 31, 2020 and 2019, the Company recorded $199,341 and $0 respectively, in discounts on these Variable Debentures.
As of December 31, 2020, the Company had notes payable to related parties amounting to $143,000. Refer to Note 7- Related Party Transactions.
As of December 31,
Notes payable at beginning of period $ 6,874,795 $ 8,158,198
Notes payable issued 1,364,611 2,101,000
Liquidated damages 452,095 -
Notes modification 25,190 -
Loan fees added to note payable 120,389 91,250
Settlements on note payable (697,253 ) -
Repayments of notes payable in cash (22,000 ) (235,000 )
Less amounts converted to redeemable notes - (67,500 )
Less amounts converted to stock (1,282,631 ) (3,173,153 )
Notes payable at end of period 6,835,196 6,874,795
Less debt discount (201,157 ) (12,649 )
$ 6,634,039 $ 6,862,146
Notes payable issued to former related party $ 143,000 $ 165,000
Notes payable issued to non-related party $ 6,491,039 $ 6,697,146
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The maturity dates on the notes payable are as follows:
Twelve months ending, Non-related parties Former Related
party Total
Past due $ 3,238,149 $ 143,000 $ 3,381,149
December 31, 2021 3,454,047 - 3,454,047
Total $ 6,692,196 $ 143,000 $ 6,835,196
Acquisition Payable
In connection with the Company’s acquisition of IPR in 2012, IPR recorded a $155,000 long-term acquisition payable for costs that were not paid at closing. This payable is non-interest bearing and IPR agreed to make payments up to 25% of the proceeds from any private placement or gross profits earned by IPR until the obligation is satisfied. The percentage of the proceeds to be paid is at the sole discretion of IPR’s Chief Executive Officer and the ex-Chief Executive Officer of the Company based on the liquidity of the Company.
Effective Interest Rate
During the year ended December 31, 2020 and 2019, the Company’s effective interest rate was 37% and 95% respectively.
Note 6 - Shareholders’ Deficit
Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock which have been designated as follows:
Number of Shares Authorized Number of Shares Outstanding at December 31, 2020 Par Value Liquidation Value per Share
Series AA 1,000,000 25,000 $ 0.0010 -
Preferred Series B 50,000 $ 0.0001
Preferred Series C 8,000 $ 0.0001 1,000
Preferred Series D 20,000 $ 0.0001 1,000
Undesignated 3,922,000 - - -
Series AA Preferred Shares
On February 22, 2013, the Board of Directors of the Company authorized an amendment to the Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”), in the form of a Certificate of Designation that authorized the issuance of up to one million (1,000,000) shares of a new series of preferred stock, par value $0.001 per share, designated “Series AA Super Voting Preferred Stock,” for which the board of directors established the rights, preferences and limitations thereof.
Each holder of outstanding shares of Series AA Super Voting Preferred Stock shall be entitled to one hundred thousand (100,000) votes for each share of Series AA Super Voting Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company. As of December 31, 2020, and 2019, there were and 25,000 shares of Series AA Preferred stock outstanding.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Series B Convertible Preferred Stock
On February 7, 2017, the Company filed a certificate of designation for 50,000 shares of Series B Convertible Preferred Stock designated as Series B (“Series B”) which are authorized and convertible, at the option of the holder, commencing six months from the date of issuance into common shares and warrants. For each share of Series B, the holder, on conversion, shall receive the stated value divided by 75% of the market price on the date of purchase of Series B and a three-year warrant exercisable into up to a like amount of common shares with an exercise price of 150% of the market price as defined in the Certificate of Designation. Dividends shall be paid only if dividends on the Company’s issued and outstanding Common Stock are paid and the amount paid to the Series B holder will be as though the conversion shares had been issued. The Series B holders have no voting rights. Upon liquidation, the holder of Series B, shall be entitled to receive an amount equal to the stated value, $100 per share, plus any accrued and unpaid dividends thereon before any distribution is made to Series C Secured Redeemable Preferred Stock or common stockholders. There has been no activity during the year ended December 31, 2020 and 2019. As of December 31, 2020, and 2019, there are 600 shares of Series B outstanding.
Series C Secured Redeemable Preferred Stock
On December 22, 2017, the Company filed a certificate of designation for 8,000 shares of Series C Secured Redeemable Preferred Stock (“Series C”). Each share of the C Preferred is entitled to receive a $20.00 quarterly dividend commencing March 31, 2018 and each quarter thereafter and is to be redeemed for the stated value, $1,000 per share, plus accrued dividends in cash (i) at the Company’s option, commencing one year from issuance and (ii) mandatorily as of December 31, 2019. Management determined that the Series C should be classified as liability per the guidance in ASC 480 Distinguishing Liabilities from Equity as of December 31, 2019.
On January 29, 2020, the Company filed the amended and restated certificate of designation fort its Series C Secured Redeemable Preferred Stock. The amendment changed the rights of the Series C by (a) removing the requirement to redeem the Series C, (b) removing the obligation to pay dividends on the Series C, (c) Allowing the holders of shares of Series C to convert the stated value of their shares into common stock of the Company at 75% of the closing price of such common stock on the day prior to the conversion. The Series C preferred does not have any rights to vote with the common stock. Upon liquidation, the holder of Series C, shall be entitled to receive an amount equal to the stated value, $1,000 per share, plus any accrued and unpaid dividends thereon before any distribution is made to common stockholders but after distributions are made to holders of Series B.
Management reviewed the guidance in ASC 470-60 Troubled Debt Restructurings and ASC 470-50 Debt Modifications and Extinguishments and concluded that the changes to the terms of the Series C qualified for debt extinguishment and recorded a loss on debt extinguishment totaling approximately $604,000 for the twelve months ended December 31, 2020.
Management determined the fair value of the new instrument based on the guidance in ASC 820 Fair Value Measurement. Management concluded that the preferred stock should not be classified as a liability per the guidance in ASC 480 Distinguishing Liabilities from Equity even though the conversion would require the issuance of variable number of shares since such obligation is not unconditional. Management classified the Series C in permanent equity as of December 31, 2020.
For the years ended December 31, 2020 and 2019, the Company has sold 0 and 94 shares of Series C in units comprised of shares of C Preferred and common stock purchase warrants exercisable into up to 0 and 960 shares of common stock for consideration of $0 and $94,000. The warrants resulted in a debt discount after amortization of $0 and $776 at December 31, 2020 and 2019, respectively, and are recorded as a discount to the preferred stock liability on the consolidated balance sheets.
During the twelve months ended December 31, 2020, the Company converted 1,051 shares of Series C into 2,754,822 shares of common stock. As of December 31, 2020, and 2019, there were 763 and 1,814 shares of Series C outstanding.
Series D Convertible Preferred Stock
On November 11, 2019, the Company filed a certificate of designation for 20,000 shares of Series D Convertible Preferred Stock designated as Series D (“Series D”), which are authorized and convertible, at the option of the holder, at any time from the date of issuance, into shares of common shares. On or prior to August 1, 2020, for each share of Series D, the holder, on conversion, shall receive a number of common shares equal to 0.01% of the Company’s issued and outstanding shares on conversion date and for conversion on or after August 2, 2020, the holder shall receive conversion shares as though the conversion date was August 1, 2020, with no further adjustments for issuances by the Company of common stock after August 1, 2020, except for stock split or reverse stock splits of the common stock.
The Series D holders have no voting rights. Upon liquidation, the holder of Series D, shall be entitled to receive an amount equal to the stated value, $1,000 per share, plus any accrued and unpaid dividends thereon before any distribution is made to common stockholders. During the years ended December 31, 2020 and 2019, 50 and 255 shares of Series D have been issued. As of December 31, 2020, and 2019, there are 305 and 255 shares of Series D outstanding.
Common Stock
On December 31, 2018, we entered into a non-transferrable Investment Agreement whereby the investor committed to purchase up to $10,000,000 of our common stock, over the course of 36 months. The aggregate number of shares issuable by us and purchasable by the investor under the Investment Agreement is 81,250. A registration statement for the sale of our common stock related to the Investment Agreement went effective on February 11, 2019.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
We may draw on the facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Investment Agreement. The maximum amount that we are entitled to put in any one notice is the greater of: (i) 200% of the average daily volume (U.S. market only) of the common stock for the three (3) trading days prior to the date of delivery of the applicable put notice, multiplied by the average of the closing prices for such trading days or (ii) $100,000. The purchase price shall be set at ninety-four percent (94%) of the lowest daily VWAP of our common stock during the Pricing Period. However, if, on any trading day during a Pricing Period, the daily VWAP of the common stock is lower than the floor price specified by us in the put notice, then we will withdraw that portion of the put amount for each such trading day during the Pricing Period, with only the balance of such put amount above the minimum acceptable price being put to the investor. There are put restrictions applied on days between the put notice date and the closing date with respect to that particular put. During such time, we are not entitled to deliver another put notice.
There are circumstances under which we will not be entitled to put shares to the investor, including the following:
● we will not be entitled to put shares to the investor unless there is an effective registration statement under the Securities Act to cover the resale of the shares by the investor.
● we will not be entitled to put shares to the investor unless our common stock continues to be quoted on the OTCQB market or becomes listed on a national securities exchange.
● we will not be entitled to put shares to the investor to the extent that such shares would cause the investor’s beneficial ownership to exceed 4.99% of our outstanding shares; and
● we will not be entitled to put shares to the investor prior to the closing date of the preceding put.
In connection with the preparation of the Investment Agreement and the registration rights agreement, we incurred fees of $20,000.
In no event will we be obligated to register for resale more than $10,000,000 in value of shares of common stock, or 81,250 shares.
During the year ended December 31, 2020 and 2019, the Company issued 0 and 17,900 shares of common stock in exchange for $0 and $168,343 cash, respectively, pursuant to the Investment Agreement.
On May 29, 2020, the Company filed a post-effective amendment on Form RW removing from registration all of the remaining unsold securities with respect to Amendment Number 1 to Registration Statement on Form S-1 filed January 8, 2019 Registration No. 333-229146 and ordered effective February 11, 2019. The shares removed from registration include all remaining shares under the Equity Line Purchase Agreement.
On May 18, 2020, the Company and Cavalry Fund I LP (the “investor”) entered into an Equity Line Purchase Agreement (“ELPA”) pursuant to which the investor committed to purchase, subject to certain restrictions and conditions, up to $10,000,000 (the “Commitment”) worth of the Company’s common stock, over a period of 24 months from the effectiveness of the registration statement registering the resale of shares purchased by the investor pursuant to the ELPA.
The Company agreed to issue shares of its common stock (the “commitment shares”) to the investor having a market value of 5% of the commitment ($500,000 and 3,859,630 shares) based on the market price of the shares at the execution of the ELPA to be delivered in three tranches of 385,963 shares on: (i) the execution of the ELPA; (ii) thirty days after the effectiveness of the registration statement to be filed under the RRA (the “registration right agreement” or the “registration statement”), and (iii) 90 trading days after the effectiveness of the registration statement with the balance of the commitment shares to be issued pro-rata over the first $3,000,000 of puts in accordance with a formula set forth in the ELPA.
The ELPA provides that at any time after the effective date of the registration statement and provided the closing sale price of the common shares on the OTCQB is not below $0.01, from time to time on any business day selected by the Company (the “Purchase Date”), the Company shall have the right, but not the obligation, to direct the investor to buy up to 300,000 shares of the common stock (the “regular purchase amount”) at a purchase price equal to the lower of: (i) the lowest applicable sales price on the date of the put and (ii) 85% of the arithmetic average of the 3 lowest closing prices for the common stock during the 10 consecutive trading days ending on the trading day immediately preceding such put date. The regular purchase amount may be increased as follows: to up to 400,000 shares of common stock if the closing price of the common shares is not below $0.25 per share and up to 500,000 shares if the closing price is not below $0.40 per share.
Under the ELPA the Company has the right to submit a regular purchase notice to the investor as often as every business day. The payment for the shares covered by each put notice will generally occur on the day following the put notice. The ELPA contains provisions which allow for the Company to make additional puts beyond the regular purchase amount at greater discounts to the market price of the common stock as forth in the ELPA.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The ELPA requires the Company to apply at least 50% of the proceeds of puts to the payment of certain variable rate convertible notes issued by the Company.
During the twelve months ended December 31, 2020, pursuant to the execution of the ELPA, the Company issued 771,926 shares of common stock with a fair value of $97,920. The Company does not anticipate that it will raise any funds under the ELPA.
During the year ended December 31, 2020 and 2019, the Company issued 14,557,343 and 728,057 shares of common stock, respectively, for the conversion of notes and accrued interest for aggregate fair value of issued common stock of $3,339,109 and $7,533,318, respectively.
During the year ended December 31, 2020 and 2019, the Company issued 1,206,398 and 10,340 shares of common stock with a value of $109,800 and $159,850 related to services, respectively.
During the year ended December 31, 2020 and 2019, the Company issued 0 and 753 shares of common stock valued at $0 and $12,121, respectively, related to the extension of outstanding notes and lock-up agreements;0 and 1,091 shares valued at $26,545 were issued as additional consideration for the issuance of two promissory notes totaling $0 and $336,000, respectively.
During the year ended December 31, 2020, the Company issued 1,234,568 shares of common stock in exchange for $100,000 cash pursuant to Securities Purchase Agreements. During the year ended December 31, 2019, the Company issued 17,900 shares of common stock in exchange for $168,343 cash pursuant to Securities Purchase Agreements.
During the year ended December 31, 2020, the Company issued 1,500,000 shares of common stock for total value of $165,000 in exchange for 34,690 stock options regarding the ambiguity of price adjustment in the event of a reverse split that the Company completed on December 20, 2019.
During the year ended December 31, 2020, the Company issued 58,428 shares of common stock to Series C with a value of $8,152 to induce the holders to convert into shares of common stock.
During the year ended December 31, 2020, the Company issued 2,754,822 shares of common stock with a value of $1,400,934, related to the conversion of Series C.
During the year ended December 31, 2020, the Company modified the terms of its promissory note with one investor, which extended the maturity date of its promissory note and the issuance of 500,000 restricted stock with a fair value of $55,000. The recorded of this transaction resulted in a loss on debt extinguishment of $55,000 per ASC 470-60 Troubled Debt Restructurings.
During the year ended December 31, 2020, in connection with the issuance of a new self-amortization promissory note, the Company issued 355,000 restricted shares as inducement with a fair value of $24,140.
During the year ended December 31, 2020, the Company issued 409,000 shares with a value of $58,855 to one investor to exchange one variable convertible note with remaining principal of $283,000 past maturity for a fix rate convertible note with principal of $525,000 and maturing one year from issuance. The Company recorded a loss on debt extinguishment of $151,496 for the fair value of the shares issued in accordance with guidance in ASC 470-50 Debt- Modifications and Extinguishments.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Stock Options
During the year ended December 31, 2020, the Company granted stock options to independent contractor exercisable into up to 3,000,000 shares of common stock with an exercise price of $ 0.15 per share and expiration date of 2 years from the vesting date. The options shall vest in twelve equal quarterly installments so long as the contractor remains under retention by the Company to provide service. The stock options will vest in twelve equal installments of 250,000 shares. These options were valued at approximately $245,900 using the Black Scholes option pricing model.
During the year ended December 31, 2019, the Company granted stock options to the Company’s Chief Medical Officer, exercisable into up to 5,280 shares of common stock with an exercise price of from $11.60 per share, and a weighted average remaining life of 3.38 years. These stock options were valued at $76,532 using the Black Scholes option pricing model. The stock options will vest in eight equal quarterly installments of 660 shares. 1,980 options are vested and exercisable in shares of common stock as of December 31, 2020. Per the terms of the agreement, the Company forfeited the 3,300 remaining options due to termination of employment.
Share-based compensation expense for the years ended December 31, 2020, and 2019, totaled $57,400 and $31,012, respectively. At December 31, 2020, the total unrecognized deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 29 months for outstanding grant was approximately $198,060.
The weighted average grant date fair value of stock options issued during the years ended December 31, 2020 and 2019 were $0.08 and $14.49 per share, respectively.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Stock option activities for the years ended December 31, 2020 and 2019 are as follows:
Options Weighted
Average
Exercise Price
Per Share Weighted
Average
Remaining
Contractual
Term (years) Aggregate
Intrinsic
Value
Outstanding at January 1, 2019 94,553 $ 28.71 2.94 $ -
Granted 5,280 $ 11.60 3.38
Cancelled - $ -
Exercised - $ -
Outstanding at December 31, 2019 99,833 $ 27.81 2.02 $ -
Granted 3,000,000 $ 0.15 1.65
Cancelled (85,753 ) $ 23.53 0.68
Exercised - $ -
Outstanding at December 31, 2020 3,014,080 $ 0.37 1.67 $ -
Exercisable at December 31, 2020 514,080 $ 1.46 1.76 $ -
The balance of all stock options outstanding as of December 31, 2020 is as follows:
Outstanding Exercisable
Weighted
Average Weighted
Weighted
Range of
Remaining Average
Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
Options
$ 54.00 11,750 6.30 $ 54.00 11,750 $ 54.00
$ 47.00 0.12 $ 47.00 $ 47.00
$ 11.60 1,980 1.75 $ 11.60 1,980 $ 11.60
$ 0.15 3,000,000 1.65 $ 0.15 500,000 $ 0.15
3,014,080 1.67
514,080 $ 1.76
On June 11, 2020, the Board of Directors approved the issuance of 74,668,000 non-incentive stock options to officers, directors, and key consultants. The key terms and conditions of the award have not been mutually understood and agreed upon, as a result, the Company has not recognized stock compensation for such awards for the year ended December 31, 2020.
Warrants
During the year ended December 31, 2020, the Company did not issue any warrants. During the year ended December 31, 2019, in conjunction with the conversion of fixed rate promissory notes into Preferred C stock, the Company issued two-year common stock purchase warrants to acquire up to 960 shares of common stock with exercise prices ranging from $14.50 to $27.90 per share.
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
A summary of the status of the warrants granted under these agreements at December 31, 2020, and changes during the years ended December 31, 2020 and 2019 are presented below:
Outstanding Warrants
Weighted Average
Exercise Price
Shares Per Share
Outstanding at January 1, 2019 77,551 $ 297.92
Granted $ 19.53
Cancelled (5,025 ) $ 122.46
Exercised - $ -
Outstanding at December 31, 2019 73,486 $ 306.28
Granted - $ -
Cancelled (33,920 ) $ 404.55
Exercised (271 ) $ 44.35
Outstanding at December 31, 2020 39,295 $ 200.72
Exercisable at December 31, 2020 39,295 $ 200.72
Outstanding
Exercisable
Weighted
Average
Weighted
Weighted
Range of
Remaining
Average
Average
Exercise
Number
Contractual
Exercise
Number
Exercise
Prices
Outstanding
Life
Price
Exercisable
Price
Warrants
$ 14.50-50.00
11,286
1.26
$ 31.53
11,286
$ 31.53
$ 51.00-100.00
16,078
1.02
$ 75.59
16,078
$ 75.59
$ 101.25-239.00
4,765
0.82
$ 174.66
4,765
$ 174.66
$ 255.00-480.00
1,062
0.55
$ 320.22
1,062
$ 320.22
$ 562.30-1,000.00
6,104
0.23
$ 842.61
6,104
$ 842.61
39,295
0.93
$ 200.71
39,295
$ 200.72
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note 7 - Related Party and former Related Parties Transactions
One executive officer, one former executive and one former operational manager of the Company have agreed to defer a portion of their compensation until cash flow improves. As of December 31, 2020, and 2019, the balances of their deferred compensation was $1,240,575 and $898,475, which reflects $535,000 accrual of deferred compensation and $192,900 cash repayments of deferred compensation during the year ended December 31, 2020 and $650,000 accrual of deferred compensation, $684,675 cash repayments during the year ended December 31, 2019.
From time-to-time officers of the Company advance monies to the Company to cover costs. During the years ended December 31, 2020 and 2019, officers and operational manager advanced $30,074 and $27,130 of funds to the Company of which $23,545 and $14,722 were repaid during the years then ended. Also, during the years ended December 31, 2020 and 2019 accrued interest was repaid in an amount of $0 and $17,000, respectively. The balance of short-term advances due to one officer and executive of the Company at December 31, 2020 and 2019 was $6,529 and $5,236, respectively and is included in the Company’s accounts payable balance as of December 31, 2020.
At December 31, 2020 and 2019, notes payable remain outstanding to the former President of the Company, in the amounts of $143,000 and $165,000, respectively. At December 31, 2020 and 2019, accrued interest on these notes payable totaled $54,271 and $38,389, respectively, and are included in accrued expenses on the consolidated balance sheets.
Note 8 - Income taxes
The Company files income tax returns with the Internal Revenue Service (“IRS”) and various state jurisdictions. For jurisdictions in which tax filings are prepared, the Company is subject to income tax examinations by state tax authorities and federal tax authorities for all tax years.
The deferred tax assets are mainly comprised of net loss carryforwards. As of December 31, 2020, the Company had approximately $26,900,000 of federal net operating loss carryforwards, that it can use to offset a certain amount of taxable income in the future. Some of these federal net operating loss carryforwards begin to expire in 2030. The resulting deferred tax asset is offset by a 100% valuation allowance due to the uncertainty of its realization. Utilization of these net operating losses could be limited under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and similar state laws based on ownership changes and the value of the Company’s stock.
A reconciliation of the provision for income tax expense with the expected income tax computed by applying the federal statutory income tax rate to income before provision for income taxes was as follows for the years ended December 31, 2020 and 2019:
Income tax computed at federal statutory rate -21.0 % -21.0 %
State taxes, net of federal benefit -7.1 % -7.1 %
Non-Deductible expenses 15.0 % 15.0 %
Change in valuation allowance 13.1 % 13.1 %
Total 0.0 % 0.0 %
Endonovo Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The primary difference between income tax expense attributable to continuing operations and the amount of income tax expense that would result from applying domestic federal statutory rates to income before provision for income taxes relates to the change in the valuation allowance.
The Company has adopted the accounting standards that clarify the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities. Our policy is to include interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties totaled $0 for the years ended December 31, 2020 and 2019.
Note 9 - Commitments and Contingencies
Legal matters
The Company is a defendant in a case brought by Auctus Fund, LLC seeking to enforce a variable rate dated in August 2019 which was in the original amount of $275,250 and claiming damages in excess of $500,000, other unspecified damages and attorney fees. The Company is vigorously defending the action and as filed an answer with counterclaims. While the matter is in its early stages and there are always uncertainties in litigation, management does not believe that the litigation will have a result significantly averse to the Company.
The Company may become involved in various legal proceedings in the normal course of business.
Note 10 - Concentrations.
Sales
During the year ended December 31, 2020, we had two significant customers which accounted for 36%, 20% of sales. During the year ended December 31, 2019, we had three significant customers which accounted for 7.2%, 7.5% and 23.7% of sales.
Supplier
We also have a single source for our bioelectric medical devices, which account for 100% of our sales. The interruption of products provided by this supplier would adversely affect our business and financial condition unless an alternative source of products could be found.
Accounts Receivable
At December 31, 2020, we had two customers which accounted for 67%, 33% of our accounts receivable balances. At December 31, 2019, we had three customers which accounted for 37%, 33% and 16% of our accounts receivable balances.
Note 11 - Subsequent Events.
Subsequent to December 31, 2020, an aggregate of 19,739,112 shares of restricted common stock were issued on the conversion of $260,700 of principal and $84,034 of accrued interest pursuant to Variable Notes.
Subsequent to December 31, 2020, the Company received $126,000 of cash from the issuance of 7,000,000 shares of common stock.
Subsequent to December 31, 2020, the Company issued 2,300,334 as inducement for the execution of convertible promissory notes at no consideration.
Subsequent to December 31, 2020, the Company received $250,000 of cash from the issuance of convertible notes with principal amount of $250,000.
As a result of these issuances, the total number of common shares outstanding is 53,576,135, Preferred B shares outstanding is 600, Preferred C shares outstanding is 763 and Preferred D shares outstanding is 305.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Disclosure of controls and procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As required by the SEC Rule 13a-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2020 at the reasonable assurance level due to the material weaknesses described below.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses which have caused management to conclude that as of December 31, 2020 our disclosure controls and procedures were not effective at the reasonable assurance level:
1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the year ended December 31, 2020. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the authorization of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. The recording of transactions function is maintained by a third-party consulting firm whereas authorization and custody remains under the Company’s Chief Executive Officer’s responsibility. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer.
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the issuer; and
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of the end of our most recent fiscal year, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that as of December 31, 2020, such internal control over financial reporting was not effective. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal control over financial reporting that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives of having segregation of the initiation of transactions, the recording of transactions and the custody of assets; and (3) lack of communication between management and external accounting personnel. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of December 31, 2020.
Management believes that the material weaknesses set forth in items (1) and (2) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only the management’s report in this annual report.
Management’s Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures: we will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. First, we will create a position to segregate duties consistent with control objectives of having separate individuals perform (i) the authorization of transactions, (ii) the recording of transactions and (iii) the custody of assets. Second, we will create a senior position to focus on financial reporting and standardizing and documenting our accounting procedures with the goal of increasing the effectiveness of the internal controls in preventing and detecting misstatements of accounting information. Third, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us. Lastly, we will improve channels of communication between management and accounting through regularly scheduled monthly meetings. We anticipate the costs of implementing these remediation initiatives will be approximately $50,000 to $100,000 a year in increased salaries, legal and accounting expenses.
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.
Changes in internal controls over financial reporting.
There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
On April 3, 2013, the Company filed an amendment to the Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”), in the form of a Certificate of Designation that authorized the issuance of up to one million (1,000,000) shares of a new series of preferred stock, par value $0.001 per share, designated “Series AA Super Voting Preferred Stock,” for which the board of directors established the rights, preferences and limitations thereof.
The Company’s board of directors authorized the Series AA Super Voting Preferred Stock pursuant to the authority given to the board under the Articles of Incorporation, which authorizes the issuance of up to 5,000,000 shares of preferred stock, par value $0.001 per share, and authorized the board, by resolution, to establish any or all of the unissued shares of preferred stock, not then allocated to any series into one or more series and to fix and determine the designation of each such shares, the number of shares which shall constitute such series and certain preferences, limitations and relative rights of the shares of each series so established.
Each holder of outstanding shares of Series AA Super Voting Preferred Stock shall be entitled to one hundred thousand (100,000) votes for each share of Series AA Super Voting Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company.
The summary of the rights, privileges and preferences of the Series AA Super Voting Preferred Stock described above is qualified in its entirety by reference to the Certificate of Designation as filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
Past maturity Notes
Due to its limited resources, the Company has not been able to pay certain promissory notes when due. As of December 31, 2020, there are $6,835,196 in existing notes with an aggregate principal of $3,381,149 which are beyond their maturity date. Management believes that the Company may have valid defenses as to some of the promissory notes and will be able to modify some of these notes if requested by the holders to do so and otherwise avoid any default.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth the name and age of officers and director. Our Executive officers are elected annually by our Board of Directors. Our executive officers hold their offices until they resign, are removed by the Board, or his successor is elected and qualified.
Name
Age
Position
Alan Collier
Director, Chief Executive Officer, Interim Chief Financial Officer, and Secretary
Michael Mann
Former President (retired on February 28, 2019)
Biographies
Alan Collier has been the Chief Executive Officer, Secretary, and a director of the Company Since March 2012. Mr. Collier has more than twenty (20) years of experience in finance, telecommunications, and consumer products. Over the progression of his career, he has specialized in the development and financing of early stage, high growth, and acquisitive companies (public and private). He has structured, participated in, and completed numerous transactions including mergers and acquisitions, equity and debt placements, capital restructuring, joint venture development, and channel partner procurement. Additionally, Mr. Collier was a Senior Managing Director at Mid-Market Securities, a FINRA-registered Broker-Dealer. He is also the co-founder and a Managing Member of C2 Capital, LLC, which provides management consulting services to companies preparing to go public. Prior to joining Mid-Market Securities, Mr. Collier was a Managing Director of Mosaic Capital and co-managed its Capital Markets Group at Mosaic Capital. He was previously a Vice President at Corporate Capital Group and Managing Director and CEO of Greenbridge Capital Group. He has held numerous board and executive positions throughout his career.
Michael Mann has been the President since January 2014. Mr. Mann was the Vice President of Shareholder Relations from March 2012 to January 2014 for the Company, and he brings significant related experience in business operations and corporate finance. From 2008 to March 2012, Mr. Mann has served as the President and Chief Executive Officer of Hanover Portfolio Acquisitions, Inc. formerly known as Hanover Asset Management, Inc. Immediately prior thereto, Mr. Mann was the Founder, President, and Chief Executive Officer of U.S. Debt Settlement, Inc., a company listed on the Frankfurt Stock Exchange. Mr. Mann had personally overseen the growth and development of U.S. Debt Settlement since 2003. From January 2002 to July 2003, Mr. Mann was the Chief Executive Officer of Shared Vision Capital, a boutique investment banking firm that assisted emerging companies with early seed capital and bridge loans. From October 1998 through December 2001, Mr. Mann was the Vice President of Investor Relations for JuriSearch.com, an online legal research platform. During his tenure with JuriSearch.com, Mr. Mann was directly responsible for financing for the company’s growth and development. In addition, Mr. Mann founded and served as the president of Universal Pacific Communications, a privately-owned telecommunications company. Under his leadership, Universal Pacific developed a fiber optic disaster recovery telecommunications network. Michael Mann retired from his position of President on February 28, 2019.
Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
Code of Ethics
We do not have a code of ethics that applies to our officers, employees and directors.
Corporate Governance
The business and affairs of the company are managed under the direction of our board. We have a board consisting of one member. In addition to the contact information in this annual report, each stockholder will be given specific information on how he/she can direct communications to the officers and our director of the corporation. All material communications from stockholders are relayed to our board.
Role in Risk Oversight
Our board is primarily responsible for overseeing our risk management processes. The board receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The board focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks undertaken by our company are consistent with the board’s appetite for risk. While the board oversees our company’s risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure supports this approach.
Section 16(a) Beneficial Ownership Reporting Compliance
We became subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (“34 Act”) on June 15, 2015 when we filed a Form 8-A. Our officers and director have made appropriate filings under Section 16(a) of the Exchange Act, although on two occasions, Mr. Mann filed his Form 4 a few days late. These instances involved reporting of open market purchases and did not involve any short swing profits.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
The following executives of the Company received compensation in the amounts set forth in the chart below for the fiscal years ended December 31, 2020, and 2019. No other item of compensation was paid to any officer or director of the Company other than reimbursement of expenses.
Summary Compensation Table
Name and Principal Position Fiscal Year Salary ($) Bonus ($) Stock Awards ($) All Other Compensation ($) Total ($)
Alan Collier, CEO, Interim $ 300,000 $ - $ - $ - $ 300,000
CFO, Secretary and Director (*) $ 300,000 $ 15,000 $ - $ - $ 315,000
Michael Mann, Former $ - $ - $ - $ - $ -
President (retired on 2/28/2019) (*) $ 45,000 $ - $ - $ - $ 45,000
(*) Salary information as reflected above represents compensation earned but not paid based on terms of consulting agreements. The Company’s Chief Executive was paid $99,000 as compensation and receive $10,000 of expenses reimbursement during the year ended December 31, 2020.
(*) Salary information as reflected above represents compensation earned but not paid based on terms of consulting agreements.
Outstanding Equity Awards at Fiscal Year-End Table
Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Option
Exercise Price
($) Option
Expiration Date
Alan Collier, CEO, Interim 5,000 - $ 54.00 4/17/2027
CFO, Secretary and Director
Compensation of Directors
The directors receive no compensation for serving as directors. However, the Company may reimburse its directors for any out-of-pocket cost reasonably incurred to attend a Board meeting.
Compensation Agreements
All of the new officers pursuant to the terms of the Share Exchange Agreement dated March 14, 2012 have agreed to accrue and defer payment of their compensation until the Company has generated sufficient financing proceeds or revenue to pay such compensation. Initially, Messrs. Collier and Mann each received compensation of $10,000 per month which has increased to $25,000 and $22,500 per month, respectively. No compensation was provided for Michael Mann (former President of the Company) during the year ended December 31, 2020. Mr. Mann has been acting as an advisor since he retired on February 28, 2019.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information regarding our shares of common stock beneficially owned as of April 8, 2021, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.
For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of April 8, 2021. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of April 8, 2021 is deemed to be outstanding but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise specified, the address of each of the persons set forth below is care of the company at the address of 6320 Canoga Avenue, 15th Floor Woodland Hills, CA 91367.
Name of Beneficial Owner Amount of Beneficial Ownership
(1)
Percent of Ownership
(2)
Alan Collier 31,219 0.13 %
All officers and directors as a group (1 person) 31,219 0.13 %
(1)
This includes common shares controlled by Mr. Collier, acting Chief Executive Officer and interim Chief Financial Officer
(2)
Based on shares of common stock outstanding as of December 31, 2020

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
On March 31, 2014, the Company issued a promissory note to Michael Mann (former President) for a principal amount of $70,000. The Note carries an interest rate of 14% per annum and a maturity date of September 30, 2017 with interest due monthly. The note was fully paid as of December 31, 2019.
On October 29, 2014, the Company issued a promissory note to Michael Mann (former President) for a principal amount of $50,000. The Note carries an interest rate of 12% per annum and a maturity date of October 29, 2017 with interest due monthly. On September 29, 2019, the maturity date of the promissory note was extended to December 31, 2019. The note was fully paid as of December 31, 2020.
On February 10, 2015, the Company issued a promissory note to Michael Mann (former President) for a principal amount of $50,000. The Note carries an interest rate of 12% per annum and a maturity date of June 4, 2015 with interest due monthly. On September 29, 2019, the maturity date of the promissory note was extended to December 31, 2019. As of December 31, 2020, the Company has a remaining principal balance of $43,000.
On December 21, 2017, the Company issued a promissory note to Michael Mann (former President) for a principal amount of $100,000. The Note carries an interest rate of 10% per annum and a maturity date of March 22, 2018 with interest due monthly. On September 29, 2019, the maturity date of the promissory note was extended to December 31, 2019. As of December 31, 2020, the Company has a remaining principal balance of $100,000.
The outstanding notes to Mr. Mann equal $143,000 at December 31, 2020. In the opinion of management, these notes were on terms no less favorable to the lenders than the Company might have obtained from an unaffiliated party.
Director Independence
We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
● the director is, or at any time during the past three years was, an employee of the company;
● the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
● a family member of the director is, or at any time during the past three years was, an executive officer of the company;
● the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient ‘ s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
● the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
● the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
Mr. Alan Collier is not considered independent because he is the Company’s Chief Executive Officer and acting Chief Financial Officer.
We do not currently have a separately designated audit, nominating or compensation committee.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
Audit Fees
For the Company’s fiscal years ended December 31, 2020 and 2019, we were billed approximately $98,500 and $87,315, respectively, for professional services rendered for the audit and review of our financial statements.
Audit Related Fees
There were no fees for audit related services for the years ended December 31, 2020 and 2019.
Tax Fees
For the Company’s fiscal years ended December 31, 2020 and 2019, we were billed approximately $9,245 and $9,900 for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
For the Company’s fiscal years ended December 31, 2020 and 2019, we were billed approximately $11,000 and $0, respectively, for professional services rendered in connection with our registration statement.
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2020 and 2019.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
● approved by our audit committee; or
● entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.
We do not have an audit committee. Our board of directors pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees was pre-approved. However, all of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
(a) The following documents are filed as part of this report:
(1) Financial Statements and Report of Independent Registered Public Accounting Firm, which are set forth in the index to Consolidated Financial Statements of this report.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders’ Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule: None.
(3) Exhibits
EXHIBIT NUMBER
DESCRIPTION
2.1
Share Exchange Agreement. Incorporated by reference to the current report on Form 8-K filed with the Securities and Exchange Commission on March 21, 2012. Incorporated by reference from exhibit 2.1 to our annual financial statements on Form 10-K filed with the SEC on May 4, 2020.
3.1
Articles of Incorporation. Incorporated by reference to the registration statement filed with the Securities and Exchange Commission on September 22, 2011.
3.2
By-Laws. Incorporated by reference to the registration statement filed with the Securities and Exchange Commission on September 22, 2011.
3.3
Agreement and Plan of Merger (Delaware reincorporation). Incorporated by reference to the registration statement filed with the Securities and Exchange Commission on September 22, 2011.
3.4
Certificate of Designation (Super AA Voting Preferred). Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2012
3.5
Articles of Amendment -Name Change. Incorporated by reference to Exhibit 3.1 to Form 8-K filed with the Securities and Exchange Commission on January 24, 2014.
3.6
Articles of Amendment - Increase Authorized Shares. Incorporated by reference to Exhibit 3.1 to Form 8-K filed with the Securities and Exchange Commission on January 24, 2014.
3.7
Articles of Amendment - Reverse Stock Split. Incorporated by reference to Exhibit 3.7 to Form S-1 amendment filed with the Securities and Exchange Commission on October 6, 2016.
3.8
Certificate of Designation Series B Preferred Stock. Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission February 10, 2017.
3.9
Certificate of Designation Series C Preferred Stock. Incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed with the Securities and Exchange Commission December 26, 2017.
3.10
Articles of Amendment Authorizing additional Shares. Incorporated by reference to Exhibit 3.1 to Form 8-K filed with the Securities and Exchange Commission on September 18, 2018.
4.1
Specimen Common Stock Certificate. Incorporated by reference to like numbered Exhibit to Registration on Form S-1 amendment filed on June 10, 2016.
10.1
Investment Agreement by and between the Company and Azure Capital, dated as of December 31, 2018. Incorporated by reference to like numbered exhibit to Current Report on Form 8-k filed with the Securities Exchange Commission on January 3, 2018.
10.2
Registration Rights Agreement by and between the Company and Azure Capital, dated as of December 31, 2018. Incorporated by reference to like numbered exhibit to Current Report on Form 8-k filed with the Securities Exchange Commission on January 3, 2018.
10.3
Acquisition Agreement between the Company and We Heal Animals, Inc. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed November 19, 2013
10.4
Settlement and Mutual Release, effective November 22, 2018, between the Company and Rio Grande Neurosciences, LLC. Incorporation by reference to Exhibit 10.1 to current report on Form 8-K filed with the Securities and Exchange Commission on December 26, 2017.
10.5
Exchange Agreement dated as of November 30, 2018, between the Company and Eagle Equities, LLC. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities Exchange Commission on December 7, 2018.
10.6
Secured $1,500,000 Convertible Promissory Note, dated as of November 30, 2018, issued by the Company and Eagle Equities, LLC. Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities Exchange Commission on December 7, 2018.
31.1
Certification of Chief Executive and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.PRE*
XBRL Taxonomy Presentation Linkbase
In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
*
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of this annual report or purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.