UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For
the quarterly period ended
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from _________ to ________
Commission
file numbers
(Name of registrant as specified in its charter)
(State or Other Jurisdiction of Organization) |
(IRS Employer Identification Number) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Ticker symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S–T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company, or an emerging growth company.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
Growth Company |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act). Yes ☐ No
As of October 28, 2025, there were shares of common stock and 12,000,000 shares of Series B preferred stock issued and outstanding.
TABLE OF CONTENTS
| 2 |
Nutra Pharma Corp (“Nutra Pharma”) and its wholly owned subsidiary, ReceptoPharm, Inc. (“ReceptoPharm”), are referred to herein as “we”, “our” or “us” (ReceptoPharm is also individually referred to herein).
Forward Looking Statements
This Quarterly Report on Form 10–Q for the period ending September 30, 2023, contains forward–looking statements that involve risks and uncertainties, as well as assumptions that if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward–looking statements. The words or phrases “would be,” “will allow, “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions are intended to identify “forward–looking statements.” We are subject to risks detailed in Item 1(a). All statements other than statements of historical fact are statements that could be deemed forward–looking statements, including: (a) any projections of revenue, gross margin, expenses, earnings or losses from operations, synergies or other financial items; and (b) any statements of the plans, strategies and objectives of management for future operations; and (c) any statement concerning developments, plans, or performance. Unless otherwise required by applicable law, we do not undertake and we specifically disclaim any obligation to update any forward–looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.
| 3 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NUTRA PHARMA CORP.
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory, current portion | ||||||||
| Other receivable | ||||||||
| Convertible notes receivable, net of discount | ||||||||
| Receivable from sale of Stemsation stocks | ||||||||
| Settlement receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Inventory, less current portion | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Security deposit | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued payroll due to officers | ||||||||
| Deferred revenue - related party | ||||||||
| Accrued interest to related parties | ||||||||
| Due to officer | ||||||||
| Derivative liabilities | ||||||||
| Other debt, net of discount, current portion | ||||||||
| SBA notes payable, current portion | ||||||||
| Operating lease obligations, current portion | ||||||||
| Total current liabilities | ||||||||
| Notes payable, less current portion | ||||||||
| Convertible note, less current portion | ||||||||
| SBA notes payable, less current portion | ||||||||
| Operating lease obligations, less current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 12) | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, $ par value, shares authorized and Series B Preferred shares authorized, issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding | ||||||||
| Common stock to be issued | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| F-1 |
NUTRA PHARMA CORP.
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Net sales to a related party | ||||||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative - including stock based compensation of $ for the three months ended September 30, 2023 and 2022, and $ and $ for the nine months ended September 30, 2023 and 2022, respectively | ||||||||||||||||
| Bad debt expense (recovery) - related party | ( | ) | ||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense to related parties | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of convertible notes and derivatives | ( | ) | ( | ) | ||||||||||||
| Stock based loan modification cost | ( | ) | ( | ) | ||||||||||||
| Loss on settlement of debt | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ||||||||||||
| (Loss) income before income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net (loss) income per share - basic and diluted | $ | ) | $ | $ | ) | $ | ||||||||||
| Weighted average number of shares outstanding during the period - basic | ||||||||||||||||
| Weighted average number of shares outstanding during the period - diluted | ||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| F-2 |
NUTRA PHARMA CORP.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
For the Three Months Ended September 30, 2023 and 2022
(Unaudited)
Preferred Stock Series B | Common Stock | C.S to be issued | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance -June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Common stock issued for conversion of debt | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance -September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
Preferred Stock Series B | Common Stock | C.S to be issued | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance -June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Common stock issued for debt modification and penalty | - | |||||||||||||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||||||||||
| Balance -September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| F-3 |
NUTRA PHARMA CORP.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
For the Nine Months Ended September 30, 2023 and 2022
(Unaudited)
Preferred Stock Series B | Common Stock | C.S to be issued | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance -December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Common stock issued for conversion of debt | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance -September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
Preferred Stock Series B | Common Stock | C.S to be issued | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance -December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Common stock issued for debt modification and penalty | - | |||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of debt | - | - | ||||||||||||||||||||||||||||||||||
| Common stock issued for settlement of debt | - | - | ||||||||||||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||||||||||
| Balance -September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| F-4 |
NUTRA PHARMA CORP.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Bad debt expense - related party | ||||||||
| Loss on settlement of debt and accrued expense | ||||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Stock-based loan modification cost | ||||||||
| Amortization of convertible notes receivable discount | ( | ) | ( | ) | ||||
| Change in fair value of convertible notes and derivatives | ( | ) | ||||||
| Amortization of loan discount | ||||||||
| Amortization of operating lease right-of-use assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (increase) in accounts receivable | ( | ) | ||||||
| Increase in inventory | ( | ) | ( | ) | ||||
| Increase in other receivable | ( | ) | ( | ) | ||||
| Decrease (increase) in prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Increase (decrease) in accounts payable | ||||||||
| Increase in accrued expenses | ||||||||
| Increase in accrued payroll due to officers | ||||||||
| Increase in deferred revenue - related party | ||||||||
| Increase (decrease) in accrued interest to related parties | ||||||||
| Decrease in operating lease obligations | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Sale of Stemsation stock | ||||||||
| Convertible notes receivable advances | ( | ) | ( | ) | ||||
| Convertible notes receivable repayments | ||||||||
| Acquisition of equipment | ( | ) | ||||||
| Net cash provided by (used) in investing activities: | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Loans from officer | ||||||||
| Repayment of officer loans | ( | ) | ( | ) | ||||
| Proceeds from convertible notes | ||||||||
| Repayment of convertible notes | ( | ) | ( | ) | ||||
| Advances from other notes payable | ||||||||
| Repayments of other notes payable | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non Cash Financing and Investing: | ||||||||
| Common stock issued in settlement of notes | $ | $ | ||||||
| Common stock issued for conversion of debt | $ | $ | ||||||
| Warrants issued with Debt —Debt discount | $ | $ | ||||||
| Stemsation shares awarded but not yet issued in settlement of convertible notes receivable | $ | $ | ||||||
| Stemsation shares received in settlement of convertible notes receivable | $ | $ | ||||||
| Reclassification of other receivable to convertible notes receivable | $ | $ | ||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| F-5 |
NUTRA PHARMA CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 2023
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Nutra Pharma Corp. (“Nutra Pharma”), is a holding company that owns intellectual property and operates in the biotechnology industry. Nutra Pharma was incorporated under the laws of the state of California on February 1, 2000, under the original name of Exotic-Bird.com.
Through its wholly-owned subsidiary, ReceptoPharm, Inc. (“ReceptoPharm”), Nutra Pharma conducts drug discovery research and development activities. In October 2009, Nutra Pharma launched its first consumer product called Cobroxin®, an over-the-counter pain reliever designed to treat moderate to severe chronic pain. In May 2010, Nutra Pharma launched its second consumer product called Nyloxin®, an over-the-counter pain reliever that is a stronger version of Cobroxin® and is designed to treat severe chronic pain. In December 2014, Nutra Pharma launched Pet Pain-Away, an over-the-counter pain reliever designed to treat pain in cats and dogs. In October 2019, Nutra Pharma launched Equine Pain-Away™, an over-the-counter topical pain reliever designed to treat pain and inflammation in horses. In March 2021, Nutra Pharma launched Luxury Feet™, an over-the-counter pain reliever designed specifically to treat foot pain and inflammation especially for women that wear high heels and stilettos. In October of 2021, Nutra Pharma began manufacturing a zeolite detoxifier called Cell Defender for a third party distributor.
Basis of Presentation and Consolidation
The Unaudited Condensed Consolidated Financial Statements and notes are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and do not contain certain information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Interim results are not necessarily indicative of results for a full year. Therefore, the interim Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto contained in the Company’s Annual Report on Form 10-K from which the accompanying condensed consolidated balance sheet dated December 31, 2022 was derived.
The accompanying Unaudited Condensed Consolidated Financial Statements include the results of Nutra Pharma and its wholly-owned subsidiaries Designer Diagnostics Inc. and ReceptoPharm (collectively “the Company”, “us”, “we” or “our”). We operate as one reportable segment. Designer Diagnostics Inc. has been inactive since June 2011. All intercompany transactions and balances have been eliminated in consolidation.
Liquidity and Going Concern
Our
Unaudited Condensed Consolidated Financial Statements are presented on a going concern basis, which contemplate the realization of assets
and satisfaction of liabilities in the normal course of business. We have experienced recurring, significant losses from operations,
and have an accumulated deficit of $
There is substantial doubt regarding our ability to continue as a going concern which is contingent upon our ability to secure additional financing, increase ownership equity and attain profitable operations. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate.
We do not have sufficient cash to sustain our operations for a period of twelve months from the issuance date of this report and will require additional financing in order to execute our operating plan and continue as a going concern. Since our sales are not currently adequate to fund our operations, we continue to rely principally on debt and equity funding; however, proceeds from such funding have not been sufficient to execute our business plan. The Company’s common stock is presently on the OTC Market Group’s Expert Market, which means that the Company’s common stock is not eligible for proprietary broker-deal quotes. As this limits our ability to raise capital, our plan is to attempt to secure adequate funding through notes payable until sales of our pain products are adequate to fund our operations. We cannot predict whether additional financing will be available, and/or whether any such funding will be in the form of equity, debt, or another form. In the event that these financing sources do not materialize, or if we are unsuccessful in increasing our revenues and profits, we will be unable to implement our current plans for expansion, repay our obligations as they become due and continue as a going concern.
| F-6 |
The accompanying Unaudited Condensed Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Use of Estimates
The accompanying Unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S.GAAP which require management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense. Significant estimates include our ability to continue as going concern, the recoverability of inventories and long-lived assets, the recoverability of amounts due from officer, the valuation of stock-based compensation and certain debt and derivative liabilities, recognition of loss contingencies and deferred tax valuation allowances. Actual results could differ from those estimates. Changes in facts and circumstances may result in revised estimates, which would be recorded in the period in which they become known.
Revenue from Contracts with Customers
The Company accounts for revenue from contracts with customers in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC Topic 606, revenue recognition has a five-step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied.
Our revenues are primarily derived from customer orders for the purchase of our products. We recognize revenues as performance obligations are fulfilled upon shipment of products. We record revenues net of promotions and discounts.
Deferred revenue represents cash received from customers in advance of performance under the contract. Such amounts are recognized as revenue when the related performance obligations are satisfied, which typically occurs upon shipment of the products. All deferred revenue as of the balance sheet dates are from related parties.
Accounting for Shipping and Handling Costs
We account for shipping and handling as fulfilment activities and record amounts billed to customers as revenue and the related shipping and handling costs as cost of sales.
Accounts Receivable and Allowance for Doubtful Accounts
We grant credit without collateral to our customers based on our evaluation of a particular customer’s credit worthiness. Accounts receivable are due 30 days after the issuance of the invoice. In addition, allowances for doubtful accounts are maintained for potential credit losses based on the age of the accounts receivable and the results of periodic credit evaluations of our customers’ financial condition. Accounts receivable are written off after collection efforts have been deemed to be unsuccessful. Accounts written off as uncollectible are deducted from the allowance for doubtful accounts, while subsequent recoveries are netted against the provision for doubtful accounts expense. We generally do not charge interest on accounts receivable. We use third party payment processors and are required to maintain reserve balances, which are included in accounts receivable.
Accounts
receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated
allowances for uncollectible accounts.
| F-7 |
Inventories
Inventories,
which are stated at the lower of average cost or net realizable value, consist of packaging materials, finished products, and raw venom
that is utilized to make the API (active pharmaceutical ingredient). The raw unprocessed venom has an indefinite life for use. We classify
inventory as short-term or long-term inventory based on timing of when it is expected to be consumed. The Company regularly reviews inventory
quantities on hand. If necessary, it records a net realizable value adjustment for excess and obsolete inventory based primarily on its
estimates of product demand and production requirements. Write-downs are charged to cost of goods sold. We performed an evaluation of
our inventory and related accounts at September 30, 2023 and December 31, 2022, and increased the reserve on supplier advances for future
venom purchases included in prepaid expenses and other current assets by $
Financial Instruments
Our financial instruments include cash, accounts receivable, accounts payable, accrued expenses, loans payable, due to officers and derivative financial instruments. Other than certain warrant and convertible instruments (derivative financial instruments) and liabilities to related parties (for which it was impracticable to estimate fair value due to uncertainty as to when they will be satisfied and a lack of similar type transactions in the marketplace), we believe the carrying values of our financial instruments approximate their fair values because they are short term in nature or payable on demand. Our derivative financial instruments are carried at a measured fair value.
Cash and cash equivalents
The
Company maintains cash balances in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose
of the unaudited consolidated statements of cash flows, all highly liquid investments with an original maturity of three months or less
are considered to be cash equivalents. As of September 30, 2023 and December 31, 2022, the Company had
Concentration of Credit Risk
Balances
in various cash accounts may at times exceed federally insured limits. We have not experienced any losses in such accounts. We do not
hold or issue financial instruments for trading purposes. For the three and nine months ended September 30, 2023, one customer, a related
party, accounted for approximately
Operating Lease Right-of-Use Asset and Liability
The Company accounts for leases in accordance with Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as amended (“ASC Topic 842”). This standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months and classify as either operating or finance leases.
In accordance with ASC Topic 842, at the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present and the classification of the lease including whether the contract involves the use of a distinct identified asset, whether we obtain the right to substantially all the economic benefit from the use of the asset, and whether we have the right to direct the use of the asset. Leases with a term greater than one year are recognized on the balance sheet as ROU assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less under practical expedient in paragraph ASC 842-20-25-2.
Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The implicit rate within our operating leases are generally not determinable and, therefore, the Company uses the incremental borrowing rate at the lease commencement date to determine the present value of lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company determines the incremental borrowing rate for each lease using our estimated borrowing rate.
| F-8 |
Derivative Financial Instruments
Management evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to other income. For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
Convertible Debt
Effective January 1, 2022, the Company adopted ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The update eliminates certain separation models, including the beneficial conversion feature and cash conversion models, so convertible instruments issued after adoption are generally accounted for as a single liability or equity instrument, unless a conversion feature requires separate derivative accounting under ASC 815. ASU 2020-06 also amends diluted EPS guidance.
The Fair Value Measurement Option
We have elected the fair value measurement option for convertible debt with embedded derivatives that require bifurcation, and record the entire hybrid financing instrument at fair value under the guidance of ASC Topic 815, Derivatives and Hedging (“ASC Topic 815”). The Company reports interest expense, including accrued interest, related to this convertible debt under the fair value option, within the change in fair value of convertible notes and derivatives in the accompanying consolidated statement of operations.
Derivative Accounting for Convertible Debt and Options and Warrants
The Company evaluated the terms and conditions of the convertible debt under the guidance of ASC Topic 815, Derivatives and Hedging. The conversion terms of some of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the debt is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted, and all additional convertible debt and options and warrants are included in the value of the derivative liabilities. Pursuant to ASC 815-15, Embedded Derivatives, the fair values of the convertible debt, options and warrants and shares to be issued were recorded as derivative liabilities on the issuance date and revalued at each reporting period.
Debt Modifications and Extinguishments
The Company evaluates amendments, restatements, or other changes to its debt agreements in accordance with ASC 470-50, Debt — Modifications and Extinguishments. Under this guidance, we determine whether the revised terms represent a modification of the existing debt or an extinguishment of the old debt and issuance of new debt. If the changes are not deemed substantial, the transaction is accounted for as a modification and any associated fees or costs are amortized over the remaining term of the modified debt. If the changes are determined to be substantial, the original debt is considered extinguished, the new debt is recorded at fair value, and any resulting difference between the carrying amount of the old debt and the fair value of the new debt is recognized in earnings as a gain or loss on extinguishment.
| F-9 |
Property and Equipment
Property
and equipment is recorded at cost. Expenditures for major improvements and additions are added to property and equipment, while replacements,
maintenance and repairs which do not extend the useful lives are expensed. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets of
Long-Lived Assets
The carrying value of long-lived assets is reviewed annually and on a regular basis for the existence of facts and circumstances that may suggest impairment. If indicators of impairment are present, we determine whether the sum of the estimated undiscounted future cash flows attributable to the long-lived asset in question is less than its carrying amount. If less, we measure the amount of the impairment based on the amount that the carrying value of the impaired asset exceeds the discounted cash flows expected to result from the use and eventual disposal of the impaired assets.
Income Taxes
The Company recorded income tax expense for the nine months ended September 30, 2023 and 2022 because the estimated annual effective tax rate was zero. The Company applies the asset and liability method of accounting for income taxes, under which deferred tax assets and liabilities are recognized for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities, as well as for net operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance when, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
As of September 30, 2023, the Company continues to maintain a full valuation allowance against its net deferred tax assets due to a history of operating losses and the uncertainty regarding the Company’s ability to generate sufficient future taxable income to realize such assets.
Reclassification
Certain amounts in the condensed consolidated statement of changes in stockholders’ deficit have been reclassified to conform to the current period presentation.
We account for stock-based compensation in accordance with FASB ASC Topic 718, Stock Compensation (“ASC Topic 718”). ASC Topic 718, which requires that the cost resulting from all share-based transactions be recorded in the financial statements over the respective service periods. It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions.
Net income (loss) per share is calculated in accordance with FASB ASC Topic 260, Earnings per Share. Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which we incur losses, common stock equivalents, if any, are not considered, as their effect would be anti-dilutive or have no effect on earnings per share. Any common shares issued as of a result of the exercise of conversion options and warrants would come from newly issued common shares from our remaining authorized shares.
| F-10 |
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Basic and diluted numerator: | ||||||||||||||||
| Net income (loss) - basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Change in fair value of convertible notes | ( | ) | ( | ) | ||||||||||||
| Interest on convertible debt | ||||||||||||||||
| Net income (loss) - diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Basic and diluted denominator: | ||||||||||||||||
| Weighted-average common shares outstanding - basic | ||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Convertible debt | ||||||||||||||||
| Options and warrants | ||||||||||||||||
| Weighted-average common shares outstanding - diluted (1) | ||||||||||||||||
| Net income (loss) per share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | |||||||||
| (1) |
September 30, 2023 | September 30, 2022 | |||||||
| Options and warrants | ||||||||
| Convertible notes payable at fair value | ||||||||
| Convertible notes payable | ||||||||
| Total | ||||||||
The following table summarizes the weighted average securities that were excluded from the diluted per share calculation because (1) for the nine months ended September 30, 2023, the effect of including these potential shares was antidilutive due to a net loss and (2) for the nine months ended September 30, 2022, the exercise prices of the options and warrants were greater than the average market price of the common shares:
| September 30, 2023 | September 30, 2022 | |||||||
| Options and warrants | ||||||||
| Convertible notes payable at fair value | ||||||||
| Convertible notes payable | ||||||||
| Total | ||||||||
| F-11 |
Recent Accounting Pronouncements
Adopted Pronouncements
As of January 1, 2023, the Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016- 13”), which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. The Company is required to estimate an allowance for expected credit losses on trade receivables that are either current or not yet due under ASU 2016-13. The adoption did not have a material effect on the accompanying condensed consolidated financial statements.
Not Yet Effective Pronouncements
The Company has evaluated the impact of the following recently issued accounting standards, which have not yet been adopted as of September 30, 2023:
ASU No. 2023-03, Codification Improvements to Segment Reporting (Topic 280) (“ASU 2023-03”), which provides clarifications and improvements to the existing segment reporting requirements, including updates related to the aggregation criteria, reconciliation of segment measures to consolidated financial statements, and disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company has not yet adopted this standard, and its adoption is not expected to have a material effect on the accompanying condensed consolidated financial statements.
All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.
2. FAIR VALUE MEASUREMENTS
Certain assets and liabilities that are measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022 are measured in accordance with FASB ASC Topic 820-10-05, Fair Value Measurements. FASB ASC Topic 820-10-05 defines fair value, establishes a framework for measuring fair value and expands the disclosure requirements regarding fair value measurements for financial assets and liabilities as well as for non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis in the condensed consolidated financial statements.
The statement requires fair value measurement be classified and disclosed in one of the following three categories:
| Level 1: | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities; |
| Level 2: | Quoted prices in markets that are not active or inputs which are observable either directly or indirectly for substantially the full term of the asset or liability; and |
| Level 3: | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). |
| F-12 |
The following table summarizes our financial instruments measured at fair value at September 30, 2023 and December 31, 2022:
| Fair Value Measurements at September 30, 2023 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
| Convertible notes at fair value | $ | $ | $ | $ | ||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Fair Value Measurements at December 31, 2022 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
| Convertible notes at fair value | $ | $ | $ | $ | ||||||||||||
The following table shows the changes in fair value measurements for the warrant liability using significant unobservable inputs (Level 3) during the nine months ended September 30, 2023 and the year ended December 31, 2022:
| Description | September 30, 2023 | December 31, 2022 | ||||||
| Beginning balance | $ | $ | ||||||
| Purchases, issuances, and settlements | ||||||||
| Total gain included in earnings (1) | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
| (1) | The gain related to the revaluation of our warrant liability is included in “Change in fair value of convertible notes and derivatives” in the accompanying unaudited condensed consolidated statements of operations. |
We
valued our warrants using a Dilution-Adjusted Black-Scholes Model. Assumptions used include (1)
We valued derivative liabilities using the number of potential convertible shares for warrants in equity and convertible notes with fixed conversion price that are recorded at amortized cost times the closing stock price of our restricted common stock at September 30, 2023. These derivative liabilities are recorded due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit and the equity environment is tainted, and therefore all convertible debt and options and warrants should be accounted for as liabilities.
The following table summarizes assumptions and the significant terms of the convertible notes for which the entire hybrid instrument is recorded at fair value at September 30, 2023 and December 31, 2022:
Conversion Price - Lower of Fixed | ||||||||||||||||||
| Debenture | Face Amount | Interest Rate | Default Interest Rate | Discount Rate | Anti-Dilution Adjusted Price | % of stock price for look-back period | Look-back Period | |||||||||||
| September 30, 2023 | $ | N/A | $ | |||||||||||||||
| December 31, 2022 | $ | N/A | $ | |||||||||||||||
| F-13 |
Using the stated assumptions summarized in the table above, we calculated the inception date and reporting period fair values of each note issued. The following table shows the changes in fair value measurements for the convertible notes at fair value using significant unobservable inputs (Level 3) during the nine months ended September 30, 2023 and the year ended December 31, 2022:
| Description | September 30, 2023 | December 31, 2022 | ||||||
| Beginning balance | $ | $ | ||||||
| Loss (gain) from change in fair value (1) | ( | ) | ||||||
| Repayments in cash | ( | ) | ( | ) | ||||
| Conversion to common stock | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
| (1) |
3. INVENTORIES
Inventories are valued at the lower of cost or net realizable value on an average cost basis. At September 30, 2023 and December 31, 2022, inventories were as follows:
September 30, 2023 | December 31, 2022 | |||||||
| Raw Materials | $ | $ | ||||||
| Finished Goods | ||||||||
| Total Inventories | ||||||||
| Less: Long-term inventory | ( | ) | ( | ) | ||||
| Current portion | $ | $ | ||||||
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at September 30, 2023 and December 31, 2022:
September 30, 2023 | December 31, 2022 | |||||||
| Computer equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Lab equipment | ||||||||
| Telephone equipment | ||||||||
| Office equipment – other | ||||||||
| Leasehold improvements | ||||||||
| Total | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
We
review our long-lived assets for recoverability if events or changes in circumstances indicate the assets may be impaired. At September
30, 2023, we believe the carrying values of our long-lived assets are recoverable. During the first quarter of 2023, the Company wrote
off $
| F-14 |
5. DUE TO/FROM OFFICER
At
September 30, 2023, the net balance due to Rik Deitsch, the Company’s former CEO, and the companies majority owned and
controlled by him (collectively referred to as “Due to Officer”) in the aggregate is $
At
December 31, 2022, the net balance due to Rik Deitsch, and the companies majority owned and controlled by him (collectively referred
to as “Due to Officer”) in the aggregate is $
These transactions were not conducted on an arm’s-length basis and, as such, may differ from the terms that would have been negotiated with an unrelated third party.
6. DEBTS
Debts consist of the following at September 30, 2023 and December 31, 2022:
| September 30, 2023 | December 31, 2022 | |||||||
| Notes payable – Unrelated third parties (Net of discount of $ | $ | $ | ||||||
| Convertible notes payable – Unrelated third parties (Net of discount of $ | ||||||||
| Convertible notes payable, at fair value (3) | ||||||||
| Other advances from an unrelated third party (4) | ||||||||
| SBA notes payable (5) | ||||||||
| Ending balances | ||||||||
| Less: Long-term portion-Notes payable-Unrelated third parties | ( | ) | ( | ) | ||||
| Less: Long-term portion-Convertible Notes payable-Unrelated third parties | ( | ) | ||||||
| Less: Long-term portion- SBA notes payable | ( | ) | ( | ) | ||||
| Current portion | $ | $ | ||||||
| (1) |
| ● | In
August 2016, we issued two Promissory Notes for a total of $ |
| F-15 |
| ● | On
August 2, 2011 under a settlement agreement with Liquid Packaging Resources, Inc. (“LPR”), we agreed to pay LPR a total
of $ | |
| ● | At
December 31, 2012, we owed University Centre West Ltd. approximately $ | |
| ● | In
April 2016, we issued a promissory note to an unrelated third party in the amount of $ | |
| ● | In
May 2016, the Company issued a promissory note to an unrelated third party in the amount of $ | |
| ● | In
June 2016, the Company issued a promissory note to an unrelated third party in the amount of $ | |
| ● | A
promissory note originally issued to an unrelated third party in August 2016 was restated in September 2019 in the amount of $ | |
| ● | On
September 26, 2016, we issued a promissory note to an unrelated third party in the amount of $ |
| F-16 |
| ● | In
October 2016, we issued a promissory note to an unrelated third party in the amount of $ | |
| ● | In
June 2017, we issued a promissory note to an unrelated third party in the amount of $ | |
| ● | During
July 2017, we received a loan for a total of $ | |
| ● | In
July 2017, we issued a promissory note to an unrelated third party in the amount of $ | |
| ● | In
November 2017, we issued a promissory note to an unrelated third party in the amount of $ | |
| ● | In
November 2017, we issued a promissory note to an unrelated third party in the amount of $ | |
| ● | In
June 2022, the Company entered a Purchase and Sale of Future Receipts Agreement with a non-related
party. This third party purchased $ | |
| ● | In
January 2022, the Company received a loan for $ |
| F-17 |
| In
October 2022, the Company received a second loan for $ | ||
| ● | In
December 2022, a promissory note of $ | |
| ● | In June 2023, the Company entered into a Purchase and Sale of Future Receipts Agreement with an unrelated third party. Pursuant to the agreement, the buyer purchased $ of the Company’s future receivables for total proceeds of $. Under the terms of the agreement, the Company authorized the buyer to debit amounts directly from its bank account at a specified remittance frequency until the total purchased amount of $ was fully collected. In connection with the transaction, the Company recorded a total debt discount of $, representing loan origination fees and issuance costs, which was amortized over the term of the agreement. The outstanding balance under this agreement was fully repaid in February 2024 in conjunction with the initiation of a subsequent agreement. Amortization for the debt discount for the three and nine months ended September 30, 2023 was $ and $, respectively. We repaid $ during the second and third quarter of 2023. At September 30, 2023, the principal balance, net of debt discount of $, is $. |
| (2) |
| ● | In
October 2017, we issued a promissory note to an unrelated third party in the amount of $ | |
| ● | During
January through December 2018, we issued convertible notes payable to 14 unrelated third parties for a total of $ | |
| ● | During
February 2019, the Company issued convertible notes payable totalling $ |
| F-18 |
| ● | During November 2019, we issued a convertible promissory note to an unrelated third party for $ | |
| At
September 30, 2023 and December 31, 2022, the outstanding principal balance of the notes issued in 2019 was $ | ||
| ● | During
the year ended December 31, 2020, the Company issued convertible notes payable of $ | |
| ● | During
2021, we issued convertible promissory notes to unrelated third parties totaling $ | |
| During
December 2021, in connection with the issuance of three of the above mentioned convertible notes of $ | ||
| ● | During
March 2021, the remaining balance of the promissory note of $ |
| ● | During
August 2021, the promissory note of $ |
| F-19 |
| ● | During
2022, we issued convertible promissory notes to unrelated third parties totaling $
with original issuance discounts of $ | |
| ● | During
January and May 2022, in connection with the issuance of one of the above mentioned convertible notes of $ | |
| ● | During
2022, the convertible promissory notes for a total of $ | |
| ● | During
June 2022, we repaid a convertible note payable originated in May 2021 in cash for $ | |
| ● | In
August 2022, we settled a convertible note payable of $ | |
| ● | In
November 2022, the Company settled a convertible note payable of $ | |
| ● | During
the first quarter of 2023, the convertible promissory notes for a total of $ | |
| ● | During the first quarter of 2023, we issued a convertible promissory note to an unrelated third party for a total of $ with an original issuance discount of $. The Noteholder has the right to convert the note into shares of Common Stock at a fixed conversion price of $ per share. The note is due one year from the execution and funding of the note. | |
| ● | In
March 2023, the Company repaid $ |
| F-20 |
| ● | In
February 2023, the Company settled a $ | |
| ● | During
the second quarter of 2023, the convertible promissory notes for a total of $ | |
| ● | During
the third quarter of 2023, the convertible promissory notes for a total of $ | |
| ● | During
the third quarter of 2023, we issued a convertible promissory note to an unrelated third party for $ | |
| ● | During
the third quarter of 2023, the Company settled convertible promissory notes of $ | |
| ● | At
the date of this report, $ | |
| ● | The
total discount amortization on all notes for the three and nine months ended September 30, 2023 is $ |
| (3) |
| ● | The
balance of $ | |
| ● | During
May 2017, we issued a Convertible Debenture in the amount of $ | |
| ● | During
October 2020, we issued a Convertible Debenture in the amount of $ |
| F-21 |
| ● | During
July 2018, we issued a convertible debenture in the amount of $ | |
| ● | During
January 2019, we issued a convertible denture in the amount of $ | |
| At
September 30, 2023 and December 31, 2022, the convertible note payable of $ | ||
| ● | During
February 2019, we issued a convertible promissory note to an unrelated third party in the amount up to $ | |
| ● | During
June 2019, we issued a convertible promissory note to an unrelated third party for $ |
| F-22 |
| (4) | |
| (5) |
At September 30, 2023, the future minimum principal payments for all debts are as follows:
| September 30, | Amount | ||||
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| $ | |||||
| Less: Long-term portion | |||||
| SBA notes payable | ( | ) | |||
| Notes payable | ( | ) | |||
| Current portion | $ | ||||
7. STOCKHOLDERS’ DEFICIT
Series B Preferred Stock
Effective March 2021, pursuant to authority of its Board of Directors, the Company filed a Certificate of Determination for its Series B Preferred Stock. The Series B Preferred Stock has a par value of $ per shares and consists of shares.
| F-23 |
Terms of the Series B Preferred include the following:
| 1. | The Series B Preferred votes with the Company’s common stock as a single class on all matters or consents for the Company’s common stockholders. Each share of Series B Preferred is entitled to one thousand votes per share. | |
| 2. | The Series B Preferred will not be entitled to dividends unless the Company pays cash dividends or dividends in other property to holders of outstanding shares of common stock, in which event, each outstanding share of the Series B Preferred will be entitled to receive dividends of cash or property in an amount or value equal to one thousand multiplied by the amount paid in respect of one share of common stock. Any dividend payable to the Series B Preferred will have the same record and payment date and terms as the dividend payable on the common stock. | |
| 3. | Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of all shares of Series B Preferred then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount in cash equal to $ in cash per share before any distribution is made on any shares of the Company’s common stock. If upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the application of all amounts available for payments with respect to Series B Preferred would not result in payment in full of Series B Preferred, the holders shall share equally and ratably in any distribution of assets of the Company in proportion to the full liquidation preference to which each is entitled. | |
| 4. | The Series B Preferred does not have any redemption rights. |
During
November 2021, the Board of Directors approved resolutions for the issuance of a total of shares of Series B Preferred stock
to Mr. Deitsch to discharge $
Effective November 15, 2021, the Board of Directors authorized an exchange of shares of Series A Preferred Stock held by Mr. Deitsch for an equal number of Series B Preferred Stock.
Common Stock Issued for Conversion of Convertible Debt
Pursuant
to the Note agreement in the amount up to $
Common Stock Warrants
During
August 2020, convertible promissory notes of $
| Month of Issuance | Number of Warrants | Month of Expiration | ||||
| August, 2020 | ||||||
| October, 2020 | ||||||
During
November and December, 2020, the Company granted the warrants at an exercise price of $
During
December 2021, in connection with the issuance of three of the convertible notes of $
| F-24 |
During
January and May 2022, in connection with the issuance of the convertible note of $
A summary of warrants outstanding in conjunction with private placements of common stock were as follows during the year ended December 31, 2022 and the nine months ended September 30, 2023:
| Number Of | Weighted average | |||||||
| shares | exercise price | |||||||
| Balance December 31, 2021 | $ | |||||||
| Exercised | ||||||||
| Issued | ||||||||
| Expired | ( | ) | ||||||
| Balance December 31, 2022 | $ | |||||||
| Exercised | ||||||||
| Issued | ||||||||
| Expired | ( | ) | ||||||
| Balance September 30, 2023 | $ | |||||||
The following table summarizes information about fixed-price warrants outstanding as of September 30, 2023 and December 31, 2022:
| Exercise Price | Weighted Average Number Outstanding | Weighted Average Contractual Life | Weighted Average Exercise Price | |||||||||||||
| September 30, 2023 | $ | years | $ | |||||||||||||
| December 31, 2022 | $ | years | $ | |||||||||||||
9. ACCRUED EXPENSES
Accrued expenses consisted of the following:
September 30, 2023 | December 31, 2022 | |||||||
| Accrued consulting fees | $ | $ | ||||||
| Accrued settlement expenses (1) | ||||||||
| Accrued payroll taxes | ||||||||
| Accrued interest | ||||||||
| Accrued others | ||||||||
| Total | $ | $ | ||||||
| (1) |
| F-25 |
10. PREPAID EXPENSES
Prepaid expenses and other current assets consist of the following:
September 30, 2023 | December 31, 2022 | |||||||
| Supplier advances for future purchases | $ | $ | ||||||
| Reserve for supplier advances | ( | ) | ( | ) | ||||
| Net supplier advances | ||||||||
| Prepaid professional fees | ||||||||
| Total | $ | $ | ||||||
We
performed an evaluation of our inventory and related accounts at September 30, 2023 and December 31, 2022, and increased the reserve
on supplier advances for future venom purchases by $
11. CONVERTIBLE NOTES RECEIVABLE
During
March through November 2021, we purchased five convertible notes from StemSation International (the “StemSation”) for a total
of $
From
March to December 2022, we purchased six convertible notes from StemSation totaling $
During
March through June 2023, we purchased additional convertible notes for a total of $
All
the notes mature
The
principal balance of the notes prior to settlement was $
Pursuant
to the agreement, the Company is entitled to receive shares of StemSation’s common stock in exchange for the full settlement
of the outstanding notes receivable. As of June 30, 2023, the Company recognized the settlement receivable at $
During
the third quarter of 2023, the Company received shares in two tranches, which were subsequently sold for total of $
under a series of Stock Purchase Agreements, reducing the carrying value of the settlement receivables to $
| F-26 |
Of
the total proceeds of $, $
In November 2023, the Company received additional shares of StemSation common stock as the third tranche under the settlement agreement. These shares were recorded as part of the Company’s investment in StemSation Stock and remain subject to future sale or disposition.
In March 2024, the Company sold shares to a third party for $. As of the date of this report, the $ from this transaction, together with the $ receivable from September 2023, remains outstanding, totaling $ due to the Company.
Date of Conversion Notice | Conversion Amount | Number of Shares Issued | Value of Shares Issued ($/per share) at Issuance | |||||||||
| 7/12/2023 | $ | |||||||||||
| 8/24/2023 | $ | |||||||||||
| 11/7/2023 | $ | |||||||||||
In
summary, $
During
the third quarter of 2023, we purchased one convertible note for $
Amortization
for all the convertible notes receivable was $
Amortization
for all the convertible notes receivable was $
12. COMMITMENTS AND CONTINGENCIES
Operating Leases
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Lease cost | ||||||||
| Operating lease cost | $ | $ | ||||||
| Short-term lease cost | ||||||||
| Total lease cost | $ | $ | ||||||
| Balance sheet information | ||||||||
| Operating ROU Assets | $ | $ | ||||||
| Less accumulated amortization | ( | ) | ( |
) | ||||
| Operating ROU Assets, net | $ | $ | ||||||
| Operating lease obligations, current portion | $ | $ | ||||||
| Operating lease obligations, non-current portion | ||||||||
| Total operating lease obligations | $ | $ | ||||||
| Weighted average remaining lease term (in years) – operating leases | ||||||||
| Weighted average discount rate-operating leases | % | % | ||||||
| Supplemental cash flow information related to leases were as follows: | ||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | ||||||
| F-27 |
Future minimum payments under these lease agreements are as follows:
| December 31, | Total | |||
| 2023(remaining 3 months) | $ | |||
| 2024 | ||||
| 2025 | ||||
| Total future lease payments | $ | |||
| Less imputed interest | ( | ) | ||
| Total | $ | |||
Consulting Agreements
During
July 2015, we signed an agreement with a company to provide consulting services for
During
October 2015, the Company signed an agreement with a consultant for consulting services for a year. In connection with the agreement,
During
September 2022, the Company renewed its consulting agreement with an external consultant for a three-year term, providing for monthly
compensation of $
Litigation
CSA 8411, LLC v. Nutra Pharma Corp., Case No. CACE 18-023150
On
October 12, 2018, CSA 8411, LLC filed a lawsuit against the Company in the 17th Judicial Circuit Court in and for Broward County, Florida
(Case No. CACE 18-023150) to recover $
| F-28 |
Securities and Exchange Commission v. Nutra Pharma Corporation, Erik Deitsch, and Sean Peter McManus
On September 28, 2018, the United States Securities and Exchange Commission (the “SEC”) filed a lawsuit in the United States District Court for the Eastern District of New York (Case No. 2:18-cv-05459) against the Company, Mr. Deitsch, and Mr. McManus. The lawsuit alleges that, from July 2013 through June 2018, the Company and the other defendants’ defrauded investors by making materially false and misleading statements about the Company and violated anti-fraud and other securities laws.
On May 29, 2019 (following each of the defendants filing motions to dismiss), the SEC filed a First Amended Complaint which generally alleged the same conduct as its original Complaint, but accounted for certain guidance provided by the United States Supreme Court in a case that had been recently decided. Each of the defendants then moved to dismiss the SEC’s First Amended Complaint. On March 31, 2020, the Court entered an Order granting in part and denying in part the various motions to dismiss. Following that Order, the SEC filed a Second Amended Complaint (the operative pleading) and the defendants have filed their answers which generally deny liability. At this time, discovery is closed and the SEC has indicated an intent to file a summary judgment motion regarding certain non-fraud claims asserted in its Second Amended Complaint. The defendants have opposed the SEC’s request to file such motion(s). The Court conducted a hearing on February 23, 2021 and set an initial briefing schedule for the SEC’s Motion for Partial Summary Judgment wherein the Plaintiffs’ Motion for Partial Summary Judgment was due on April 5, 2021, the Defendants’ Consolidated (i.e., collectively, Nutra Pharma Corporation, Erik “Rik” Deitsch, and Sean McManus) Response Brief to the SEC’s Motion was due May 3, 2021, and the Plaintiffs’ Reply Brief was due on May 19, 2021. On March 23, 2021, the Plaintiff filed a Motion for Extension of Time to file the Motion for Partial Summary Judgment. On April 9, 2021, the Plaintiff filed a Motion for Partial Summary Judgment, Defendants’ filed a Memorandum of Law in Opposition to Plaintiff’s Motion on May 7, 2021, and Plaintiff filed its Reply brief on May 21, 2021.
In
July 2024, a final judgment was issued, ordering the defendant to pay $
13. RELATED PARTY TRANSACTIONS
The Company acts as a product formulator and contract manufacturer for Avini Health. The Company’s former chief executive officer is an owner of Avini Health and is its chief scientific officer.
| F-29 |
Commencing
in May 2022, the Company sublets a portion of its space to Avini Health under a one-year sublease for a monthly rent of $
During
2010 we borrowed $
As of September 30, 2023 and December 31, 2022, we had the following related party balances:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Deferred revenue to a related party | $ | $ | ||||||
| Due to officer, net | ||||||||
| Accrued payroll due to officers | ||||||||
| Accrued interest to a related party | ||||||||
For the three months ended September 30, 2023 and 2022, we had the following related party transactions:
September 30, 2023 | September 30, 2022 | |||||||
| Net sales to a related party | $ | $ | ||||||
| Bad debt expense (recovery)- related party | ( | ) | ||||||
| Interest expense to a related party | ||||||||
For the nine months ended September 30, 2023 and 2022, we had the following related party transactions:
September 30, 2023 | September 30, 2022 | |||||||
| Net sales to a related party | $ | $ | ||||||
| Bad debt expense - related party | ||||||||
| Interest expense to a related party | ||||||||
These transactions were not conducted at arm’s length and therefore may not reflect the terms that would have been agreed to with an unrelated third party.
14. SUBSEQUENT EVENTS
Convertible Promissory Notes
During the fourth quarter of 2023, we issued convertible promissory notes to the unrelated third parties for a total of $ with original issuance discount of $. The Noteholders have the right to convert the notes into shares of Common Stock at a fixed conversion price of $ per share. The notes are due one year from the execution and funding of the notes. The notes are in default and in negotiation of settlement.
| F-30 |
During the fourth quarter of 2023, the Company issued a convertible promissory note to an unrelated third party for $ with an original issue discount of $. The noteholder has the right to convert the note into shares of common stock at a fixed conversion price of $ per share. The note is due one year from its execution and funding. The note is in default and under negotiation for settlement.
During the first quarter of 2024, we issued convertible promissory notes to the unrelated third parties for a total of $ with original issuance discount of $. The Noteholders have the right to convert the note into shares of Common Stock at a fixed conversion price of $ per share. The notes are due one year from the execution and funding of the notes. The notes are in default and in negotiation of settlement.
During the first quarter of 2024, we issued convertible promissory notes to the unrelated third parties for a total of $ with original issuance discount of $. The Noteholders have the right to convert the note into shares of Common Stock at a fixed conversion price of $ per share. The notes are due one year from the execution and funding of the notes. The notes are in default and in negotiation of settlement.
During the second quarter of 2024, we issued convertible promissory notes to the unrelated third parties for a total of $ with original issuance discount of $. The Noteholders have the right to convert the note into shares of Common Stock at a fixed conversion price of $ per share. The notes are due one year from the execution and funding of the notes. The notes are in default and in negotiation of settlement.
During the second quarter of 2024, we issued convertible promissory notes to the unrelated third parties for a total of $ with original issuance discount of $. The Noteholders have the right to convert the note into shares of Common Stock at a fixed conversion price of $ per share. The notes are due one year from the execution and funding of the notes. The notes are in default and in negotiation of settlement.
During the fourth quarter of 2024, we issued convertible promissory notes to the unrelated third parties for a total of $ with original issuance discount of $. The Noteholders have the right to convert the note into shares of Common Stock at a fixed conversion price of $ per share. The notes are due one year from the execution and funding of the notes.
In January 2025, we issued a convertible promissory note to an unrelated third party for $ with original issuance discount of $. The noteholder has the option to convert the outstanding principal into shares of Common Stock at a conversion price of $ per share. In connection with the issuance of the notes, we paid % of the proceeds to a third party, which has been recorded as a debt discount. Both the original issue discount and the issuance-related costs are being amortized over the term of the note.
Between February and June 2025, we issued two convertible promissory notes to an unrelated third party for a total commitment of up to $, to be funded in tranches. As of the date of the audit report, an aggregate of $ has been funded. The notes carry an original issue discount of %, applied at the time of funding for each tranche. Each tranche matures one year from its respective execution and funding date. The noteholder has the option to convert the outstanding principal into shares of Common Stock at a conversion price of $ per share. In connection with the issuance of the notes, we paid % of the proceeds to a third party, which has been recorded as a debt discount. Both the original issue discount and the issuance-related costs are being amortized over the term of each tranche.
During April 2025, we issued convertible promissory notes to unrelated third parties for a total of $ with original issuance discount of $. The Noteholders have the right to convert the notes into shares of Common Stock at a fixed conversion price of $ per share. The notes are due one year from the execution and funding of the notes.
Common Stock Issued for Debt Modification and Penalty
During
February 2024, we issued restricted shares to a Note holder due to the default on repayments of the promissory note of $
| F-31 |
Settlement of Convertible Debt
During the fourth quarter of 2023, the Company settled convertible promissory notes of $
During
second quarter of 2024, the Company settled convertible promissory notes of $
During
third quarter of 2024, the Company settled convertible promissory notes of $
Restatement of Convertible Promissory Notes
During
the first quarter of 2024, the convertible promissory notes for a total of $
Promissory Notes
In February 2024, the Company entered into a second Purchase and Sale of Future Receipts Agreement with the same third party. Under this agreement, the buyer purchased $ of the Company’s future receivables for total proceeds of $. The Company authorized the buyer to debit its bank account at the specified remittance frequency until the full purchased amount of $ was remitted. In connection with this second transaction, the Company recorded a total debt discount of $ for loan origination fees and issuance costs, which was amortized over the term of the agreement. The outstanding balance under this agreement was fully repaid in October 2024.
In October 2024, the Company entered into a Purchase and Sale of Future Receipts Agreement with a third party. Pursuant to this agreement, the buyer purchased $ of the Company’s future receivables in exchange for total proceeds of $. The Company authorized the buyer to debit its bank account at a specified remittance frequency until the full purchased amount of $ was collected. In connection with this transaction, the Company recorded a total debt discount of $ related to loan origination fees and issuance costs, which is being amortized over the term of the agreement.
In
November 2024, the Company fully repaid the $
In December 2024, the Company entered into a Purchase and Sale of Future Receipts Agreement with a third party. Pursuant to this agreement, the buyer purchased $ of the Company’s future receivables in exchange for total proceeds of $. The Company authorized the buyer to debit its bank account at a specified remittance frequency until the full purchased amount of $ was collected. In connection with this transaction, the Company recorded a total debt discount of $ related to loan origination fees and issuance costs, which is being amortized over the term of the agreement.
Settlement of Convertible Notes Receivable
Pursuant
to the settlement with StemSation to convert notes receivable totaling $
During
October 2023 through December 2024, we purchased multiple convertible notes from the StemSation for a total of $
| F-32 |
On
July 1, 2024, the Company entered into a one-year Research Services Agreement with StemSation, to provide research and development services
on certain StemSation technologies. Under the agreement, the Company is entitled to receive $
Settlement of Promissory Note Litigation
At
December 31, 2022, the Company had a promissory note with a principal balance of $
Restatements of One Convertible Promissory Note
The
convertible promissory notes totaling $
| F-33 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
Our business during the nine months ended September 30, 2023 has focused upon marketing our homeopathic drugs for the treatment of pain:
| ● | Nyloxin (Stage 2 Pain) | |
| ● | Nyloxin Extra Strength (Stage 3 Pain) | |
| ● | Pet Pain–Away | |
| ● | Equine Pain–Away | |
| ● | Luxury Feet |
During the nine months ended September 30, 2023 and thereafter, the following has occurred:
On March 22, 2024, we announced that we had reached a settlement in the civil lawsuit brought by the SEC.
Nyloxin/Nyloxin Extra Strength
We offer Nyloxin/Nyloxin Extra Strength as our over-the-counter (OTC) pain reliever that has been clinically proven to treat moderate to severe (Stage 2) chronic pain.
Nyloxin and Nyloxin Extra Strength are available as a two-ounce topical gel for treating joint pain and pain associated with arthritis and repetitive stress, and as a one ounce oral spray for treating lower back pain, migraines, neck aches, shoulder pain, cramps, and neuropathic pain. Both the topical gel and oral spray are packaged and sold as a one-month supply.
Nyloxin and Nyloxin Extra Strength offer several benefits as a pain reliever. With increasing concern about consumers using opioid and acetaminophen-based pain relievers, the Nyloxin products provide an alternative that does not rely on opiates or non-steroidal anti-inflammatory drugs, otherwise known as NSAIDs, for their pain-relieving effects. Nyloxin also has a well-defined safety profile. Since the early 1930s, the active pharmaceutical ingredient (API) of Nyloxin, Asian cobra venom, has been studied in more than 46 human clinical studies. The data from these studies provide clinical evidence that cobra venom provides an effective treatment for pain with few side effects and has the following benefits:
| ● | safe and effective; | |
| ● | all natural; | |
| ● | long-acting; | |
| ● | easy to use; | |
| ● | non-narcotic; | |
| ● | non-addictive; and | |
| ● | analgesic and anti-inflammatory. |
Potential side effects from the use of Nyloxin are rare, but may include headache, nausea, vomiting, sore throat, allergic rhinitis and coughing.
The primary difference between Nyloxin and Nyloxin Extra Strength is the dilution level of the venom. The approximate dilution levels for Nyloxin and Nyloxin Extra Strength are as follows:
Nyloxin
| ● | Topical Gel: 30 mcg/mL | |
| ● | Oral Spray: 70 mcg/mL |
Nyloxin Extra Strength
| ● | Topical Gel: 60 mcg/mL | |
| ● | Oral Spray: 140 mcg/mL |
In December 2011, we began marketing Nyloxin and Nyloxin Extra Strength at www.nyloxin.com. Both Nyloxin and Nyloxin Extra Strength are packaged in a roll-on container, squeeze bottle and as an oral spray. Additionally, Nyloxin topical gel is available in an 8 ounce pump bottle.
We are currently marketing Nyloxin and Nyloxin Extra Strength as treatments for moderate to severe chronic pain. Nyloxin is available as an oral spray for treating back pain, neck pain, headaches, joint pain, migraines, and neuralgia and as a topical gel for treating joint pain, neck pain, arthritis pain, and pain associated with repetitive stress. Nyloxin Extra Strength is available as an oral spray and gel application for treating the same physical indications but is aimed at treating the most severe (Stage 3) pain that inhibits one’s ability to function fully.
The Nyloxin products are available for sale on the www.Nyloxin.com website, the Nyloxin Amazon storefront at www.Amazon.com/nyloxin and on the Walmart Marketplace. Nyloxin is also sold in physician offices, clinics and small-chain pharmacies.
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Nyloxin Military Strength
In December 2012, we announced the availability of Nyloxin Military Strength for sale to the United States Military and Veteran’s Administration. Over the past few years, the U.S. Department of Defense has been reporting an increase in the use and abuse of prescription medications, particularly opiates. In 2009, close to 3.8 million prescriptions for pain relievers were written in the military. This staggering number was more than a 400% increase from the number of prescriptions written in the military in 2001. But prescription drugs are not the only issue. The most common and seemingly harmless way to treat pain is with non–steroidal, anti–inflammatory drugs (NSAIDS). But there are risks. Overuse can cause nausea, vomiting, diarrhea, heartburn, ulcers and internal bleeding. In severe cases chest pain, heart failure, kidney dysfunction and life–threatening allergic reactions can occur. It is reported that approximately 7,600 people in America die from NSAID use and some 78,000 are hospitalized. Ibuprofen, also an NSAID has been of particular concern in the military. The terms “Ranger Candy” and “Military Candy” refer to the service men and women who are said to use 800mg doses of Ibuprofen to control their pain. But when taking anti–inflammatory Ibuprofen in high doses for chronic pain, there is potential for critical health risks; abuse can lead to serious stomach problems, internal bleeding and even kidney failure. There are significantly greater health risks when abuse of this drug is combined with alcohol intake. Our goal is that with Nyloxin, we can greatly reduce the instances of opiate abuse and overuse of NSAIDS in high risk groups like the US military. The Nyloxin Military Strength represents the strongest version of Nyloxin available and is approximately twice as strong as Nyloxin Extra Strength. We are working with outside consultants to register Nyloxin Military Strength and the other Nyloxin products for sale to the US government and the various arms of the military as well as the Veteran’s Administration. In February of 2018, Nyloxin was added to the Federal Supply Schedule but was subsequently removed the following week without an adequate explanation. We have continued to work with our consultants to understand why our products were improperly removed the Federal Supply Schedule and when we may be able to get re-listed on the Federal Supply Schedule for eventual sales to governmental agencies or to the US Military.
International Sales
We are pursuing international drug registrations in Canada, Mexico, India, Australia, New Zealand, Central and South America and Europe. Since European rules for homeopathic drugs are different than the rules in the US, we cannot estimate when this process will be completed. On March 25, 2013 we announced the publication of our patent and trademark for Nyloxin in India. We are actively seeking new distribution partners in India.
On May 14, 2015 we announced that we had engaged the Nature’s Clinic to begin the process of regulatory approval of our Company’s Over–the–Counter pain drug, Nyloxin for marketing and distribution in Canada. The Nature’s Clinic has already begun setting up their Chatham, Ontario warehouse. Due to lack of funding and then the subsequent COVID crisis, we have waited to complete the approval process to begin distributing Nyloxin and expect to re-engage in the process in 2026.
Additionally, we plan to complete several human clinical studies aimed at comparing the ability of Nyloxin Extra Strength to replace prescription pain relievers. We have provided protocols to several hospitals and will provide details and timelines when those protocols have been accepted. We cannot provide any timeline for these studies until adequate financing is available.
To date, our marketing efforts have been limited due to lack of funding. As sales increase, we plan to begin marketing more aggressively to increase the sales and awareness of our products.
Pet Pain–Away
During June of 2013, we announced the launch of our new homeopathic formula for the treatment of chronic pain in companion animals, Pet Pain–Away. Pet Pain–Away is a homeopathic, non–narcotic, non–addictive, over–the–counter pain reliever, primarily aimed at treating moderate to severe chronic pain in companion animals. It is specifically indicated to treat pain from hip dysplasia, arthritis pain, joint pain, and general chronic pain in dogs and cats. The initial product run was completed in December of 2014 and launched through Lumaxa Distributors on December 19, 2014.
In May of 2016, we signed a license agreement to begin the process of creating an infomercial (Direct Response) campaign for Pet Pain–Away. In November of 2016, we announced the license agreement with DEG Productions for the marketing and distribution of Pet Pain–Away globally. DEG created their own website (www.getpetpainaway.com) and began airing commercials in December of 2016.
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In February of 2020, we took back the marketing of Pet Pain-Away and are currently selling the product on Amazon.com and through www.petpainaway.com
Luxury Feet
In June of 2017, we announced the creation of Luxury Feet; an over–the–counter pain reliever and anti–inflammatory product that is designed for women who experience pain or discomfort due to high heels and stilettos. We announced the official marketing launch of Luxury Feet in March of 2021. The product is currently available through www.luxuryfeet.com and on Amazon.
Equine Pain-Away (Formerly Equine Nyloxin)
In October of 2013, we announced that we were in the process of launching the newest addition to our line of homeopathic treatments for chronic pain, Equine Nyloxin. We had been working with trainers and veterinarians in the equine industry and have already identified distributors for the product. The Equine Nyloxin represents the Company’s first topical solution for the animal market. Equine Nyloxin was rebranded as Equine Pain-Away™ and officially rolled into the market in October of 2019. Equine Pain-Away is being marketed through several retailers and online at www.EquinePainAway.com and on Amazon.
Drug Discovery and Pipeline
Nutra Pharma is developing proprietary therapeutic protein products for the biologics market. The Company has two leading drug candidates: RPI–MN and RPI–78M.
RPI–MN
RPI–MN inhibits the entry of several viruses that are known to cause severe neurological damage in such diseases as encephalitis and Human Immunodeficiency Virus (HIV). It is being developed first for the treatment of HIV.
RPI–78M
RPI–78M is being developed for the treatment of Multiple Sclerosis (MS) and Adrenomyeloneuropathy (AMN). Other neurological and autoimmune disorders that may be served by RPI–78M include Myasthenia Gravis (MG), Rheumatoid Arthritis (RA) and Amyotrophic Lateral Sclerosis (ALS).
RPI–78M and RPI–MN contain anticholinergic peptides that recognize the same receptors as nicotine (acetylcholine receptors) but have the opposite effect. In a specific chemical process unique to Nutra Pharma, the drugs are created through a process of chemical modification.
In September, 2015 RPI–78M was granted Orphan Status by the FDA for the treatment of pediatric Multiple Sclerosis. This allows for much shorter timelines to drug approval, waiver of FDA fees (around $2.5M), rolling review and fast–track approval. Orphan status also allows for potential grant money and other funding opportunities through the clinical process.
RPI–MN and RPI–78M possess several desirable properties as drugs:
● They lack measurable toxicity but are still capable of attaching to and affecting the target site on the nerve cells. This means that patients cannot overdose.
● They display no serious adverse side effects following years of investigations in humans and animals.
● They are extremely stable and resistant to heat, which gives the drugs a long shelf life. The drugs’ stability has been determined to be over 4 years at room temperature. This is extremely unusual for a biologic drug.
● RPI–78M may be administered orally –– a first for a biologic MS drug. This will present MS patients with additional quality of life benefits by eliminating the requirement for routine injections.
● They are easy to administer.
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We are currently working with consultants to develop trial protocols for a Phase I/II trial for the use of RPI–78M in the treatment of Pediatric Multiple Sclerosis. Our goal is to initiate these trials in 2026.
Critical Accounting Policies and Estimates
Our condensed consolidated unaudited financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) applied on a consistent basis. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our critical accounting policies and estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K filed with the SEC on September 3, 2025. We evaluated the applicability of ASU 2016-03, Intangibles – Goodwill and Other (Topic 350): Simplifying the Transition to the Equity Method of Accounting, which became effective for us in 2023, and determined that it did not impact our financial statements. Accordingly, there were no material changes to our accounting policies during the nine months ended September 30, 2023.
We regularly evaluate the accounting policies and estimates that we use to prepare our condensed consolidated financial statements. In general, management’s estimates are based on historical experience, information from third party professionals, and various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management under different and/or future circumstances.
Results of Operations – Comparison of Three Months Periods Ended September 30, 2023 and 2022
Net sales to unrelated customers were $51,612 for the three months ended September 30, 2023, compared to $24,624 for the same period in 2022—an increase of $26,988, or approximately 109.6%. The increase primarily reflects higher sales of Nyloxin and Pet Pain-Away.
Net sales to a related party were $88,215 for the three months ended September 30, 2023, compared to $84,580 for the same period in 2022—an increase of $3,635, or approximately 4.3%. The slight increase reflects a stabilization of recurring orders and steady customer demand as the related party’s sales levels normalized following the initial product rollout in March 2022.
Cost of sales for the three–month period ended September 30, 2023 is $24,845 compared to $41,051 for the three–month period September 30, 2022. Our cost of sales includes the direct costs associated with manufacturing, shipping and handling costs. Our gross profit margin for the three–month period ended September 30, 2023 is $114,982 or 82.23% compared to $68,153 or 62.41% for the three–month period ended September 30, 2022. The margin improvement primarily reflects lower manufacturing costs associated with sales to a related party.
Selling, general and administrative expenses decreased $45,724 or 14.01% from $326,473 for the quarter ended September 30, 2022 to $280,749 for the quarter ended September 30, 2023, generally due to the overall decrease in professional fees as business activity slowed and operations were limited in response to the unresolved lawsuit. In addition, we had a bad debt expense of $0 and a bad debt recovery of $21,799 from the receivables from companies controlled by the Company’s former CEO for the three months ended September 30, 2023 and 2022, respectively.
Other income was $300 and $4,210 for the three months ended September 30, 2023 and 2022, respectively. The amounts relate to the amortization of debt discounts on convertible notes receivable.
Interest expense, including related party interest expense, decreased $114,842 or 57.51%, from $199,696 for the quarter ended September 30, 2022 to $84,854 for the quarter ended September 30, 2023. This decrease was primarily due to the decrease in amortization of loan discounts in the quarter ended September 30, 2023 compared to the quarter ended September 30, 2022.
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We carry certain of our debentures and common stock warrants at fair value. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted, and all additional convertible debt, options and warrants are included in the value of the derivative liabilities. For the three months ended September 30, 2023 and 2022, the liability related to these hybrid instruments fluctuated, resulting in a loss of $26,665 and a gain of $1,019,736, respectively. Interest expense on these debentures is included in the fair value loss in the accompanying unaudited condensed consolidated statements of operations.
Loss on settlement of debts increased $1,500 or 100%, from a loss of $0 for the three months ended September 30, 2022 to a loss of $1,500 for the three months ended September 30, 2023. The increase reflects a debt settlement recognized during the current quarter, whereas no such settlements occurred in the comparable period of 2022.
As a result of the foregoing, our net income decreased by $855,715 or 148.25%, from net income of $577,229 for the quarter ended September 30, 2022 to a net loss of $278,486 for the quarter ended September 30, 2023.
Results of Operations – Comparison of Nine Months Periods Ended September 30, 2023 and September 30, 2022
Net sales to unrelated customers were $158,532 for the nine months ended September 30, 2023, compared to $66,814 for the same period in 2022—an increase of $91,718, or approximately 137.27%. The increase primarily reflects higher sales of Nyloxin and Pet Pain-Away.
Net sales to a related party were $301,206 for the nine months ended September 30, 2023, compared to $154,966 for the same period in 2022—an increase of $146,240, or approximately 94.37%. The increase primarily reflects stronger demand for existing products. The prior-year same period included only initial sales following the products launch in March 2022, before full market adoption.
Cost of sales for the nine–month period ended September 30, 2023 is $157,022 compared to $116,254 for the nine–month period September 30, 2022. Our cost of sales includes the direct costs associated with manufacturing, shipping and handling costs. Our gross profit margin for the nine–month period ended September 30, 2023 is $302,716 or 65.85% compared to $105,526 or 47.6% for the nine–month period ended September 30, 2022. The margin improvement primarily reflects lower manufacturing costs associated with sales to a related party.
Selling, general and administrative expenses decreased $47,549 or 4.8% from $991,557 for the nine months ended September 30, 2022 to $944,008 for the nine months ended September 30, 2023. The decrease was primarily driven by lower professional fees, as operations were limited due to the unresolved lawsuit, partially offset by higher legal expenses. In addition, we incurred bad debt expense of $105,465 and $0 from the receivables from companies controlled by the Company’s former CEO for the nine months ended September 30, 2023 and 2022, respectively.
Other income was $33,094 and $16,215 for the nine months ended September 30, 2023 and 2022, respectively. The amounts primarily relate to services rendered in exchange for a convertible note receivable and the amortization of debt discounts on convertible notes receivable.
Interest expense, including related party interest expense, decreased $274,886 or 46.37%, from $592,815 for the nine months ended September 30, 2022 to $317,929 for the nine months ended September 30, 2022. This decrease was primarily due to decrease in amortization of loan discounts in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.
We carry certain of our debentures and common stock warrants at fair value. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted, and all additional convertible debt, options and warrants are included in the value of the derivative liabilities. For the nine months ended September 30, 2023 and 2022, the liability related to these hybrid instruments fluctuated, resulting in a loss of $116,850 and a gain of $6,569,581, respectively. Interest expense on these debentures is included in the fair value loss in the accompanying unaudited condensed consolidated statements of operations.
Loss on settlement of debts decreased $149,709 or 98.8%, from a loss of $151,559 for the nine months ended September 30, 2022 to a loss of $1,850 for the nine months ended September 30, 2023. This decrease in loss was primarily due to fewer debts being settled in the nine months ended September 30, 2023 compared to the same period in 2022.
As a result of the foregoing, our net income decreased by $6,095,183 or 123.26%, from an income of $4,944,891 for the nine months ended September 30, 2022 to a loss of $1,150,292 for the nine months ended September 30, 2023.
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Liquidity and Capital Resources
We have incurred significant losses from operations and working capital and stockholders’ deficits raise substantial doubt about our ability to continue as a going concern. Further, as stated in Note 1 to our condensed consolidated unaudited financial statements for the period ended September 30, 2023, we have an accumulated deficit of $74,702,410 at September 30, 2023. In addition, we have a significant amount of indebtedness in default, a working capital deficit of $13,586,792 and a stockholders’ deficit of $13,525,244 at September 30, 2023.
Our ability to continue as a going concern is contingent upon our ability to secure additional financing, increase ownership equity, and attain profitable operations. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate. As of the date of the filing of this report, we do not believe that our source of cash is adequate for the next 12 months of operation and there is substantial doubt about our ability to continue as a going concern. In addition, our common stock is presently on the OTC Market Group’s Expert Market, which means that the Company’s common stock is not eligible for proprietary broker-deal quotes.
Current operations are primarily being funded through a combination of product sales, promissory notes and convertible notes. During the nine months ended September 30, 2023, we raised $36,500 through the issuance of convertible notes and $182,200 through the issuance of a promissory notes.
We expect to utilize the proceeds from these funds and additional capital to manufacture Nyloxin and Pet Pain–Away and reduce our debt level. We estimate that we will require approximately $600,000 to fund our existing operations over the next twelve months. These costs include: (i) compensation for six (6) full-time employees; (ii) compensation for various consultants who we deem critical to our business; (iii) general office expenses including rent and utilities; (iv) product liability insurance; and (v) outside legal and accounting services. These costs reflected in (i) – (v) do not include research and development costs or other costs associated with clinical studies.
Our ability to meet our future operating expenses is highly dependent on the amount of such future revenues. To the extent that future revenues from the sales of Nyloxin and Pet Pain-Away are insufficient to cover our operating expenses we may need to raise additional equity capital, which could result in substantial dilution to existing shareholders. There can be no assurance that we will be able to raise sufficient equity capital to fund our working capital requirements on terms acceptable to us, or at all. We may also seek additional loans from our officers and directors; however, there can be no assurance that we will be successful in securing such additional loans.
The accompanying Unaudited Condensed Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Impact of COVID-19 on our Operations
The COVID-19 pandemic did not have a material impact on the Company’s business, operations, or financial results for the periods presented. While the pandemic created significant global disruption in prior years, the Company’s operations have returned to normal, and management does not currently expect COVID-19 to have a material adverse effect on future results. However, the Company will continue to monitor any public health developments and related economic conditions that could affect its business.
Uncertainties and Trends
Our operations and possible revenues are dependent now and in the future upon the following factors:
| ● | Whether we successfully develop and commercialize products from our research and development activities. | |
| ● | If we fail to compete effectively in the intensely competitive biotechnology area, our operations and market position will be negatively impacted. | |
| ● | If we fail to successfully execute our planned partnering and out-licensing of products or technologies, our future performance will be adversely affected. | |
| ● | The recent economic downturn and related credit and financial market crisis may adversely affect our ability to obtain financing, conduct our operations and realize opportunities to successfully bring our technologies to market. | |
| ● | Biotechnology industry related litigation is substantial and may continue to rise, leading to greater costs and unpredictable litigation. | |
| ● | If we fail to comply with extensive legal/regulatory requirements affecting the healthcare industry, we will face increased costs, and possibly penalties and business losses. |
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Off–Balance Sheet Arrangements
We have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under whom we have:
| ● | An obligation under a guarantee contract. | |
| ● | A retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets. | |
| ● | Any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument. | |
| ● | Any obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by us and material to us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us. |
We do not have any off-balance sheet arrangements or commitments that have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material, other than those which may be disclosed in this Management’s Discussion and Analysis of Financial Condition and the audited Consolidated Financial Statements and related notes.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of September 30, 2023, we carried out an evaluation under the supervision and the participation of our Chief Executive Officer/Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of September 30, 2023, as defined in Rule 13a–15 under the Securities Exchange Act of 1934 (“Exchange Act”). Based on that evaluation, our management, including our Chief Executive Officer/Chief Financial Officer, concluded that, because of the material weaknesses in internal control over financial reporting discussed in Section 9A of our annual report on Form 10–K, our disclosure controls and procedures were not effective, at a reasonable assurance level, as of September 30, 2023. In light of this, we performed additional post–closing procedures and analyses in order to prepare the Condensed Consolidated Unaudited Financial Statements included in this report. As a result of these procedures, we believe our Condensed Consolidated Unaudited Financial Statements included in this report present fairly, in all material respects, our financial condition, results of operations and cash flows for the periods presented. A control system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, with the company have been detected.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, who also acted as our Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a–15 or 15d–15 under the Exchange Act that occurred during the quarter ended September 30, 2023 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
CSA 8411, LLC v. Nutra Pharma Corp., Case No. CACE 18-023150
On October 12, 2018, CSA 8411, LLC filed a lawsuit against the Company in the 17th Judicial Circuit Court in and for Broward County, Florida (Case No. CACE 18-023150) to recover $100,000 allegedly owed under an amended promissory note dated April 12, 2017. On November 1, 2018, the Company filed its Answer and Affirmative Defenses to the Complaint. The Company believes that this lawsuit is without merit. Moreover, the Company believes that it has a number of valid defenses to this claim. Among other things, the owner of CSA 8411, LLC violated the terms of a Binding Memorandum of Understanding by failing to invest in the Company and fraudulently inducing the Company to enter into the subject amended promissory note (contrary to the Get Credit Healthy lawsuit discussed above, we are certain that this individual is the majority owner of CSA 8411, LLC). Opposing counsel reached out to schedule mediation, and mediation was set for June 21, 2019 in Plantation, FL, however, the mediation was unsuccessful. Defendant also filed affirmative claims against the Plaintiff, its owner Dan Oran and several related entities. On May 19, 2025, the Company entered into a settlement agreement with the counterparty, under which the total obligation was resolved for $125,000. The settlement terms include an initial payment of $35,000 made on May 19, 2025, followed by nine monthly payments of $10,000 each. The agreement also provides that, in the event of a payment default not cured within five business days of written notice, the counterparty may seek entry of a consent judgment against the Company in the amount of $400,000, reduced by any amounts already paid under the settlement. The total liability recorded prior to the settlement on May 19, 2025 was $178,526, consisting of $91,156 in principal and $87,370 in accrued interest. The settlement of $125,000 will result in a gain on settlement of $53,526, which will be recognized upon full satisfaction of the payment terms.
Securities and Exchange Commission v. Nutra Pharma Corporation, Erik Deitsch, and Sean Peter McManus
On September 28, 2018, the United States Securities and Exchange Commission (the “SEC”) filed a lawsuit in the United States District Court for the Eastern District of New York (Case No. 2:18-cv-05459) against the Company, Mr. Deitsch, and Mr. McManus. The lawsuit alleges that, from July 2013 through June 2018, the Company and the other defendants’ defrauded investors by making materially false and misleading statements about the Company and violated anti-fraud and other securities laws.
The violations alleged against the Company by the SEC include: (a) raising over $920,000 in at least two private placement offerings for which the Company failed to file required registration statements with the SEC; (b) issuing a series of materially false or misleading press releases; (c) making false statements in at least one Form 10-Q; and (d) failing to make required public filings with the SEC to disclose the Company’s issuance of millions of shares of stock. The lawsuit makes additional allegations against Mr. McManus and Mr. Deitsch, including that Mr. McManus acted as a broker without SEC registration and defrauded at least one investor by making false statements about the Company, that Mr. Deitsch engaged in manipulative trades of the Company’s stock by offering to pay more for shares he was purchasing than the amount the seller was willing to take, and that Mr. Deitsch failed to make required public filings with the SEC. The lawsuit seeks both injunctive and monetary relief.
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On May 29, 2019 (following each of the defendants filing motions to dismiss), the SEC filed a First Amended Complaint which generally alleged the same conduct as its original Complaint, but accounted for certain guidance provided by the United States Supreme Court in a case that had been recently decided. Each of the defendants then moved to dismiss the SEC’s First Amended Complaint. On March 31, 2020, the Court entered an Order granting in part and denying in part the various motions to dismiss. Following that Order, the SEC filed a Second Amended Complaint (the operative pleading) and the defendants have filed their answers which generally deny liability. At this time, discovery is closed and the SEC has indicated an intent to file a summary judgment motion regarding certain non-fraud claims asserted in its Second Amended Complaint. The defendants have opposed the SEC’s request to file such motion(s). The Court conducted a hearing on February 23, 2021 and set an initial briefing schedule for the SEC’s Motion for Partial Summary Judgment wherein the Plaintiffs’ Motion for Partial Summary Judgment was due on April 5, 2021, the Defendants’ Consolidated (i.e., collectively, Nutra Pharma Corporation, Erik “Rik” Deitsch, and Sean McManus) Response Brief to the SEC’s Motion was due May 3, 2021, and the Plaintiffs’ Reply Brief was due on May 19, 2021. On March 23, 2021, the Plaintiff filed a Motion for Extension of Time to file the Motion for Partial Summary Judgment. On April 9, 2021, the Plaintiff filed a Motion for Partial Summary Judgment, Defendants’ filed a Memorandum of Law in Opposition to Plaintiff’s Motion on May 7, 2021, and Plaintiff filed its Reply brief on May 21, 2021.
In July 2024, a final judgment was issued, ordering the defendant to pay $520,940 in disgorgement, $59,295 in prejudgment interest, and a $100,000 civil penalty. As of September 30, 2023 and December 31, 2022, the Company had accrued a total legal settlement amount of $680,235 (See Note 9).
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During February 2024, we issued 35,000,000 restricted shares to a Note holder due to the default on repayments of the promissory note of $183,619 amended in February 2022. The shares were valued at a fair value of $3,500.
Pursuant to the Note agreement in the amount up to $1,000,000 signed in February 2019, As of December 31, 2022, the remaining balance of $17,917 is due September 2023. In August 2023, the Noteholder received 25,000,000 shares of our restricted common stock in satisfaction of the $12,500 of the Note with a fair value of $2,500.
Item 3. Defaults Upon Senior Securities
Debt owed to a Director
During 2010 we borrowed $200,000 from one of our directors. Under the terms of the loan agreement, this loan was expected to be repaid in nine months to a year from the date of the loan along with interest calculated at 10% for the first month plus 12% after 30 days from funding. We are in default regarding this loan. The loan is under personal guarantee by Mr. Deitsch. We repaid the principal balance in full as of December 31, 2016. We repaid $40,000 of the accrued interest in cash during the first and second quarters of 2021, and $10,000 of accrued interest in common stocks during the fourth quarter of 2021. During the first quarter of 2022, we repaid $5,000 of accrued interest. In April 2022, we repaid $10,000 of accrued interest. At September 30, 2023 and December 31, 2022, we owed this director accrued interest of $163,771 and $149,909, respectively.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None
Item 6. Exhibits
| Exhibit No. | Title | |
| 31.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002. | |
| 32.1 | Certification of Chief Executive Officer 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.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NUTRA PHARMA CORP. | |
| Registrant | |
| Dated: October 28, 2025 | /s/ Michael Flax, DDS |
| Michael Flax, DDS | |
| Chief Executive Officer/Chief Financial Officer |
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