Electromedical Technologies, Inc 10-Q for FY2023 Q2

Electromedical Technologies, Inc (EMED)

10-Q 2023-08-21 For: 2023-06-30

Added on April 06, 2026

About this 10-Q

Electromedical Technologies, Inc filed this 10-Q on August 21, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $294.95K; up 30.9% from $225.25K a year earlier
Net loss: $1.46M; compared with a net loss of $535.93K a year earlier
Diluted EPS: $0.00; compared with $0.00 a year earlier

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16561 N. 92^nd Street, Ste. 101
Scottsdale, AZ	85260
(Address of principal executive offices)	(Zip Code)

Title of Each Class		Trading Symbol(s)		Name of each Exchange on which Registered
Common Stock		EMED		None

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


PART I. FINANCIAL INFORMATION

Item 1.	UNAUDITED FINANCIAL STATEMENTS:	3

	BALANCE SHEETS AS OF JUNE 30, 2023 AND DECEMBER 31, 2022	3

	STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022	4

	STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022	6

	STATEMENTS OF CASH FLOWS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022	7

	NOTES TO THE UNAUDITED FINANCIAL STATEMENTS	8

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23

Item 4.	CONTROLS AND PROCEDURES	23

PART II. OTHER INFORMATION		25

Item 1.	LEGAL PROCEEDINGS	25

Item 1A.	RISK FACTORS	25

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	25

Item 3.	DEFAULTS UPON SENIOR SECURITIES	40

Item 4.	MINE SAFETY DISCLOSURE	40

Item 5.	OTHER INFORMATION	40

Item 6.	EXHIBITS	40

SIGNATURES		43


	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	416,256	$	368,425
Accounts receivable		25,788		9,444
Inventories		113,151		62,061
Prepaid expenses and other current assets		326,801		207,872
Total current assets		881,996		647,802

Property and equipment, net		149,705		705,469
Total assets	$	1,031,701	$	1,353,271

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Accounts payable	$	269,498	$	266,744
Credit cards payable		20,769		37,633
Accrued expenses and other current liabilities		663,604		1,065,483
Customer deposits		237,650		217,588
Convertible promissory notes, net of discount of $0 and $375,865, respectively		1,412,601		1,304,909
Long term debt, current portion		—		31,818
Derivative liabilities- convertible promissory notes		549,604		—
Total current liabilities		3,153,726		2,924,175

Long-term liabilities:
Bank debt, net of current portion		—		489,707
Government debt, net of current portion		150,000		150,000
Other liabilities		9,998		10,234
Total liabilities		3,313,724		3,574,116

Commitments and contingencies (Note 10)		—		—

Stockholders’ deficit
Series A Preferred Stock, $.00001 par value, 1,000,000 shares authorized and outstanding		365,000		365,000
Series B Preferred Stock, $.00001 par value, 1 share authorized and 1 and 0 shares outstanding at June 30, 2023 and December 31, 2022, respectively		400,000		—
Common stock, $.00001 par value, 1,999,000,000 and 999,000,000 shares authorized; 432,493,896 and 189,784,529 shares outstanding at June 30, 2023 and December 31, 2022, respectively		4,323		1,896
Additional paid-in-capital		23,693,025		22,237,300
Accumulated deficit		(26,744,371)		(24,825,041)
Total stockholders’ deficit		(2,282,023)		(2,220,845)
Total liabilities and stockholders’ deficit	$	1,031,701	$	1,353,271


	THREE MONTHS ENDED JUNE 30,				SIX MONTHS ENDED JUNE 30,
	2023		2022		2023		2022
Net sales	$	294,954	$	225,251	$	673,600	$	447,145

Cost of sales		62,519		45,335		150,215		112,976

Gross profit		232,435		179,916		523,385		334,169

Selling, general and administrative expenses		573,838		463,179		2,126,326		1,342,989

Loss from operations		(341,403)		(283,263)		(1,602,941)		(1,008,820)

Other income (expense)
Interest expense		(284,487)		(136,468)		(672,688)		(349,847)
Gain on sale of fixed asset		—		—		1,193,676		—
Change in fair value of derivative liabilities		(126,958)		—		(126,958)		—
Loss on derivative liabilities		(366,958)		—		(366,958)		—
Other expense		(340,000)		—		(340,000)		—
Loss on extinguishment of debt		—		(116,200)		—		(321,800)
Total other expense		(1,118,403)		(252,668)		(312,928)		(671,647)

Net loss	$	(1,459,806)	$	(535,931)	$	(1,915,869)	$	(1,680,467)
Deemed dividend related to warrant resets		(3,461)		—		(3,461)		(63,381)
Net loss attributable to common stockholders	$	(1,463,267)	$	(535,931)	$	(1,919,330)	$	(1,743,848)

Weighted average shares outstanding - basic and diluted		335,001,567		114,596,514		288,045,553		105,976,603
Weighted average loss per share - basic and diluted	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.02)


														Total
	Series A Preferred Stock			Series B Preferred Stock			Common Stock			Paid in		Accumulated		Stockholders’
	Amount		Shares	Amount		Shares	Amount		Shares	Capital		Deficit		Deficit
Balance, December 31, 2022	$	365,000	1,000,000	$	—	—	$	1,896	189,784,529	$	22,237,300	$	(24,825,041)	$	(2,220,845)

Shares issued for consulting services		—	—		—	—		350	35,000,000		314,650		—		315,000

Share issued as CEO compensation		—	—		400,000	1		—	—		—		—		400,000

Shares issued in conjunction with settlement reset		—	—		—	—		461	46,102,156		697,539		—		698,000

Cashless warrant exercises		—	—		—	—		180	18,000,000		(180)		—		—

Trigger warrants issued		—	—		—	—		—	—		160,000		—		160,000

Conversion of convertible promissory note		—	—		—	—		50	5,000,000		49,950		—		50,000

Settlement of stock -based compensation liabilities		—	—		—	—		30	3,000,000		20,970		—		21,000

Net loss		—	—		—	—		—	—		—		(456,063)		(456,063)

Balance, March 31, 2023	$	365,000	1,000,000	$	400,000	1	$	2,967	296,886,685	$	23,480,229	$	(25,281,104)	$	(1,032,908)

Conversion of convertible promissory notes		—	—		—	—		1,315	131,532,211		209,376		—		210,691

Conversion true-up		—	—		—	—		41	4,075,000		(41)		—		—

Warrant reset		—	—		—	—		—	—		3,461		(3,461)		—

Net loss		—	—		—	—		—	—		—		(1,459,806)		(1,459,806)

Balance, June 30, 2023	$	365,000	1,000,000	$	400,000	1	$	4,323	432,493,896	$	23,693,025	$	(26,744,371)	$	(2,282,023)


														Total
	Series A Preferred			Series B Preferred			Common Stock			Paid in		Accumulated		Stockholders’
	Amount		Shares	Amount		Shares	Amount		Shares	Capital		Deficit		Deficit
Balance, December 31, 2021	$	355,000	500,000	$	—	—	$	876	87,725,842	$	20,804,333	$	(21,882,712)	$	(722,503)

Shares issued for consulting services		—	—		—	—		106	10,600,000		356,794		—		356,900

Warrants issued in conjunction with convertible promissory notes		—	—		—	—		—	—		142,996		—		142,996

Warrants reset in conjunction with convertible promissory notes		—	—		—	—		—	—		63,381		(63,381)		—

Adoption of ASU 2020-06		—	—		—	—		—	—		(1,013,414)		634,059		(379,355)

Issuance of common stock for cash		—	—		—	—		15	1,500,000		42,751		—		42,766

Cashless warrant exercises		—	—		—	—		51	5,129,725		(51)		—		—

Stock-based compensation		—	—		—	—		—	—		4,703		—		4,703

Net loss		—	—		—	—		—	—		—		(1,144,536)		(1,144,536)

Balance, March 31, 2022		355,000	500,000		—	—		1,048	104,955,567		20,401,493		(22,456,570)		(1,699,029)

Shares issued for consulting services		—	—		—	—		30	3,000,000		44,970		—		45,000

Shares issued in conjunction with forbearance of convertible promissory notes		—	—		—	—		40	4,000,000		142,760		—		142,800

Conversion of convertible promissory notes and accrued interest		—	—		—	—		267	26,734,801		668,103		—		668,370

Warrants issued in conjunction with debt extinguishment		—	—		—	—		—	—		65,000		—		65,000

Cashless warrant exercises		—	—		—	—		35	3,550,162		(35)		—		—

Net loss		—	—		—	—		—	—		—		(535,931)		(535,931)

Balance, June 30, 2022	$	355,000	500,000	$	—	—	$	1,420	142,240,530	$	21,322,291	$	(22,992,501)	$	(1,313,790)


	2023		2022
Cash flows from operating activities:
Net loss	$	(1,915,869)	$	(1,680,467)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		715,000		406,603
Depreciation and amortization		4,557		10,938
Loss on extinguishment of debt		—		321,800
Amortization of debt discount and warrant expense		535,865		254,585
Change in fair value of derivative liabilities		126,958		—
Loss on derivatives		366,958		—
Gain on sale of fixed assets		(1,193,676)		—
Other		11,875		—
Change in operating assets and liabilities:
Accounts receivable		(16,344)		7,797
Inventories		(51,090)		58,955
Prepaid expenses and other current assets		(118,929)		7,927
Accounts payable		2,754		66,348
Credit cards payable		(16,864)		29,784
Accrued expenses and other current liabilities		440,077		8,114
Customer deposits		20,062		90,850
Other liabilities		—		1,001
Net cash used in operating activities		(1,088,666)		(415,765)

Cash flows from investing activities:
Purchase of property and equipment		(149,705)		—
Sale of property and equipment		1,894,588		—
Net cash provided by investing activities		1,744,883		—
Cash flows from financing activities:
Repayments on bank debt		(522,401)		(13,787)
Related party notes payable-net		—		(57,875)
Issuance of convertible promissory notes		—		494,220
Repayments on convertible promissory notes		(85,985)		(367,500)
Issuance of common stock for cash -net		—		42,766
Net cash (used in) provided by financing activities		(608,386)		97,824
Net increase (decrease) in cash and cash equivalents		47,831		(317,941)

Cash and cash equivalents, beginning of period		368,425		383,170

Cash and cash equivalents, end of period	$	416,256	$	65,229

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	31,574	$	79,402
Income taxes	$	—	$	—

Non-cash investing and financing activities:

January 1,2022 adoption of ASU 2020-06	$	—	$	379,355
Warrants and common stock feature issued in conjunction with convertible promissory notes	$	—	$	350,796
Settlement of stock-based compensation liabilities	$	719,000	$	—
Conversion of convertible promissory notes, derivatives and accrued interest into shares of common stock	$	260,691	$	668,370


Fair value- December 31, 2022	$	—
Derivative liabilities in conjunction with convertible promissory note defaults		491,846
Conversion of convertible promissory notes		(69,200)
Change in fair value of derivative liabilities		126,958
Fair value- June 30, 2023	$	549,604


	Level 1		Level 2		Level 3		Total
Liabilities

Derivative liabilities – convertible promissory notes	$	—	$	—	$	549,604	$	549,604

Total fair value	$	—	$	—	$	549,604	$	549,604


	June 30,		December 31,
	2023		2022
Building	$	—	$	875,000
Tooling		149,705		—
Furniture and equipment		24,987		24,987
		174,692		899,987
Less: accumulated depreciation and amortization		(24,987)		(194,518)
	$	149,705	$	705,469


	June 30,		December 31,
Convertible promissory notes	2023		2022
Principal balance	$	1,412,601	$	1,680,774
Debt discount balance		—		(375,865)
Net Notes balance	$	1,412,601	$	1,304,909


	Principal		Debt Discount		Net
Pre 2020	$	50,000	$	—	$	50,000
October 2021		73,336		—		73,336
February 2022		44,882		—		44,882
March 2022		307,500		—		307,500
August 2022		122,500		—		122,500
September 2022		814,383		—		814,383
	$	1,412,601	$	—	$	1,412,601


	2023
Market value of common stock		$0.0008-$0.005
Expected volatility		111.2-145.6	%
Expected term (in years)		0.5-.75
Risk-free interest rate		4.39-5.04	%


Fair Value of Common Share	$	0.006-0.009
Exercise Price	$	0.01
Risk Free Rate		3.92-3.96	%
Expected Life (Yrs.)		5.0
Volatility		130.0	%


Date Issued	Exercise Price		Number Outstanding	Expiration Date
December 1, 2018	$	0.00102	170,000		December 1, 2023
May 1, 2020	$	0.52	100,000		May 1, 2025
October 1, 2021	$	0.025	9,000,000		October 1, 2026
October 17, 2021	$	0.025	450,000		October 17, 2024
August 10, 2022, 2022	$	0.00102	3,336,843		August 10, 2027
September 29, 2022, 2022	$	0.00102	2,780,690		September 29,2027
February 11, 2023	$	0.00102	500,000		February 11, 2028
March 10, 2023	$	0.00102	12,500,000		March 10, 2028
			28,837,533


Date Issued	Exercise Price		Number Outstanding	Expiration Date
December 1, 2018	$	0.01	170,000		December 1, 2023
May 1, 2020	$	0.52	100,000		May 1, 2025
October 1, 2021	$	0.025	9,000,000		October 1, 2026
October 17, 2021	$	0.01	450,000		October 17, 2024
August 10, 2022	$	0.01	3,336,843		August 10, 2027
September 15, 2022	$	0.01	12,000,000		September 15, 2025
September 29, 2022	$	0.01	2,780,690		September 29, 2027
			27,837,533


	2023		2022		Change
Marketing	$	20,000	$	2,860	$	17,140
Commissions		28,000		45,514		(17,514)
Payroll related		255,082		207,164		47,918
Consulting and professional fees		117,106		139,766		(22,660)
Research and development		—		15,000		(15,000)
Other operating expenses		153,650		52,875		100,775
	$	573,838	$	463,179	$	110,659

Exhibit No.	Description of Exhibit	Location

3(i)	Certificate of Incorporation.	Incorporated by reference from the Company’s Form S-1/A-4 filed on July 20, 2020.

3(i)	Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on August 23, 2017, converting from a limited liability company to a C corporation.	Incorporated by reference from the Company’s Form S-1/A-4 filed on July 20, 2020.

3(i)	Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on November 1, 2019, designating Series A Preferred Shares.	Incorporated by reference from the Company’s Form S-1/A-4 filed on July 20, 2020.

3(i)	Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on July 9, 2020, increasing authorized common stock to 50 million shares.	Incorporated by reference from the Company’s Form S-1/A-4 filed on July 20, 2020.

3(i)	Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on December 3, 2020, increasing authorized common stock to 125 million shares.	Incorporated by reference from the Company’s Form 8-K filed December 3, 2020.

10.12	March 3, 2022, Second Warrant, Blue Lake Partners, LLP	Incorporated by reference from the Company’s Form 10-K filed March 31, 2023

10.13	June 21, 2022, Settlement Agreement, JR-HD Enterprises III, LLC	Incorporated by reference from the Company’s Form 10-K filed March 31, 2023

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a).	Filed herewith.

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a).	Filed herewith.

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith.

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 [included in Exhibit 32.1].	Filed herewith.

101.1NS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (formatted as Inline XBRL as contained in Exhibit 101)

	ELECTROMEDICAL TECHNOLOGIES INC.

	By:	/s/ Matthew Wolfson
		Matthew Wolfson
		President & Chief Executive Officer
		(Principal Executive Officer)


	By:	/s/ Matthew Wolfson
		Matthew Wolfson
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

	By:	/s/ Matthew Wolfson
	Matthew Wolfson
Date: August 21, 2023	Principal Executive Officer

Dated: August 21, 2023	By:	/s/ Matthew Wolfson
	Matthew Wolfson
	Chief Executive Officer, Chief Financial Officer