The following plan of operation provides information which management believes
is relevant to an assessment and understanding of our results of operations and
financial condition. The discussion should be read along with our financial
statements and notes thereto. This section includes a number of forward-looking
statements that reflect our current views with respect to future events and
financial performance. Forward-looking statements are often identified by words
like believe, expect, estimate, anticipate, intend, project and similar
expressions, or words which, by their nature, refer to future events. You should
not place undue certainty on these forward-looking statements. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from our predictions.
Plan of Operations
In January 2014, Mr. Weissberg negotiated with Lifewave Ltd., a public company
organized under the laws of the State of Israel, for the purpose of acquiring
certain of Lifewave's IP assets pertaining to a wound healing device. The
Registrant signed a patent purchase agreement with Lifewave on January 6, 2014
(the "Agreement"), the closing of which was subject to several material
conditions, including our ability of raising equity capital sufficient to
develop and commercially exploit the technology.
On June 4, 2014, we completed the purchase of all right, title and interest to
certain IP assets, including rights to a wound treatment device. The IP assets,
including the wound healing device, acquired by the Registrant are designed for
wound treatment incorporating Bioelectrical Signal Therapy ("BST Device"). The
BST Device implements patented and proprietary electrical stimulation
technologies to treat hard-to-cure wounds and ulcers up to complete closure
and/or cure.
Pursuant to the Agreement, the Registrant has agreed to pay Lifewave a royalty
of from 10% to 20% of the profits (as defined in the Agreement) generated from
the BST Device.
In June 2014, the Registrant entered into an agreement with the Austen
BioInnovation Institute in Akron ("ABIA" or the "Institute"), for the purpose of
bringing our BST Device to the U.S. market.
The Company's management selected ABIA's Product Innovation and
Commercialization Division, which has significant expertise in wound healing,
clinical trial development, and regulatory operations, to spearhead its
pre-market clinical trial program, which is necessary to apply for regulatory
approval from the United States Food and Drug Administration ("FDA") to
distribute the BST Device in the United States. As part of the Institute's fully
integrated regulatory and device development service Offerings, ABIA will
prepare on behalf of the Company an application to obtain FDA approval. The
initial trial will include 70 patients in a double-arm, randomized, multi-center
study to assess the safety and efficacy of the BST Device in patients with Stage
II and III pressure and venous stasis ulcers; and submit data to the FDA to
obtain approval.
On December 18, 2015, the Registrant confirmed certain information that it had
received from ABIA that, while ABIA still anticipated that it would be able to
provide the Registrant with a final draft of the IDE application, ABIA had
sustained financial difficulties and key personnel losses that would likely
adversely affect its ability to perform under the Agreement on a timely basis,
if at all. As a result, the Registrant requested that ABIA fully refund the
monies paid to ABIA under the Agreement. In addition, the Registrant agreed to
engage a professional regulatory consultant, who was a former member of ABIA's
regulatory staff, to serve as the Registrant's FDA regulatory consultant on an
interim basis, subject to the execution of a separate services agreement. The
Registrant is also evaluating the advisability of engaging another firm to
replace ABIA, which process may be expected to delay the IDE approval process
for the BST Device.
The Company's success is dependent upon the successful FDA clinical trial of its
BST Device. The Device may need additional development and may never achieve
safety or efficacy. The Company believes that its design and procedure show
promise, but the path to commercial success, even if development milestones are
met, may take more time and might be more costly.
There are a number of potential obstacles the Company might face, including the
following:
? We may not be able to raise additional funds we may need to complete the
clinical trials.
? Competitors may develop alternatives that render BST Device redundant or
unnecessary.
? We may not have a sufficient and sustainable intellectual property position.
? Our device may be shown to have harmful side effects or other characteristics
that indicate it is unlikely to be safe and effective
? Our device may not receive regulatory approval.
? Even if our device receives regulatory approval, it may not be accepted by
patients, the medical community or third-party payers.
Recent Developments
During the first quarter of fiscal 2020, we were granted approval from the
Helsinki committee to launch a Randomized Control Study (RCT) on 60-100 patients
in order to assess the efficacy of the BST Device on diabetic foot patients in
collaboration with Clalit Health Services Organization, Israel's largest HMO,
and the Israeli Ministry of Health (MOH). The study will be performed in 3-5
sites including leading clinics and hospitals in Israel. The Company intends to
enroll the first patients to the study during the first quarter of 2020 and
expects the trial to be conducted for 12-18 months until completion.
The Company has concluded a 35-wound, one arm clinical pilot, treating
recalcitrant wounds in a leading wound clinic in Tel Aviv Israel, with 78% of
the treated wounds completely healed within 20 weeks (Avg. wound duration at the
base was 8 months) and an additional 16% of the treated wounds reaching wound
area reduction of greater than 75%. Only 6% of the patients had no substantial
positive clinical effect.
17
The Company's distributor in Colombia, TekMedica SAS, has successfully concluded
a clinical pilot study at the Hospital de la Samaritana in Bogota, Colombia.
Starting in January 2020, Colsanitas, a leading Colombian HMO/Health insurance
provider and operator of comprehensive healthcare services in Colombia and a
member of the Sanitas group worldwide, will commence a clinical pilot study
which is expected to be concluded by the end of the first half of 2020. If
positive results are achieved, similar to those achieved in the Tel Aviv
clinical trials, the Company believes that it will contribute to the penetration
of the BST device treatment with Colsanitas health services in Colombia.
During the year ended December 31, 2018, the Company raised $1,795,147 from a
rights offering of a total of 9,555,468 Units at $0.10 per Unit, each consisting
of: (i) one share of Common Stock; (ii) one Class A Warrant exercisable for a
period of 24 months to purchase ½ share of Common Stock at the equivalent of
$0.50 per share; and (iii) one Callable Class B Warrant exercisable for a period
of 36 months to purchase ½ share of Common Stock at the equivalent of $1.25 per
share. The Company intends to use the proceeds of the rights offering for
general corporate purposes, including working capital, capital expenditures, as
well as acquisitions and other strategic purposes. The warrants fair value is
$408,093 and were valued using a Black- Scholes valuation model.
On February 20, 2017, the Registrant received the official certification from
the Israeli Ministry of Health authorizing the use of the Registrant's BST
Device in Israel. The BST Device implements patented and proprietary electrical
stimulation technologies to treat hard-to-cure wounds and ulcers up to complete
closure and/or cure.
On January 8, 2017, the Registrant entered into a five-year distribution
agreement (the "Distribution Agreement") with TekMedica SAS, organized under the
laws of Colombia ("TekMedica" or the "Distributor"). Pursuant to the
Distribution Agreement, the Registrant granted TekMedica the exclusive rights to
distribute the Registrant's medical device for the treatment of chronic wounds
(the "BST Device™") and the accompanying disposable electrodes (sometimes
collectively, the "Products") in Colombia (the "Territory").
The Distribution Agreement provides that Registrant will provide Distributor
with supplies of the BST Devicee and disposable electrode for treatment of
patients in hospitals, long-term care facilities, medical centers and
out-patient clinics. The Distributor will make an initial advance payment to be
applied against the first year's quota together with an initial order supported
by a Letter of Credit with subsequent orders as part of the quota, as set forth
in the Distribution Agreement, with minimum annual quota's during the five-year
term. The Distributor will be responsible for securing any product
certification, permit, license or approval that may be required in the Territory
for the marketing, sale, sublicensing and delivery and use of the BST Devise and
Products in the Territory.
Results of Operations during the year ended December 31, 2019 as compared to the
year ended December 31, 2018
We have not generated any revenues since inception. We had operating expenses
mainly related to general and administrative expenses and research and
development expenses. During the year ended December 31, 2019, we incurred
$429,804 in net loss from operations due to general and administrative expenses
of $247,654 and research and development expenses of $182,150 as compared to a
net loss from operations of $1,684,788 due to general and administrative
expenses of $1,567,226 and research and development expenses of $117,562 during
the year ended December 31, 2018. During the year ended December 31, 2019 and
2018, we had other expenses of $7,008 and 329,050, respectively.
Our net loss from continuing operations during the years 2019 and 2018 were
$436,812 and 2,013,838, respectively.
Liquidity, Capital Resources and Strategy
On December 31, 2019, we had total assets of $18,278 consisting of cash in the
same amount. As of December 31, 2018, we had total assets of $395,377 consisting
of $390,495 in cash and $4,882 in long-term assets. We had total current
liabilities of $277,381 as of December 31, 2019 consisting of $4,050 in accounts
payable, $1,564 in accrued interest, $105,862 in accrued salaries and $165,905
in loans from shareholders.
We had total current liabilities of $224,676 as of December 31, 2018 consisting
of $1,564 in accrued interest, $27,566 in accrued expenses, $157,810 in accrued
salaries and $37,736 in loans from shareholders.
We used $500,386 in our operating activities during the year 2019, which was due
to a net loss of $436,812 offset by imputed interest of $7,008, an increase in
accounts payable of $4,050, a decrease of $4,882 in accounts receivable and
prepaid expenses; and a decrease in accrued salary due to a related party of
$79,514.
We used $1,480,261 in our operating activities during the year 2018, which was
due to a net loss of $2,013,838 offset by imputed interest of $13,150, a loss
related to a debt settlement of $315,900, an increase in accounts payable and
accrued expenses of $125,027, a decrease in accounts receivable and prepaid
expenses of $21,000 and a decrease of $58,500 in prepaid expenses and other
assets.
We financed our negative cash flow from operations in 2019 through borrowings of
$128,169 from related parties.
We financed our negative cash flow from operations in 2018 through proceeds from
a rights-offering of $1,795,146 and borrowings of $64,648 from a related party.
We had no investing activities during the years ended December 31, 2019 and
2018.
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America with an
auditor's going concern opinion for the years 2019 and 2018. This means that
there is substantial doubt that we can continue as an on-going business for the
next twelve months unless we obtain additional capital to pay our bills and meet
our other financial obligations. This is because we have not generated any
revenues and no revenues are anticipated.
18
The Company has reported a net loss of $436,812 for the year ended December 31,
2019 and $2,013,838 for the year ended December 31, 2018 and had accumulated
deficits of $34,069,337 and $33,632,525 as of December 31, 2019 and 2018,
respectively.
The Company had no revenues from operations during the years ended December 31,
2019 and 2018. As of December 31, 2019, the Company had $18,278 cash on hand and
had negative working capital of $259,103.
We believe that our current cash on hand of $18,278 as of December 31, 2019,
will not be sufficient to meet our operating requirements throughout the ensuing
twelve-month period. We require additional financing at satisfactory terms and
conditions, of which there can be no assurance, in order to satisfy our ongoing
capital requirements for the next twelve months in order to execute our plan of
operation as presently constituted.
We do not expect to generate cash flow from operations unless we receive FDA
approval for our BST Device.
Our management believes that our operations will generate revenues in the US
beginning of 2022. We expect that FDA approval for our BST Device will improve
our ability to generate revenues from sales in other geographic areas. Our
future ability to generate cash flows from operations will depend on the demand
for our BST Device, as well as general economic, financial, competitive and
other factors, many of which are beyond our control.
If and when we receive FDA approval of our BST Device, of which there can be no
assurance, our business might not generate sufficient future cash flow in an
amount sufficient to enable us to fund our liquidity needs, including working
capital, capital expenditures, investments and other general corporate
requirements.
Availability of Additional Capital
We have no commitments or arrangements, formal or otherwise, from any person or
entity to provide us with any additional capital. The Company may be unable to
implement its present plan of operation and this could have a material adverse
effect on our business, prospects, financial condition and results of
operations.
Our future financing transactions may include the issuance of equity and/or debt
securities. In the event that we seek to raise funds through additional private
placements of equity or convertible debt, the trading price of our common stock
could be adversely effected. Further, if we issue additional equity or debt
securities, stockholders may experience dilution or the new equity securities
may have rights, preferences or privileges senior to those of existing holders
of our common stock. We are not aware of any material trend, event or capital
commitment, which would or could potentially adversely affect our liquidity. We
do not have any arrangements with potential investors or lenders to provide us
with any additional financing and there can be no assurance that any such
additional financing will be available when required in order to proceed with
the business plan.
Off-Balance Sheet Arrangements
As of December 31, 2019 and 2018, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated
under the Securities Exchange Act of 1934.
Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial
statements for the years ended December 31, 2019 and 2018, and are included
elsewhere in this annual report.
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