Electromedical Technologies, Inc 10-Q for FY2023 Q1

Electromedical Technologies, Inc (EMED)

10-Q 2023-05-12 For: 2023-03-31

Added on April 06, 2026

About this 10-Q

Electromedical Technologies, Inc filed this 10-Q on May 12, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $378.65K; up 70.6% from $221.89K a year earlier
Net loss: $456.06K; compared with a net loss of $1.14M a year earlier
Diluted EPS: -$0.00; compared with -$0.01 a year earlier

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

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 MARCH 31, 2023 AND DECEMBER 31, 2022	3

	STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022	4

	STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022	6

	STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 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	17

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	20

Item 4.	CONTROLS AND PROCEDURES	20

PART II. OTHER INFORMATION		21

Item 1.	LEGAL PROCEEDINGS	21

Item 1A.	RISK FACTORS	21

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	22

Item 3.	DEFAULTS UPON SENIOR SECURITIES	35

Item 4.	MINE SAFETY DISCLOSURE	35

Item 5.	OTHER INFORMATION	35

Item 6.	EXHIBITS	35

SIGNATURES		38


	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	1,235,027	$	368,425
Accounts receivable		5,826		9,444
Inventories		159,704		62,061
Prepaid expenses and other current assets		170,202		207,872
Total current assets		1,570,759		647,802

Property and equipment, net		—		705,469
Total assets	$	1,570,759	$	1,353,271

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Accounts payable	$	543,644	$	266,744
Credit cards payable		34,632		37,633
Accrued expenses and other current liabilities		365,598		1,065,483
Customer deposits		134,000		217,588
Convertible promissory notes, net of discount of $215,660 and $375,865, respectively		1,365,193		1,304,909
Long term debt, current portion		—		31,818
Total current liabilities		2,443,067		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		10,600		10,234
Total liabilities		2,603,667		3,574,116

Commitments and contingencies (Note 9)		—		—

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 March 31, 2023 and December 31, 2022, respectively		400,000		—
Common stock, $.00001 par value, 1,999,000,000 and 999,000,000 shares authorized; 296,886,686 and 189,784,529 shares outstanding at March 31, 2023 and December 31, 2022, respectively		2,967		1,896
Additional paid-in-capital		23,480,229		22,237,300
Accumulated deficit		(25,281,104)		(24,825,041)
Total stockholders’ deficit		(1,032,908)		(2,220,845)
Total liabilities and stockholders’ deficit	$	1,570,759	$	1,353,271


	2023		2022
Net sales	$	378,646	$	221,894

Cost of sales		87,696		67,641

Gross profit		290,950		154,253

Selling, general and administrative expenses		1,552,488		879,810

Loss from operations		(1,261,538)		(725,557)

Other income (expense)
Interest expense		(388,201)		(213,379)
Loss on extinguishment of debt		—		(205,600)
Gain on sale of fixed assets		1,193,676		—
Total other expense		805,475		(418,979)

Net loss	$	(456,063)	$	(1,144,536)
Deemed dividend related to warrant resets		—		(63,381)
Net loss attributable to common stockholders		(456,063)		(1,207,917)

Weighted average shares outstanding - basic and diluted		240,567,805		97,260,915
Weighted average loss per share - basic and diluted	$	(0.002)	$	(0.01)


														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)


														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)


	2023		2022
Cash flows from operating activities:
Net loss	$	(456,063)	$	(1,144,536)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		715,000		361,603
Depreciation and amortization		4,557		5,469
Loss on extinguishment of debt		—		205,600
Amortization of debt discount and warrant expense		320,204		164,710
Gain on sale of fixed assets		(1,193,676)		—
Other		876		—
Change in operating assets and liabilities:
Accounts receivable		3,618		3,295
Inventories		(97,643)		21,586
Prepaid expenses and other current assets		37,670		13,072
Accounts payable		276,900		59,466
Credit cards payable		(3,001)		3,403
Accrued expenses and other current liabilities		22,044		(33,400)
Customer deposits		(83,588)		21,850
Other liabilities		366		37
Net cash used in operating activities		(452,736)		(317,845)

Cash flows from investing activities:
Sale of property and equipment		1,894,588		—
Net cash provided by investing activities		1,894,588		—
Cash flows from financing activities:
Repayments on bank debt		(522,401)		(6,888)
Related party notes payable-net		—		(57,875)
Issuance of convertible promissory notes		—		494,220
Repayments on convertible promissory notes		(52,849)		(367,500)
Net cash provided by ( used in) financing activities		(575,250)		104,723

Net (decrease) increase in cash and cash equivalents		866,602		(213,122)

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

Cash and cash equivalents, end of period	$	1,235,027	$	170,048

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	22,934	$	72,308
Income taxes	$	—	$	—

Non-cash investing and financing activities:

January 1,2022 adoption of ASU 2020-06	$	—	$	379,355
Warrants, common stock and beneficial conversion feature issued in conjunction with convertible promissory notes	$	—	$	192,996
Settlement of stock-based compensation liabilities	$	719,000	$	—
Conversion of convertible promissory notes and accrued interest into shares of common stock	$	50,000	$	—


	THREE MONTHS ENDED MARCH 31,
	2023		2022
Customer A	18.8	%	17.8	%
Customer B	10.2	%	17.4	%


	March 31,		December 31,
	2023		2022
Building	$	—	$	875,000
Furniture and equipment		24,987		24,987
		24,987		899,987
Less: accumulated depreciation and amortization		(24,987)		(194,518)
	$	—	$	705,469


	March 31,		December 31,
Convertible promissory notes	2023		2022
Principal balance	$	1,580,853	$	1,680,774
Debt discount balance		(215,660)		(375,865)
Net Notes balance	$	1,365,193	$	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
July 2022		33,135		(4,874)		28,261
August 2022		176,000		(30,279)		145,721
September 2022		896,000		(180,507)		715,493
	$	1,580,853	$	(215,660)	$	1,365,193


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	$	0.01	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	$	0.025	450,000		October 17, 2024
August 10, 2022, 2022	$	0.01	3,336,843		August 10, 2027
September 29, 2022, 2022	$	0.01	2,780,690		September 29,2027
February 11, 2023	$	0.01	500,000		February 11, 2028
March 10, 2023	$	0.01	12,500,000		March 10, 2028
			28,837,533


	2023		2022		Change
Marketing	$	5,875	$	3,238	$	2,637
Commissions		55,100		41,733		13,367
Payroll related		653,906		254,589		399,317
Consulting and professional fees		455,290		529,459		(74,169)
Research and development		289,934		15,000		274,934
Other operating expenses		92,383		35,791		56,592
	$	1,552,488	$	879,810	$	672,678

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
	Principal Executive
	Officer
Date: May 12, 2023


	By:	/s/ Matthew Wolfson
	Matthew Wolfson
Date: May 12, 2023	Principal Financial Officer

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.

3(i)	Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on October 14, 2021, increasing authorized common shares to 251 million shares.	Incorporated by reference from the Company’s 8-K filed October 14, 2021.


Dated: May 12, 2023	By:	/s/ Matthew Wolfson
	Matthew Wolfson
	Chief Executive Officer, Chief Financial Officer