Innoveren Scientific, Inc. - Quarter Report: 2023 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2023

or

For the transition period from ___________ to ____________

Commission file number: 001-36763

INNOVEREN SCIENTIFIC, INC

(Exact name of registrant as specified in its charter)

(844) 633-6839

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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 provided 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 November 10, 2023, 712,710 shares of the registrant’s common stock were outstanding.

INNOVEREN SCIENTIFIC, INC AND SUBSIDIARIES

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined under United States federal securities laws. These statements involve known and unknown risks, uncertainties, and other factors that may cause the Company’s actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although the Company believes that it has a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by the Company and its projections of the future, about which it cannot be certain. As a result of these factors, the Company cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by the Company, or any other person, that it will achieve its objectives and plans in any specified time frame, or at all. The Company does not undertake to update any of the forward-looking statements after the date of this Quarterly Report, except to the extent required by applicable securities laws.

Item 1. Financial Statements

INNOVEREN SCIENTIFIC, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See accompanying notes to the consolidated financial statements

INNOVEREN SCIENTIFIC, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to the consolidated financial statements

INNOVEREN SCIENTIFIC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

For the three months and six months ended June 30, 2023 and 2022

(Unaudited)

See accompanying notes to the consolidated financial statements

INNOVEREN SCIENTIFIC, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to the consolidated financial statements

INNOVEREN SCIENTIFIC, INC

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Description of the Company

DESCRIPTION OF THE COMPANY

On July 5, 2023, Innoveren Scientific, Inc. (the “Company formerly known as H-CYTE, Inc.”) filed with the Secretary of State of the State of Nevada a Certificate of Amendment to Second Amended and Restated Article of Incorporation to change the corporate name from H-Cyte, Inc. to Innoveren Scientific, Inc. The name change and Company’s new symbol, IVRN, became effective with FINRA on July 10, 2023.

Innoveren Scientific, Inc (“the Company”) has evolved from focusing on treating chronic lung conditions after the closure of its lung treatment clinics due to COVID-19. The Company is currently focusing on acquiring and developing early-stage companies or their technologies in the areas of therapeutics, medical devices, and diagnostics. The goal is to develop these companies and incubate their technologies to meaningful clinical inflection points.

On June 3, 2022, the Company closed its clinic in Scottsdale, Arizona. The Company has closed all of its clinical operations in the autologous infusion therapy business which delivered treatments for patients with chronic respiratory and pulmonary disorders. The Company will continue to pursue Food and Drug Administration (“FDA”) approval of the device that was utilized in the treatment provided at the clinics. The Company also has a continued interest in the commercialization of the DenerveX device through a joint venture (see Note 11 – Subsequent Events). The Company has implemented the transition into a biologics and therapeutic device incubator company to bring new technologies to market.

The consolidated results for Innoveren Scientific, Inc include the following wholly-owned subsidiaries: H-CYTE Management, LLC, Medovex Corp, Cognitive Health Institute, LLC, and Lung Institute Tampa, LLC and the results include Lung Institute Dallas, LLC (“LI Dallas”), Lung Institute Nashville, LLC (“LI Nashville”), Lung Institute Pittsburgh, LLC (“LI Pittsburgh”), and Lung Institute Scottsdale, LLC (“LI Scottsdale”), as Variable Interest Entities (“VIEs”). Additionally, H-CYTE Management, LLC was the operator and manager of the various Lung Health Institute (LHI) clinics: LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale. The LI Dallas and LI Pittsburgh clinics did not reopen in 2020 after the temporary closure of all LI clinics due to COVID-19. During the first quarter of 2022, the Company closed the LI Tampa and LI Nashville clinics. During the second quarter of 2022, the Company closed the LI Scottsdale clinic. All LHI clinics are closed as of June 30, 2023. The Company leases a shared office space for its corporate address as the Company’s employees continue to work remotely.

On June 10, 2022, the Company amended (the “Amendment”) its Articles of Incorporation to effectuate a one-for-one thousand reverse stock split (the “Reverse Split”) of its common stock. The Reverse Split was approved by FINRA on June 10, 2022 and effectuated on June 13, 2022. Pursuant to the Amendment, the Company also reduced the authorized shares of common stock to 500,000,000. As a result of the Reverse Split, as of June 30, 2023, the Company has 661,345 shares of common stock outstanding and 438,776,170 shares of Series A Preferred Stock outstanding. As a result of the Reverse Stock Split, the Series A Preferred Stock conversion ratio is now one thousand shares of Series A Preferred Stock converts into one share of common stock. Accordingly, the 438,776,170 outstanding shares of Series A Preferred Stock are now convertible into an aggregate of 438,776 shares of common stock.

On September 7, 2022, the Company acquired all of the membership interests, with common stock, of Jantibody LLC (“Jantibody”), a Nevada limited liability company. Jantibody is focused on the development of novel proprietary immunotherapies targeted towards ovarian cancer, pancreatic cancer, and mesothelioma (see Note 9).

On December 22, 2022, the Company acquired all the membership interests, with common stock, in Scion Solutions, LLC (“Scion”). Scion is a life sciences company that has developed a new technology in regenerative medicine specifically for limb salvage. Their proprietary product SkinDisc (patent pending) is a combination of stem cells and several other molecular components that stimulate tissue regeneration (see Note 9).

Note 2 – Basis of presentation

BASIS OF PRESENTATION

The accompanying interim consolidated financial statements have been prepared based upon U.S. Securities and Exchange Commission rules that permit reduced disclosure for interim periods. Therefore, they do not include all information and footnote disclosures necessary for a complete presentation of the Company’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. The Company filed audited consolidated financial statements as of and for the fiscal years ended December 31, 2022 and 2021, which included all information and notes necessary for such complete presentation in conjunction with its 2022 Annual Report on Form 10-K.

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

The results of operations for the interim period ended June 30, 2023, are not necessarily indicative of the results to be expected for any future period or the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022, which are contained in the Company’s 2022 Annual Report on Form 10-K. For further discussion refer to Note 2 – “Basis Of Presentation And Summary of Significant Accounting Policies” to the consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Note 3 – Liquidity, Going Concern and Sources of Liquidity

LIQUIDITY, GOING CONCERN AND SOURCES OF LIQUIDITY

The Company generated net income (loss) of approximately $820,000 and ($1,270,000) for the three and six months ended June 30, 2023. The Company has historically incurred losses from operations and expects to continue to generate negative cash flows as it implements its plan around acquiring and developing early-stage companies or their technologies in the areas of therapeutics, medical devices, and diagnostics. The consolidated financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) as applicable to a going concern.

The Company had cash on hand of approximately $13,000 as of June 30, 2023 and approximately $150,000, as of November 9, 2023. The Company’s cash is insufficient to fund its operations over the next year and the Company is currently working to obtain additional debt or equity financing to help support short-term working capital needs.

There can be no assurance that the Company will be able to raise additional funds or that the terms and conditions of any future financings will be workable or acceptable to the Company or its shareholders. If the Company is unable to fund its operations from existing cash on hand, operating cash flows, additional borrowings, or raising equity capital, the Company may be forced to cease operations. The 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 the Company be unable to continue as a going concern.

On February 24, 2023, the Company and certain investors entered into Securities Purchase Agreements (the “SPA”), whereby the Company sold and issued to the certain investors an aggregate of three hundred thousand dollars ($300,000) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”). In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company extended this offering to June 30, 2023, per terms of the agreement.

The Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the SPA, the Company also issued Common Stock Purchase Warrants to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial issue date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company, dated February 24, 2023. The Company issued Warrants to purchase an aggregate of 30,000 shares of Common Stock. The exercise price per share of the Common Stock under these Warrants is $2.00.

On February 28, 2023, the Company entered into a securities purchase agreement for a total of $150,000 with an accredited investor. The note issued is convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The note bears interest at 10% and is due one year from issuance. For the first six months, the Company has the right to prepay the note at a premium of between 25% and 40% depending on when it is repaid.

On March 27, 2023, the Company and three related party investors entered into Securities Purchase Agreements (the “SPA”), whereby, the Company sold and issued to the certain investors, an aggregate of one hundred twenty five thousand dollars ($125,000) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”). On April 12, 2023, the Company and an additional investor entered into the SPA, whereby, the Company sold and issued an aggregate of thirty five thousand dollars ($35,000) of the Company’s Notes. In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company extended this offering to June 30, 2023, per terms of the agreement.

The March 27, 2023 Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. The April 12, 2023 Note has a maturity date 60 days from issuance. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum and will be calculated on an actual/365-day basis. The Company defaulted on this note as of June 12, 2023, which triggered an increase of interest from 8% to 12%. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the SPA, the Company also issued Common Stock Purchase Warrants to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial issue date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company. The Company issued Warrants to purchase an aggregate of 12,500 shares of Common Stock. The exercise price per share of the Common Stock under these Warrants is $2.00.

Note 4 – Fair Value of Financial Instruments

 FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures certain financial instruments and certain financial instruments with related parties at fair value on a recurring basis. The Company elected the fair value option of accounting for certain debt instruments. Under the fair value option, the financial instrument is initially measured at its issue date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis each reporting period with the resulting fair value adjustment recognized as other income (expense) in the consolidated statement of operations. As of June 30, 2023, the fair value of these instruments was as follows:

 SCHEDULE OF FAIR VALUE INSTRUMENT

The following is a reconciliation of the beginning and ending balances for the Convertible Notes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2023:

 SCHEDULE OF CONVERTIBLE NOTE MEASURED AT FAIR VALUE

The estimated fair values reported utilize the Company’s common stock price along with certain Level 3 inputs, as discussed below, in the development of Monte Carlo simulation models. The estimated fair values are subjective and are affected by changes in inputs to the valuation models /analyses, including the Company’s common stock price, the Company’s dividend yield, risk-free rates based on U.S. Treasury security yields, and certain other Level-3 inputs including, assumptions regarding the estimated volatility in the value of the Company’s common stock price, the probability of a Qualified Offering, the estimated price of a Qualified Offering, and credit-risk adjusted discount rates. Changes in these assumptions can materially affect the estimated fair values.

Note 5 – Related Party Transactions

 RELATED PARTY TRANSACTIONS

Officers and Board Members and Related Expenses

On January 12, 2021, Mr. Raymond Monteleone was appointed as Chairman of the Board, Audit Committee Chair, and Compensation Committee Chair. There are understandings between the Company and Mr. Monteleone for him to receive $7,500 per month to serve on the Board of Directors and an additional $2,500 per quarter to serve as Chairman of the Board, Audit Committee Chair, and Compensation Committee Chair. Effective July 1, 2022, due to lack of working capital, Mr. Monteleone receives $3,750 per month to serve on the Board of Directors and to serve as Chairman of the Board, Audit Committee Chair, and Compensation Committee Chair. For the three months and six months ended June 30, 2023 the Company expensed $11,250 and $22,500, respectively, for board of director fees to Mr. Monteleone. For the three months and six months ended June 30, 2022 the Company expensed $22,500 and $47,500, respectively, for board of director fees to Mr. Monteleone. Due to lack of financial resources, the Company has been unable to pay Mr. Monteleone for his services totaling $46,250, which is included in accounts payable as of June 30, 2023.

On January 12, 2021, Mr. William Horne stepped down as Chairman of the Board. Mr. Horne will remain a member of the Board. Mr. Horne agreed to continue to defer the $108,000 in base salary deferred by him in 2018 until such time as there is a positive cash flow to meet the Company’s financial obligations and then the Company and Mr. Horne will work together in good faith to negotiate a payment plan for such deferred salary. Effective December 1, 2021, Mr. Horne will receive $5,000 per month to serve on the Board of Directors. Effective July 1, 2022, due to lack of working capital, Mr. Horne receives $2,500 per month to serve on the Board of Directors. For the three months and six months ended June 30, 2023, the Company expensed approximately $7,500 and $15,000, respectively, in compensation and board of director fees to Mr. Horne. For the three months and six months ended June 30, 2022 the Company expensed $15,000 and $35,000 respectively, for board of director fees to Mr. Horne. Due to lack of financial resources, the Company has been unable to pay Mr. Horne for his services totaling $32,500, which is included in accounts payable as of June 30, 2023.

Mr. Richard Rosenblum entered into an oral agreement with the Company effective January 17, 2022, in which Mr. Rosenblum will receive $5,000 per month to serve on the Board of Directors. Effective July 1, 2022, due to lack of working capital, Mr. Rosenblum receives $2,500 per month to serve on the Board of Directors. For the three and six months ended June 30, 2023 the Company expensed $7,500 and $15,000, for board of director fees to Mr. Rosenblum. For the three months and six months ended June 30, 2022 the Company expensed $15,000 and $27,500, respectively, for board of director fees to Mr. Rosenblum. Due to lack of financial resources, the Company has been unable to pay Mr. Rosenblum for his services totaling $32,500, which is included in accounts payable as of June 30, 2023.

Mr. Matthew Anderer entered into an oral agreement with the Company effective January 17, 2022, in which Mr. Anderer will receive $5,000 per month to serve on the Board of Directors. Effective July 1, 2022, due to lack of working capital, Mr. Anderer receives $2,500 per month to serve on the Board of Directors. For the three month and six months ended June 30, 2023 the Company expensed $7,500 and $15,000, respectively, for board of director fees to Mr. Anderer. For the three months and six months ended June 30, 2022 the Company expensed $15,000 and $27,500, respectively, for board of director fees to Mr. Anderer. Due to lack of financial resources, the Company has been unable to pay Mr. Anderer for his services totaling $32,500, which is included in accounts payable as of June 30, 2023.

Debt and Other Obligations

Convertible Notes Payable

On April 1, 2021, the Company, entered into a Secured Convertible Note Purchase Agreement (the “April 2021 Note Purchase Agreement”) with five (5) related party investors (the “Holders”). Pursuant to the terms of the April 2021 Note Purchase Agreement, the Company sold promissory notes in the aggregate principal amount of $2,575,000 maturing on June 17, 2022 with an annual interest rate of 8%. The Notes are convertible into shares of Common Stock at a discount of 20% to the price paid for such New Securities in the next round of financing that meets the definition of Qualified Financing as defined in the April 2021 Note Purchase Agreement. The Notes are secured by the assets of the Company under a security agreement with the Holders. The lead investor of the April 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $1,500,000 of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $25,000 as part of the April 2021 Note Purchase Agreement. The Company entered into an agreement with the noteholders to extend the maturity of the outstanding notes until July 31, 2024.

On October 14, 2021, the Company entered into the Second Closing Bring Down Agreement (the “October 2021 Note Purchase Agreement”) whereby the five (5) related party investors who had entered into the April 2021 Note Purchase Agreement purchased new notes in the Company in the aggregate principal amount of $750,000. The Notes are due and payable on June 17, 2022 and bear interest at an annual rate of 8%. The Notes are convertible into shares of Common Stock at a discount of 20% to the price paid for such New Securities in the next financing that meets the definition of a Qualified Financing as defined in the Note Purchase Agreement. The Notes are secured by all of the assets of the Company under a security agreement with the Holders. The lead investor of the October 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $437,000 of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $7,000 as part of the October 2021 Note Purchase Agreement. The Company entered into an agreement with the noteholders to extend the maturity of the outstanding notes until July 31, 2024.

On February 22, 2022, the Company entered into a Debt Conversion Agreement (the “Amendment Agreement”) which i) provided for an additional round of convertible debt financing (“Tranche 2 Notes”) of up to $500,000 and ii) amended the conversion price on the convertible notes issued April 1, 2021 and October 8, 2021 (“Tranche 1 Notes”) from 80% of the price paid in a Qualified Financing (proceeds of at least $15 million), to the lesser of (x) $0.002 and (y) the price paid in a Qualified Financing (proceeds of at least $10 million). The Amendment Agreement also provides the following Milestone Payments:

The Milestone Payments are not to exceed $2 million, and the Amendment Agreement also specifies that a Qualified Financing will not occur prior to the closing of the acquisition of Jantibody, LLC.

The Company evaluated the Amendment Agreement under ASC 470-50, “Debt – Modification and Extinguishment”, and concluded that probability of having to pay a Milestone payment was minimal and the change in the fair value of the conversion feature was not material. The Amendment did not cause a material change in cash flows so extinguishment accounting was not applicable.

On April 29, 2022, the Company entered into an Amended and Restated Note Conversion Agreement (the “Note Conversion Agreement”) with certain holders of its Tranche 1 Notes (i) providing for a conversion price equal to the lesser of (x) $0.002 per share (pre-split) and (y) the price per share paid by the investors in a Qualified Financing for such New Securities purchased for cash and not through conversion of Notes (as such terms are defined in the Note Conversion Agreement), in each case subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization, (ii) automatic conversion upon the occurrence of a Qualified Financing, and (iii) amendment of the maturity date from March 31, 2022 to June 17, 2022 (the “New Notes”). Upon the effective date of the Company’s 1,000-1 reverse split, the conversion price adjusted to the lesser of (a) the price in the Qualified Financing or (b) $2.00 per share. The New Notes also provided the investors with Royalty Payments equal to 15% of all net sales generated by the Company with respect to the sale of products or services associated with the 510(k) Notification related to the Company’s autologous cellular therapy (PRP-PBMC) to treat chronic lung disorder. The Royalty Payments are in lieu of the Milestone Payments but are perpetual and there is no limit to the aggregate amount of Royalty Payments that may be paid. It is the intent of the Company to pay the royalty payments even though the required conditions were not met. The Company entered into an agreement with the noteholders to extend the maturity of the outstanding notes until July 31, 2024.

Due to changes in key provisions of the Tranche 1 Notes, the Company analyzed the before and after cash flows between the (i) fair value of the New Notes and (ii) reacquisition price of the Tranche 1 Notes prior to the (A) change in the maturity date from March 31, 2022 to June 17, 2022, (B) change in the conversion price to the lesser of (x) $2.00 and (y) the price paid in a Qualified Financing, and (C) the fair value of the potential Royalty Payments, to determine whether these changes resulted in a modification or extinguishment of the Tranche 1 Notes.

The Company used a discounted cash flow method with Monte Carlo Simulation to value the Royalty Payments. Future Royalty Payments were estimated based on management’s best estimate of future cash flows under various scenarios which were discounted to present value using a risk-adjusted rate of 70%.

Based on the before and after cash flows of each note, the change was considered significantly different. Consequently, the New Notes were accounted for as a debt extinguishment of the Tranche 1 Notes and a new debt issuance of the New Notes. The Company recorded a $2.2 million loss upon extinguishment of debt in the year ended December 31, 2022, which was comprised of the following:

 SCHEDULE OF LOSS UPON EXTINGUISHMENT

The Note Conversion Agreement also provided for the consummation of a Tranche 2 Financing (the “Tranche 2 Notes”) subject to (i) the aggregate principal amount of indebtedness represented by the Tranche 2 Notes being capped at $500,000 and (ii) Tranche 2 Notes’ being an unsecured obligation of the Company and expressly subordinate in all respects to all indebtedness of the Company under the Notes and including language in which the holders of such Tranche 2 Notes acknowledge, confirm and agree to the foregoing subordination terms. Pursuant to the terms of the Note Conversion Agreement, the Investors have agreed not to sell any capital stock of the Company for a period of 12 months following the Qualified Financing. For the year ended December 31, 2022, approximately $499,000 of amortization of the debt premium is included in interest income. The Company entered into an agreement with the noteholders to extend the maturity of the outstanding notes until July 31, 2024.

On February 24, 2023, the Company and certain investors entered into Securities Purchase Agreements (the “SPA”), whereby the Company sold and issued to the certain investors an aggregate of three hundred thousand dollars ($300,000) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”). In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company extended this offering to June 30, 2023 per terms of the agreement.

The Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the February 2023 SPA, the Company also issued Common Stock Purchase Warrants to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial issue date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company, dated February 24, 2023. The Company issued Warrants to purchase an aggregate of 30,000 shares of Common Stock. The exercise price per share of the Common Stock under these Warrants is $2.00.

On March 27, 2023, the Company and three related party investors entered into Securities Purchase Agreements (the “SPA”), whereby, the Company sold and issued to the certain investors, an aggregate of one hundred twenty five thousand dollars ($125,000) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”).

On April 12, 2023, the Company and an additional investor entered into the SPA, whereby the Company sold and issued thirty five thousand dollars ($35,000) of the Company’s Notes. In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company extended this offering to June 30, 2023 per terms of the agreement.

The March 27, 2023, Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. The April 12, 2023, Note has a maturity date 60 days from issuance. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. The Company defaulted on this note as of June 12, 2023, which triggered an increase of interest from 8% to 12%. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the March 2023 and April 2023 SPA, the Company also issued Common Stock Purchase Warrants to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial issue date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company. The Company issued Warrants to purchase an aggregate of 12,500 shares of Common Stock. The exercise price per share of the Common Stock under these Warrants is $2.00.

We evaluated the February 2023, March 2023, and April 2023 SPA in accordance with ASC Topic 815, Derivatives and Hedging, and determined that they contained a variable share settlement feature tied to the price of a future financing which functions as a redemption option. FASB ASC 825-10-25 allows the Company to elect the fair value option for recording financial instruments when they are initially recognized or if there is an event that requires re-measurement of the instruments at fair value, such as a significant modification of the debt. The Company elected to initially and subsequently measure the Convertible Notes in their entirety at fair value, with changes in fair value recognized in earnings. Management believes the fair value option best reflects the underlying economics of these Convertible Notes.

Because these Convertible Notes are carried in their entirety at fair value, the value of the contingent conversion feature is embodied in that fair value. The Company estimates the fair value based on a probability weighted analysis which considers the present value of the cash flows using a credit risk adjusted rate enhanced by the conversion feature valued using a Monte Carlo model. This method was considered by management to be the most appropriate method of encompassing the credit risk and exercise behavior that a market participant would consider when valuing a hybrid financial instrument. Inputs used to value the Convertible Notes at inception included, (i) present value of future cash flows using a credit risk adjusted rate ranging from 19.0%-20.0%, (ii) remaining term of approximately one year, (iii) volatility ranging from 258%-261%, (iv) closing stock price on the valuation date, and (v) the conversion price based on the estimated price of a Qualified Offering, less a 20% discount, in accordance with the terms of the Note. A Qualified Offering is defined as an offering that results in the Company’s Common Stock being listed on a National Exchange (NASDAQ or the NYSE/AMEX). Changes due to instrument-specific credit risk are recorded in Other Comprehensive Income with all other changes in value being recorded in net income.

At inception, the fair value of the Convertible Notes using the fair value option was $1,878,948, and the fair value of the related Warrants issued was $67,820. Because the fair value of the hybrid instrument was in excess of the proceeds received of $425,000, the Company recorded a day one loss on convertible notes of $1,521,768. During the three months ending June 30, 2023, the Company issued an additional Convertible Note for $35,000. The fair value of related warrants to the $35,000 convertible note issued on April 11, 2023 was approximately $6,000. On June 30, 2023, the debt instruments were revalued at approximately $598,000 resulting in a gain of approximately $1,315,000.

Other Obligations

During the year ending December 31, 2022, Michael Yurkowsky, CEO, advanced the Company approximately $40,000 as a non-interest-bearing note with no established repayment terms. During the six months ended June 30, 2023, approximately $13,000 in additional advances were made. The balance owed is approximately $53,000 as of June 30, 2023.

Note 6 - Equity Transactions

 EQUITY TRANSACTIONS

In January 2022, the Company offered certain warrant holders the opportunity to receive an additional warrant to purchase the Company’s Common Stock at $14.00 per share, for a period of five (5) years from issuance for the exercise by March 31, 2022 of each existing warrant originally issued in April 2020. As of December 31, 2022, the Company had eleven warrant holders exercise an aggregate of 83,579 warrants at $14.00 per share resulting in cash proceeds of approximately $1,170,000 to the Company.

On June 10, 2022, the Company amended (the “Amendment”) its Articles of Incorporation to effectuate a one-for-one thousand reverse stock split (the “Reverse Split”) of its common stock. The Reverse Split was approved by FINRA on June 10, 2022, and effectuated on June 13, 2022. Pursuant to the Amendment, the Company also reduced the authorized shares of common stock to 500,000,000. As a result of the Reverse Split, the Company had approximately 618,506 shares of common stock outstanding and 438,776,170 shares of Series A Preferred Stock outstanding as of December 31, 2022. As a result of the Reverse Stock Split, the Series A Preferred Stock is convertible at a ratio of one thousand shares of Series A Preferred Stock into one share of common stock. Accordingly, the 438,776,170 outstanding shares of Series A Preferred Stock are now convertible into an aggregate of 438,776 shares of common stock.

On September 29, 2022, the Company entered into a securities purchase agreement with two related party accredited investors for the sale of shares of Common Stock and warrants (the “Purchase Agreement”). Pursuant to the Purchase Agreement, the Company sold an aggregate of 112,500 shares of common stock and warrants to purchase 56,250 shares of Common Stock exercisable at $2.50 per share for gross proceeds of approximately $225,000.

On November 14, 2022, pursuant to the Purchase Agreement, the Company sold an aggregate of 15,000 shares of common stock and warrants to purchase 7,250 shares of Common Stock exercisable at $2.50 per share for gross proceeds of $30,000.

On March 17, 2023, the Company issued 9,615 shares of Common Stock to a convertible noteholder who, at the request of the noteholder, converted $10,000 of convertible notes into the Company’s Common Stock.

On May 23, 2023, the Company issued 17,351 shares of Common Stock to a convertible noteholder who, at the request of the noteholder, converted $14,000 of convertible notes into the Company’s Common Stock.

On June 8, 2023, the Company issued 15,873 shares of Common Stock to a convertible noteholder who, at the request of the noteholder, converted $20,000 of convertible notes into the Company’s Common Stock.

The following table summarizes the Company’s common and preferred stock outstanding by class. The number of common stock shares has been adjusted to reflect a one-for-one thousand reverse stock split that became effective on June 13, 2022.

 SCHEDULE OF COMMON AND PREFERRED STOCK OUTSTANDING 

Series A Preferred Stock

During the six months ended June 30, 2023, no shares of Series A Preferred Stock were converted to Common Stock.

Voting Rights

Holders of Series A Preferred Stock (“Series A Holders”) have the right to receive notice of any meeting of holders of common stock and to vote upon any matter submitted to a vote of the holders of common stock. Each Series A Holder shall vote on each matter on an as converted basis submitted to them with the holders of common stock.

Conversion

Series A Preferred Stock converts to common stock at a 1:1,000 ratio immediately upon request of the Series A Holder.

Liquidation, Dissolution, or Winding Up

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders and, in the event of a Deemed Liquidation Event (as defined in the Second Amended and Restated Articles of Incorporation), the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or out of the consideration received by the Company for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Company), together with any other assets of the Company available for distribution to its stockholders, all to the extent permitted by Nevada law governing distributions to stockholders, as applicable, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to one (1) times the Series A Original Issue Price for such share of Series A Preferred Stock, plus any Series A Accruing Dividends accrued but unpaid thereon, whether or not declared. If upon any such liquidation, dissolution or winding up of the Company or Deemed Liquidation Event, the assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under subsection 2.1 of the Second Amended and Restated Articles of Incorporation, the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after the payment in full of all Series A Liquidation Amounts (as defined in the Second Amended and Restated Articles of Incorporation) required to be paid to the holders of shares of Series A Preferred Stock the remaining assets of the Company available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Series A Preferred Stock shall be distributed among the holders of the shares of Series A Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all shares of Series A Preferred Stock as if they had been converted to Common Stock pursuant to the terms of the Second Amended and Restated Articles of Incorporation immediately prior to such liquidation, dissolution or winding up of the Company.

Share-Based Compensation Plan

The Company utilizes the Black-Scholes valuation method to recognize share-based compensation expense over the vesting period. The expected life represents the period that the share-based compensation awards are expected to be outstanding.

Stock Option Activity

On April 1, 2021, the Board of Directors of the Company approved and granted certain directors and officers of the Company an aggregate of 54,750 stock options of which 4,750 were immediately vested on the date of grant. Each option granted has an exercise price of $70.00 per share and an expiration date of ten years from the date of grant. These options are not included in the Company’s current stock option plan as they were granted outside of the plan.

On June 10, 2022, the Company amended its Articles of Incorporation to effectuate a one-for-one thousand reverse stock split of its common stock. The Reverse Split was approved by FINRA on June 10, 2022 and effectuated on June 13, 2022.

As of June 30, 2023, 29,385 options were outstanding and 23,697 were vested. As of June 30, 2022, 29,635 options were outstanding and 19,364 were vested. For the three and six months ended June 30, 2023, the Company recognized an expense related to stock options of approximately $33,000 and $75,000, respectively, which is included in share-based compensation. For the three months and six months ended June 30, 2022, the Company recognized approximately $73,000 and $185,000 in stock-based compensation expense, respectively, which is included in share-based compensation. As of June 30, 2023, the Company has approximately $81,000 of unrecognized compensation costs related to non-vested stock options, which is expected to be recognized over a weighted average period of approximately 1.54 years.

Inputs used in the valuation models are as follows:

 SCHEDULE OF ASSUMPTIONS USED TO CALCULATE FAIR VALUE OF STOCK OPTIONS

The following is a summary of stock option activity for the six months ended June 30, 2022 and 2023:

 SUMMARY OF STOCK OPTION ACTIVITY 

The following is a summary of the Company’s non-vested shares for the six months ended June 30, 2023:

 SUMMARY OF STOCK OPTION ACTIVITY NON-VESTED

Net Loss Per Share

Basic loss per share is computed on the basis of the weighted average number of shares outstanding for the reporting period. Diluted loss per share is computed on the basis of the weighted average number of common shares plus dilutive potential common shares outstanding using the treasury stock and if-converted methods, as applicable. Any potentially dilutive securities are antidilutive due to the Company’s net losses.

The Company excluded the following securities from the calculation of basic and diluted net loss per share as the effect would have been antidilutive:

 SCHEDULE OF ANTI-DILUTIVE SECURITIES OF BASIC AND DILUTED NET LOSS PER SHARE

Excluded from the above table are 493,180 warrants and 29,385 stock options for the six months ended June 30, 2023 and 2,196 warrants and 29,635 stock options for the six months ended June 30, 2022 as they are out of the money (exercise price greater than the stock price). Inclusion of such would be anti-dilutive. As a result of the Reverse Stock Split, the Series A Preferred Stock is convertible at a ratio of one thousand shares of Series A Preferred Stock into one share of common stock. Accordingly, the 438,776,170 outstanding shares of Series A Preferred Stock are convertible into an aggregate of 438,776 shares of common stock at June 30, 2023.

Note 7 – Commitments & Contingencies

 COMMITMENTS & CONTINGENCIES

CEO Compensation Agreement

On December 23, 2021, the Company entered into an employment agreement (the “Employment Agreement”) with Michael Yurkowsky, the Company’s Chief Executive Officer, to continue to serve as the Chief Executive Officer of the Company. Under the Employment Agreement, which commenced on December 1, 2021 (the “Effective Date”) and has a term of one year from the Effective Date (the “Employment Period”), Mr. Yurkowsky will receive a base salary of $180,000 per year. Upon the expiration of the Employment Period, Mr. Yurkowsky’s employment with the Company will be on an at-will basis.

In addition to his base salary, Mr. Yurkowsky may receive an one-time cash bonus in gross amount equal to $100,000 if (i) the Company’s stock is listed and quoted on the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, or the New York Stock Exchange; or (ii) the Company secures and receives financing of at least $10,000,000.

As additional compensation, Mr. Yurkowsky shall receive shares of common stock of the Company representing 1% of the Company’s fully diluted equity as of the grant date if the Company achieves a market capitalization of at least $250 million for 60 consecutive days during the Employment Period (the “Equity Award”). If the Company achieves a market capitalization of at least $500 million for 60 consecutive days during the Employment Period, the executive shall receive an additional Equity Award of 1%, such that he has in the aggregate received shares of common stock of the Company representing 2% of the Company’s fully diluted equity as of the date of grant. These market conditions were reflected in the grant date fair value of the award as required under ASC 718 Compensation-Stock Compensation.

The Equity Award was measured at fair value on its grant date using a Monte Carlo simulation model. The Monte Carlo simulation model includes assumptions for the expected term, volatility, and dividend yield, each of which are determined in reference to the Company’s historical results. The Company will recognize aggregate share-based compensation expense of approximately $328,000 related to the Equity Award on a straight-line basis over the derived service period determined by the Monte Carlo simulation model, which was 0.71 years. During the three and six month period ending June 30, 2022, the Company recognized approximately $114,000 and $116,000 in compensation expense, respectively, related to the Equity Award. If the market capitalization targets are met sooner than the derived service period, the Company will adjust its stock-based compensation to reflect the cumulative expense associated with the vested Equity Award. The Company will recognize expense if the requisite service is provided, regardless of whether the market conditions are achieved.

Consulting Agreements

The Company entered into a consulting agreement with Tanya Rhodes of Rhodes & Associates, Inc, effective June 15, 2020, to serve as the Chief Science Officer of the Company. The agreement has a minimum term of six months with an average fee of $21,000 per month plus expenses which increases 5% per month on January 1 of each calendar year unless an alternative retainer amount is negotiated and agreed upon by both parties. The Company extended the contract on January 1, 2021, resulting in monthly expenses of $22,500 plus expenses for services rendered. Due to lack of financial resources, the Company has been unable to pay Ms. Rhodes for her services totaling approximately $187,000, which has been accrued as part of accrued liabilities as June 30, 2023.

Litigation

From time to time, the Company may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect the Company’s financial condition, results of operations, and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect the Company due to legal costs and expenses, diversion of management attention, and other factors. The Company expenses legal costs in the period incurred. The Company cannot assure that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against the Company in the future, and these matters could relate to prior, current or future transactions or events.

The Company is involved in a lawsuit with Sinclair Broadcast Group, Inc. (“Sinclair”) which was filed on September 8, 2020, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. Sinclair has obtained a legal judgment for breach of contract for advertising services in the amount of approximately $75,000 plus interest and costs. The Company has retained legal counsel for guidance in this matter. The amount is recorded in accounts payable as of June 30, 2023.

The Company is involved in a lawsuit with ITN Networks, LLC (“ITN”) which was filed on July 22, 2021, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. ITN has obtained a legal judgment for breach of contract for advertising services in the amount of approximately $45,000 plus interest and costs. The Company has retained legal counsel for guidance in this matter. The amount is recorded in accounts payable as of June 30, 2023.

Note 8 – Debt

  DEBT

Notes Payable

Notes payable were assumed in the Merger (for further discussion, see Note 1 - “Overview” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K) and are due in aggregate monthly installments of approximately $5,800 and carry an interest rate of 5%. Each note originally had a maturity date of August 1, 2019. The Company finalized an eighteen-month extension to March 1, 2021. The promissory notes have an aggregate outstanding balance of approximately $69,000 at June 30, 2023 and December 31, 2022. The Company has not made payments on these notes since February 10, 2020, due to the Company’s lack of working capital. On April 19, 2022, the Company entered into a promissory note modification agreement with the Lender extending the maturity date of the notes to April 1, 2024. The modification agreement also reduces the interest rate from 5% to 3% and requires a monthly payment of $1,000 per month with a balloon payment at the end of the modified term.

On June 9, 2022, the Company entered into a securities purchase agreement for a total of $272,500 with two accredited investors. The notes issued are convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The notes bear interest at 10% and are due one year from issuance. For the first six months, the Company had the right to prepay the notes at a premium of between 25% and 35% depending on when it is repaid.

The Company also issued a promissory note for $100,000, on June 9, 2022, to another accredited investor. This note bears interest at 15% (no matter when repaid) and converts at a discount of 25% of the price of a public offering or a 25% discount to the Volume Average Weighted Price (“VWAP”) of the five (5) days prior to conversion.

On August 8, 2022, the Company entered into a securities purchase agreement for a total of $65,000 with an accredited investor. The note issued is convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The note bears interest at 10% and is due one year from issuance. For the first six (6) months, the Company had the right to prepay the notes at a premium of between 25% and 40% depending on when it is repaid.

On February 28, 2023, the Company entered into a securities purchase agreement for a total of $150,000 with an accredited investor. The note issued is convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The note bears interest at 10% and is due one year from issuance. For the first six months, the Company has the right to prepay the note at a premium of between 25% and 40% depending on when it is repaid.

The embedded features in the June 2022, August 2022, and February 2023 convertible notes were analyzed under ASC 815 to determine if they required bifurcation as derivative instruments. To be a derivative, one of the criteria is that the embedded component must be net-settleable. While the Company’s Common Stock was traded on an exchange at the time of the transaction, the underlying shares are not readily convertible into cash since there is insufficient daily trading volume for the holders to convert the convertible notes into Common Stock without significantly affecting the share price. Accordingly, the embedded derivatives, including the embedded conversion feature, did not meet the definition of a derivative, and therefore, did not require bifurcation from the host instrument. Certain default put provisions, including a default put and default interest, were not considered to be clearly and closely related to the host instrument but the Company concluded that the value of these provisions was de minimus at inception. The Company will reconsider the value of these provisions each reporting period to determine if the value becomes material to the financial statements.

Note 9 – Acquisitions

 ACQUISITIONS

The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business. Significant judgment is required in the application of the screen test to determine whether an acquisition is a business combination or an acquisition of assets.

If an acquisition is determined to be a business combination as indicated in ASC 805, Business Combinations, the assets acquired, and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. The Company recognizes and measures goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.

If an acquisition is determined to be an asset acquisition, the Company accounts for the transaction under ASC 805-50, which requires the cost of the asset acquisition, including transaction costs, to be allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis. Assets acquired as part of an asset acquisition that are considered to be in-process research and development (IPR&D) are immediately expensed unless there is an alternative future use in other research and development projects. Goodwill is not recognized in an asset acquisition and any excess consideration transferred over the fair value of the net assets acquired is allocated to the identifiable assets based on relative fair values (excluding non-qualifying assets). If the cost of the asset acquisition is less than the fair value of the net assets acquired, no gain is recognized in earnings.

Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the consideration is paid or becomes payable (unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired). Upon recognition of the contingent consideration payment, the amount is included in the cost of the acquired asset or group of assets.

On September 7, 2022, the Company acquired all of the membership interests, with Common Stock, of Jantibody LLC (“Jantibody”), a Nevada limited liability company. Jantibody is focused on the development of novel proprietary immunotherapies targeted towards ovarian cancer, pancreatic cancer, and mesothelioma. Prior to the acquisition, Michael Yurkowsky, CEO, had approximately 17.5% ownership interest in Jantibody.

Pursuant to the Jantibody Agreement, the Company issued the equity holders of Jantibody an aggregate of 52,023 shares of the Company’s common stock which represented 15% of the Company’s common stock on a fully diluted basis at the time of the transaction. In addition, for every share of the Company’s common stock issued as a result of the future conversion of the Company’s dilutive instruments, including Series A preferred stock, warrants, stock options, and convertible notes, the Jantibody members will receive 15% of the aggregate number of shares issued (the “Anti-Dilution” shares). The Anti-Dilution shares will be issued before the end of each fiscal quarter.

The Company had agreed to issue the Jantibody holders an additional 2.0% of the Company’s common stock then outstanding upon the enrollment of the first patient in a Phase I FDA trial and additional 3.0% of the Company’s then outstanding common stock on a fully diluted basis upon the enrollment of the first patient in a Phase [III] FDA trial. The Company determined the contingent consideration was not subject to derivative accounting and will be recognized when the contingency is resolved, and the consideration is paid or becomes payable as outlined in ASC 450, Contingencies.

The Company determined this transaction represented an asset acquisition as defined by ASC 805, Business Combinations, as substantially all of the value was in a single in-process research and development (“IPR&D”) group, which included the small molecule drug CXCR4 inhibitor, AMD3100, and/or checkpoint inhibitors (CPI) for anti-cancer immune modulation. As a result, the consideration transferred was allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their relative fair values resulting in approximately $1,240,000 being assigned to the IPR&D asset and approximately $1,000,000 to assumed liabilities. The liabilities assumed were current accounts payable and as such were recorded a book value. The Company recently received notice from Jantibody that the Company was in default in its obligations to fund certain Jantibody activities and obligations and was terminating its agreement. The Company intends to engage in conversations with Jantibody with respect to restructuring the agreement.

The purchase price of approximately $247,000 represented 52,023 shares of the Company’s common stock, 344,159 Anti-Dilution shares, and direct transaction costs of $21,600. The purchase price was allocated, on a relative fair value basis, to the acquired intellectual property, and the acquired net assets as follows:

 SCHEDULE OF NET IDENTIFIABLE ASSETS ACQUIRED

The IPR&D had not yet reached technological feasibility and had no alternative future use; thus, the purchased IPR&D asset and related costs were expensed immediately subsequent to the acquisition within the consolidated statements of operations.

On December 22, 2022, the Company acquired a 100% interest, with Common Stock, in Scion Solutions, LLC (“Scion”). Scion is a life sciences company that has developed a new technology in regenerative medicine specifically for limb salvage. Their proprietary product SkinDisc (patent pending) is a combination of stem cells and several other molecular components that stimulate tissue regeneration. Prior to the acquisition, Tanya Rhodes, CSO, had approximately 33.3% ownership interest in Scion.

Pursuant to the terms of the Scion Agreement, the Company issued the equity holders of Scion an aggregate of 123,153 shares of the Company’s common stock. In addition, for every share of the Company’s common stock issued within 18-months of the Effective Date of the transaction, as a result of the future conversion of the Company’s dilutive instruments, including Series A preferred stock, warrants, stock options, and convertible notes, the Scion members will receive 20% of the aggregate number of shares issued (the “Anti-Dilution” shares). The Anti-Dilution shares will be issued before the end of each fiscal quarter.

In addition, the former shareholders of Scion are eligible to receive Performance Payments consisting of the following:

 SCHEDULE OF PERFORMANCE PAYMENTS

Substantially all of the value acquired was concentrated in a single in-process research and development (“IPRD”) asset, which included license rights, clinical trial data, clinical trial development plans, research and development materials, formulations and intellectual property related to SkinDisc. There was no workforce, and no outputs were present. Accordingly, the acquired set of assets and activities did not meet the definition of a business as defined by ASC 805, Business Combinations and was considered an asset acquisition. In an asset acquisition, the consideration transferred is allocated to identifiable tangible and intangible assets acquired and liabilities assumed based on their relative fair values. In the Scion acquisition, the only asset or liability acquired was IPR&D. As a result, the consideration transferred was recorded fully to the IPR&D asset.

In an asset acquisition, cash-settled contingent consideration is measured when probable and estimable, unless the contingent consideration falls under the guidance of ASC 815. The Company determined the contingent consideration was not subject to ASC 815 and thus, the performance payments which were estimable and probable (i.e., more than 50% likely to occur) were recorded on the acquisition date. The fair value was estimated based on a probability weighting of the present value of cash flows over the expected time period until payment, using a credit-risk adjusted interest rate. Each reporting period, the Company will determine if the performance payments are estimable and probable and will record them as a liability at that time.

The purchase price was allocated, as follows:

 SCHEDULE OF NET IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES ASSUMED

The common stock value was recorded as equity. The remaining consideration was recorded as IPR&D, since the SkinDisc technology was still in the research and development stage and had no alternative future use. The purchased IPR&D asset of $792,256 was expensed immediately subsequent to the acquisition within our consolidated statements of operations.

Note 10- Common Stock Warrants

 COMMON STOCK WARRANTS

A summary of the Company’s warrant issuance activity and related information for the six months ended June 30, 2023 and 2022 is as follows:

 SUMMARY OF ISSUANCE OF WARRANTS

The fair value of all warrants issued are determined by using the Black-Scholes valuation technique. The inputs used in the Black-Scholes valuation technique to value each of the warrants as of their respective issue dates are as follows:

 SCHEDULE OF ISSUANCE OF WARRANTS VALUATION TECHNIQUE

The fair value of warrants issued during the three and six months ended June 30, 2023, totaled approximately $6,000 and $74,000, respectively. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Note 11 - Subsequent Events

SUBSEQUENT EVENTS 

On July 10, 2023, the Company issued 21,530 shares of Common Stock to a convertible noteholder who, at the request of the noteholder, converted $6,000 of convertible notes into the Company’s Common Stock.

On July 20, 2023, the Company issued 29,834 shares of Common Stock to a convertible noteholder who, at the request of the noteholder, converted $8,700 of convertible notes into the Company’s Common Stock.

On September 28, 2023, Medovex Corp., a Nevada corporation (“Seller”) and the wholly owned subsidiary of Innoveren Scientific, Inc. (the “Innoveren” collectively the “Company”) entered into a Membership Interest And LLCA Rights Redemption Agreement (the “Agreement”) with Medovex, LLC, a Delaware limited liability company (“Medovex”) and the members of Medovex. Pursuant to the Agreement, the Company agreed to transfer its (i) 400,000 Class B membership interests and 140,000 Class C membership interests (collectively, the “Membership Interests”) in Medovex; (ii) the Company’s rights pursuant to the Amended and Restated Limited Liability Company Agreement dated April 2, 2021, including the purchase option rights set out therein (“LLCA Rights” together with the Membership Interest as the “Transferred Rights”); and (iii) the intellectual property related to the Denervex device held by the Company to Medovex (the “IP”). As consideration for the Transferred Rights, the Company shall receive $720,996.72, plus the $92,500 deposit previously paid to the Company. The Company shall also receive $55,751 upon completion of the transfer of the IP from the Seller to Medovex. In addition, the Company shall be entitled to receive a 3% royalty on the sale of any products derived from the IP from the sixth anniversary of the transfer to the tenth anniversary. The transaction closed on September 28, 2023.

The Company recently received notice from Mass General Hospital (MGH) that the Company was in default in its obligations to fund certain Jantibody activities and obligations and was terminating the license agreement between Innoveren and The General Hopsital Corporation d/b/a MGH. The Company was sent an initial breach notice on February 24, 2023, following which Company met with MGH and negotiated a Second Amendment (MGH Agreement No. 2023-2413) effective April 24, 2023. MGH notified the Company of breach for a second time on September 11, 2023, indicating grounds for termination of the Agreement unless the breach was cured. To date, the breach has not been cured and MGH has not received payment. Consequently, the Agreement is hereby terminated effective immediately as of November 6, 2023.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto appearing in Part I, Item 1 of this Quarterly Report. Historical results and trends that might appear in this Quarterly Report should not be interpreted as being indicative of future operations.

Overview

Innoveren Scientific, Inc (“the Company”) has evolved from focusing on treating chronic lung conditions after the closure of its lung treatment clinics due to COVID-19. The Company is currently focusing on acquiring and developing early-stage companies or their technologies in the areas of therapeutics, medical devices, and diagnostics. The goal is to develop these companies and incubate their technologies to meaningful clinical inflection points.

On June 3, 2022, the Company closed its clinic in Scottsdale, Arizona. The Company has now closed all of its clinical operations in the autologous infusion therapy business which delivered treatments for patients with chronic respiratory and pulmonary disorders. The Company will continue to pursue Food and Drug Administration (“FDA”) approval of the device that was utilized in the treatment provided at the clinics. The Company also has a continued interest in the commercialization of the DenerveX device through a joint venture. The Company has implemented the transition into a biologics and therapeutic device incubator company to bring new technologies to market.

The consolidated results for Innoveren Scientific include the following wholly-owned subsidiaries: H-CYTE Management, LLC, Medovex Corp, Cognitive Health Institute, LLC, and Lung Institute Tampa, LLC and the results include Lung Institute Dallas, LLC (“LI Dallas”), Lung Institute Nashville, LLC (“LI Nashville”), Lung Institute Pittsburgh, LLC (“LI Pittsburgh”), and Lung Institute Scottsdale, LLC (“LI Scottsdale”), as Variable Interest Entities (“VIEs”). Additionally, H-CYTE Management, LLC was the operator and manager of the various Lung Health Institute (LHI) clinics: LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale. The LI Dallas and LI Pittsburgh clinics did not reopen in 2020 after the temporary closure of all LI clinics due to COVID-19. During the first quarter of 2022, the Company closed the LI Tampa and LI Nashville clinics. During the second quarter of 2022, the Company closed the LI Scottsdale clinic. All LHI clinics are closed as of June 30, 2023.

As of June 30, 2023, the Company has closed all of the LHI clinics and has moved away from the Infusion Division as part of its future plans. The Company has transformed into a medical biosciences incubator focusing on bringing new biologics and therapeutic device technologies to market for various health conditions.

Critical Accounting Policies and Estimates

The Company’s discussion and analysis of its financial condition and results of operations are based on its consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods.

The Company bases our estimates on historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Results of Operations - Three and six months ended June 30, 2023 and 2022

Revenue, Cost of Sales and Gross Profit

The Company recorded no revenue for the three and six months ended June 30, 2023. The Company recorded revenue of approximately $74,000 and $453,000 for the three and six months ended June 30, 2022, respectively.

For the three and six months ended June 30, 2023 the Company did not generate a gross profit. For the three and six months ended June 30, 2022, the Company generated a gross profit totaling approximately $44,000 and $337,000, respectively. The Company has closed all of the LHI Clinics, which was the Company’s only source of revenue. The Company has transformed itself into a biologics and therapeutic device incubator company to bring new technologies to market.

Operating Expenses

Salaries and Related Costs

For the three and six months ended June 30, 2023 the Company incurred approximately $162,000 and $327,000 in salaries and related costs, respectively. For the three and six months ended June 30, 2022, the Company incurred approximately $280,000 and $627,000 in salaries and related costs, respectively. The decrease in salaries and related costs for the three and six months ended June 30, 2023, as compared to the prior year, is due to the adjustments to the Company’s corporate structure by reducing expenses as part of the transition into a biologics and therapeutic incubator company to bring new technologies to market. As of June 30, 2023, due to lack of financial resources, the Company has incurred $581,000 in unpaid salaries and wages.

Other General and Administrative

For the three and six months ended June 30, 2023 the Company incurred approximately, $214,000 and $428,000, in other general and administrative costs, respectively. For the three and six months ended June 30, 2022, the Company incurred approximately $395,000 and $905,000, in other general and administrative costs, respectively. The Company adjusted its corporate structure by reducing expenses as part of the transition into a biologics and therapeutic incubator company to bring new technologies to market.

Other Income/Expense

For the three months and six months ended June 30, 2023, the Company generated other income (expense) of approximately $1,229,000 and ($440,000) primarily related to the convertible notes payable carried at fair value.

For the three and six months ended June 30, 2023 interest expense was approximately $99,000 and $249,000, respectively. For the three and six months ended June 30, 2022 interest expense was approximately $112,000 and $187,000 respectively.

For the three and six months ended June 30, 2023 the Company did not incur inducement expense. For the three and six months ended June 30, 2022 inducement expense was approximately $0 and $3,025,000 respectively.

Funding Requirements

The Company has historically incurred losses from operations and expects to continue to generate negative cash flows as the Company implements its business plan to focus on acquiring and developing early-stage companies or their technologies in the areas of therapeutics, medical devices, and diagnostics. The Company will need to raise cash from debt and equity offerings to continue its operations. There can be no assurance that the Company will be successful in doing so.

Liquidity, Going Concern, and Sources of Liquidity

The Company incurred net income (loss) of approximately $820,000 and ($1,270,000) for the three and six months ended June 30, 2023, respectively. The Company incurred net losses of approximately $2,635,000 and $6,527,000 for the three and six months ended June 30, 2022, respectively. The Company has historically incurred losses from operations and expects to continue to generate negative cash flows as it implements the transition into a biologics and therapeutic incubator company to bring new technologies to market. The consolidated financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) as applicable to a going concern.

The Company had cash on hand of approximately $13,000 as of June 30, 2023 and approximately $150,000 as of November 9, 2023. The Company’s cash is insufficient to fund its operations over the next year and the Company is currently working to obtain additional debt or equity financing to help support short-term working capital needs.

There can be no assurance that the Company will be able to raise additional funds or that the terms and conditions of any future financings will be workable or acceptable to the Company or its shareholders. If the Company is unable to fund its operations from existing cash on hand, operating cash flows, additional borrowings, or raising equity capital, the Company may be forced to discontinue operations. The 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 the Company be unable to continue as a going concern.

On February 24, 2023, the Company and certain investors entered into Securities Purchase Agreements (the “SPA”), whereby the Company sold and issued to the certain investors an aggregate of three hundred thousand dollars ($300,000) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”). In connection with the aforementioned Notes, the Company also issued to the investors a warrant to purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company extended this offering to June 30, 2023.

The Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum and will be calculated on an actual/365-day basis. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the February 2023 SPA, the Company also issued Common Stock Purchase Warrants to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial issue date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company, dated February 24, 2023. The Company issued Warrants to purchase an aggregate of 30,000 shares of Common Stock. The exercise price per share of the Common Stock under this Warrant is $2.00.

On February 28, 2023, the Company entered into a securities purchase agreement for a total of $150,000 with an accredited investor. The note issued is convertible into common stock at a 65% discount to the lowest trading price in the 20-day period prior to conversion. The note bears interest at 10% and is due one year from issuance. For the first six months, the Company has the right to prepay the note at a premium of between 25% and 40% depending on when it is repaid.

On March 27, 2023, the Company and three related party investors entered into Securities Purchase Agreements (the “SPA”), whereby, the Company sold and issued to the certain investors, an aggregate of one hundred twenty five thousand dollars ($125,000) of the Company’s convertible promissory notes (the “Note” or “Notes”), which are convertible into the Company’s Common Stock, $0.001 par value (“Common Stock”). On April 12, 2023, the Company and an additional investor entered into the SPA, whereby, the Company sold and issued an aggregate of thirty five thousand dollars ($35,000) of the Company’s Notes. In connection with the aforementioned Notes, the Company also issued to the investors warrants to purchase (the “Purchase Warrant”) a certain number of shares of Common Stock, which are equal to 20% of the shares of Common Stock issuable upon conversion of the Note, based on a price of $2.00 per share. These warrants have a term of five (5) years, with an exercise price of $2.00 per share. Unless the Company chooses to terminate earlier, the offering and the sale of the Notes shall terminate on the sooner of the sale of the maximum offering amount or April 30, 2023. However, the Company extended this offering to June 30, 2023.

The March 27, 2023 Notes have a maturity date of the earlier of (i) one year from issuance; or (ii) upon the closing of a qualified offering. The April 12, 2023 Note has a maturity date 60 days from issuance. Interest on the Note shall accrue on the unpaid principal balance of this Note at the rate of eight percent (8%) per annum, and will be calculated on an actual/365-day basis. The Company defaulted on this note as of June 12, 2023, which triggered an increase of interest from 8% to 12%. In the event that the Company moves forward with a qualified offering, as referenced in the SPA, the Holder may convert the unpaid and outstanding principal plus any accrued and unpaid Interest into shares of the Company’s Common Stock at a conversion price equal to a 20% discount to the offering price.

Further, in connection with the March 2023 and April 2023 SPA, the Company also issued Common Stock Purchase Warrants to certain investors, which are exercisable on or prior to the close of business on the five (5) year anniversary of the initial issue date, to purchase up to a certain amount of shares of Common Stock, with 20% of the shares of Common Stock issuable upon conversion of the Convertible Promissory Note purchased by the Holder, pursuant to the SPA between the Holder and the Company. The Company issued Warrants to purchase an aggregate of 12,500 shares of Common Stock. The exercise price per share of the Common Stock under this Warrant is $2.00.

Cash activity for the six months ended June 30, 2023 and December 31, 2022 is summarized as follows:

Working Capital Deficit

Cash Flows

Cash activity for the six months ended June 30, 2023 and 2022 is summarized as follows:

As of June 30, 2023, the Company had approximately $13,000 of cash on hand.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4) during the periods presented, investments in special-purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic leases.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal accounting officer, as appropriate to allow timely decisions regarding disclosure.

The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of June 30, 2023. In designing and evaluating the Company’s disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and the Company necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2023, due to the lack of working capital, the Company’s disclosure controls and procedures were not as effective as desired because of the material weakness in our internal control over financial reporting as discussed below, and as a result, the Company engaged consultants, implemented a number of new entity and process level controls and installed a new accounting software system to help mitigate this material weakness.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of June 30, 2023, we determined that internal control deficiencies relating to a lack of segregation of duties and knowledge related to more complex accounting transactions still exist. Management believes these deficiencies mainly relate to the Company employing a limited number of accounting and finance personnel. The aggregation of these deficiencies is considered to be a material weakness in internal control over financial reporting.

In light of the conclusion that our disclosure controls and procedures were ineffective as of June 30, 2023, we have applied additional procedures and processes as necessary to ensure the reliability of our financial reporting in regard to this quarterly report. Accordingly, the Company believes, based on its knowledge, that: (i) this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report; and (ii) the financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations and cash flows as of and for the periods presented in this quarterly report.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company is involved in a lawsuit with Sinclair Broadcast Group, Inc. (“Sinclair”) which was filed on September 8, 2020, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. Sinclair has obtained a legal judgment for breach of contract for advertising services in the amount of approximately $75,000 plus interest and costs. The Company has retained legal counsel for guidance in this matter. The amount is recorded in accounts payable as of June 30, 2023.

The Company is involved in a lawsuit with ITN Networks, LLC (“ITN”) which was filed on July 22, 2021, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. ITN has obtained a legal judgment for breach of contract for advertising services in the amount of approximately $45,000 plus interest and costs. The Company has retained legal counsel for guidance in this matter. The amount is recorded in accounts payable as of June 30, 2023.

ITEM 1A. RISK FACTORS.

We are a smaller reporting company as defined by 17 CFR 229.10(f)(1). Thus, we are not required to provide information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

Not applicable.

ITEM 6. EXHIBITS.

The exhibits listed in the accompanying Exhibit Index are filed, furnished or incorporated by reference as part of this Quarterly Report on Form 10-Q.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 14, 2023

EXHIBIT INDEX