UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from _________to ___________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
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.
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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
☒ | Smaller reporting company | |||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards 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
Number of common shares outstanding as of May
4, 2023 was
i
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, net | ||||||||
Notes receivable | ||||||||
Deposits and prepaid expenses | ||||||||
Investment in marketable securities | ||||||||
Total current assets | ||||||||
Right-of-use asset | ||||||||
Property, plant and equipment, net | ||||||||
Intangible assets | ||||||||
Goodwill | ||||||||
Total Assets | $ | $ | ||||||
Liabilities & Stockholders’ Equity (Deficit) | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | $ | ||||||
Accrued liabilities | ||||||||
Line of credit | ||||||||
Notes payable, related party | ||||||||
Paycheck protection program loan, current | ||||||||
Operating lease liability, current | ||||||||
Total current liabilities | ||||||||
Operating lease liability, non-current | ||||||||
Convertible notes payable, net of discount | ||||||||
Paycheck protection program loan | ||||||||
Total Liabilities | ||||||||
Commitments and contingencies |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Stockholders’ Equity (Deficit) | ||||||||
Series A Preferred stock, $ | ||||||||
Series B Preferred stock, $ | ||||||||
Common stock, $ | ||||||||
Common stock to be issued | - | |||||||
Additional paid in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Controlling interest | ( | ) | ( | ) | ||||
Non-controlling interest | ( | ) | ( | ) | ||||
Total Stockholders’ (Deficit) Equity | ( | ) | ( | ) | ||||
Total Liabilities and Stockholders’ (Deficit) Equity | $ | $ |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(UNAUDITED)
2023 | 2022 | |||||||
Net Revenue | $ | $ | ||||||
Cost of sales | ||||||||
Gross profit | ||||||||
Operating expenses: | ||||||||
Stock based compensation | ||||||||
Personnel expenses | ||||||||
General and administrative expenses | ||||||||
Professional fees | ||||||||
Total operating expenses | ||||||||
Loss from operations | ( | ) | ( | ) | ||||
Other income (expense): | ||||||||
Amortization of debt discount | ( | ) | ( | ) | ||||
Interest expense | ( | ) | ( | ) | ||||
Net gain (loss) from investments | ( | ) | ||||||
Interest income | ||||||||
Total other income (expense) | ( | ) | ( | ) | ||||
Loss before income tax benefit (expense) | ( | ) | ( | ) | ||||
Income tax benefit (expense) | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Net loss attributable: | ||||||||
Non-controlling interest | ( | ) | ( | ) | ||||
Common stockholders | ( | ) | ( | ) | ||||
Net loss | $ | ( | ) | $ | ( | ) | ||
$ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2023
(UNAUDITED)
Series A Preferred Stock | Series B Preferred Stock | Common Stock | Common Stock to be Issued | Additional Paid in | Accumulated | Non-Controlling | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||||||||||||||
Balance December 31, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock previously in common stock to be issued | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
Sale of common stock | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock units | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
Balance March 31, 2023 | ( | ) | ( | ) | ( | ) |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2022
(UNAUDITED)
Series A Preferred Stock | Series B Preferred Stock | Common Stock | Common Stock to be Issued | Additional Paid in | Accumulated | Non-Controlling | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||||||||||||||
Balance December 31, 2021 | $ | $ | $ | $ | | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
Conversion of Series A preferred stock into common stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for business acquisition | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
Balance March 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(UNAUDITED)
2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
Depreciation and amortization | ||||||||
Stock-based compensation | ||||||||
Net (gain) loss from investments | ( | ) | ||||||
Amortization of debt discount | ||||||||
Right-of-use asset | ||||||||
Income tax benefit | - | ( | ) | |||||
Changes in operating assets & liabilities | ||||||||
Accounts receivable and notes receivable | ( | ) | ( | ) | ||||
Deposits & prepaid expenses | ( | ) | ( | ) | ||||
Accounts payable | ||||||||
Accrued liabilities | ||||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Cash acquired in business combination | - | |||||||
Sales of marketable securities | ||||||||
Purchase of marketable securities | ( | ) | ( | ) | ||||
Acquisition of fixed assets | - | ( | ) | |||||
Net cash provided by (used in) investing activities | - | |||||||
Cash Flows from Financing Activities: | ||||||||
Sale of common stock | - | |||||||
Proceeds from convertible notes payable | ||||||||
(Payments) proceeds from PPP loan | ( | ) | ( | ) | ||||
Payments on line of credit | ( | ) | ( | ) | ||||
Net cash provided by (used in) financing activities | ( | ) | ||||||
(Decrease) increase in Cash | ( | ) | ||||||
Cash at beginning of period | ||||||||
Cash at end of period | $ | $ |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(UNAUDITED)
2023 | 2022 | |||||||
Supplemental Cash Flow Information | ||||||||
Cash paid for interest | $ | $ | ||||||
Cash paid for income taxes | $ | $ | ||||||
Non-cash investing and financing activities: | ||||||||
Common stock issued for business combination | $ | - | $ |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of operations
Optimus Healthcare Services, Inc. (formerly Between Dandelions, Inc., “Optimus”, “Company”) was initially organized under the laws of Florida on February 26, 1990, as Phoenix Management Associates, Inc. Over the ensuing years, the Company made a series of amendments to its Articles of Incorporation relating to authorization of various series of Preferred Shares and made a series of name changes. The current name of Optimus Healthcare Services, Inc. became effective with the State of Florida on January 24, 2021.
The Company is dedicated to: (1) advancing access to clinical trial research; and (2) improving and simplifying access to vaccines and pharmaceutical products. Currently the Company provides these services through its portfolio companies, Clinical Research Alliance, Inc. (CRA), and Worker’s Health Rx (d/b/a Vitality Rx).
2. Summary of significant accounting policies
Principles of Consolidation
The consolidated financial statements which include the accounts of the Company and its subsidiaries are prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP). All significant intercompany balances and transactions have been eliminated. The consolidated financial statements and related condensed disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the annual financial statements reported in the latest Form 10-K filed for the year ended December 31, 2022. The results of operations of any interim period are not necessarily indicative of the results for the full year. The fiscal year end is December 31.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of equity issued for services, valuation of equity associated with convertible debt, the valuation of derivative liabilities, and the valuation of deferred tax assets. Actual results could differ from these estimates.
Reclassification
Certain amounts included in prior year financial statements have been reclassified to conform to the current year presentation. These reclassifications did not have a material impact on the Company’s previously reported financial statements.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, “Revenue from contracts with customers,” (Topic 606). Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
8
The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. The Company’s main revenue stream is from services. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery. For services performed by CRA, the Company’s performance obligations are generally met at the point in time the services are rendered.
Fair Value Measurements and Fair Value of Financial Instruments
Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements, clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3: Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The estimated fair value of certain financial instruments, including all current liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
ASC subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.
The Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value. The following table represents the Company’s assets and liabilities by level measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022.
March 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Marketable securities | $ | $ |
9
Derivative Liability
The Company evaluates convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. The Company currently has no derivative liability instruments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. The Company places its cash equivalents with financial institutions and invests its excess cash primarily in certificates of deposit, deposit accounts or treasury bills. The Company has established guidelines relative to credit ratings and maturities that seek to maintain stability and liquidity.
Cash and Cash Equivalents
The Company had cash and cash equivalents
of $
The Company places most of its temporary
cash investments with financial institutions, which from time to time may exceed the Federal Deposit Insurance Corporation limit.
The amount at risk at March 31, 2023 and December 31, 2022 was $
Accounts Receivable
Trade accounts receivable are recorded at the net invoice value and are not interest bearing. The Company considers receivables past due based on the payment terms. The Company reviews its exposure to accounts receivable and reserves specific amounts if collectability is no longer reasonably assured. The Company also reserves a percentage of its trade receivable balance based on collection history and current economic trends that might impact the level of future credit losses. The Company re-evaluates such reserves on a regular basis and adjusts its reserves as needed.
As of March
31, 2023, there was one customer representing
Sales Concentrations
Revenue
to a single customer in any one year can exceed
Property, Plant and Equipment
Property,
plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for Computer Equipment and Furniture and
Fixtures over
10
Finite-lived Intangible Assets
Our internal software development costs primarily relate to internal-use software. Such costs are capitalized in the application development stage in accordance with ASC 350-40, Internal-use Software (“ASC 350-40”). We also capitalize software development costs upon the establishment of technological feasibility for a product in accordance with ASC 985-20, Software to be Sold, Leased, or Marketed (“ASC 985-20”). Software development costs are amortized on a straight-line basis.
Goodwill
We assess goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, by comparing its carrying value to the reporting unit’s fair value. As of March 31, 2023 and December 31, 2022, we determined that there was no goodwill impairment.
Stock Based Compensation
The Company records stock-based compensation
in accordance with the provisions of FASB ASC Topic 718, “Accounting for Stock Compensation,” which establishes accounting
standards for transactions in which an entity exchanges its equity instruments for goods or services. In accordance with guidance provided
under ASC Topic 718, the Company recognizes an expense for the fair value of its stock awards at the time of grant and the fair value
of its outstanding stock options as they vest, whether held by employees or others. The Company uses the Black-Scholes option-pricing
model to compute the estimated fair value of option awards and includes assumptions regarding expected volatility, expected option term,
dividend yields and risk-free interest rates. For the three months ended March 31, 2023 and 2022, the Company recorded $
Convertible Debentures
The Company adopted the guidance in Accounting Standards Updated (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity on April 1, 2022. ASU 2020-06 simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. Additionally, ASU 2020-06 removes the requirements for accounting for beneficial conversion features.
Advertising, Marketing and Public Relations
The Company follows the policy of charging
the costs of advertising, marketing, and public relations to expense as incurred. There were $
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. CRA had elected Subchapter S corporation status for income tax purposes. As a result, items of profit and loss were taxed to the shareholders of CRA and no provision was made for federal or state income taxes. Effective upon being acquired by CRAAC on November 25, 2020, the Subchapter S election of CRA was automatically terminated.
11
The Company recognizes the effect of
income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured
at the largest amount that is greater than
The Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Net Income (Loss) Per Common Share
Basic income (loss) per share available to common stockholders is calculated using the weighted average number of common shares outstanding during the applicable period. Diluted net income (loss) per share available to common stockholders is calculated using the weighted average number of common shares outstanding plus the number of dilutive potential common shares outstanding during the applicable period. Dilutive potential common shares consist of the incremental common shares (i) issuable upon the vesting of outstanding restricted stock units and the exercise of outstanding stock options using the treasury stock method and (ii) issuable for non-participating preferred stock using the if-converted method. Our warrants and some of our preferred stock are considered participating securities pursuant to the two-class method. Dilutive potential common shares are excluded from the calculation of diluted net income (loss) per share available to common stockholders if their effect is antidilutive. The following potential common shares were excluded from the calculation of diluted net income (loss) per share available to common stockholders because their effect would have been antidilutive:
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Warrants | ||||||||
Stock options | ||||||||
Convertible notes payable | ||||||||
Preferred stock | ||||||||
Total |
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
12
3. Operating lease right-of-use asset and operating lease liability
Base | ||||
Rent Periods | Rent | |||
January 1, 2023 to August 31, 2023 | $ | |||
September 1, 2023 to August 31, 2024 | $ | |||
September 1, 2024 to August 31, 2025 | $ | |||
September 1, 2025 to August 31, 2026 | $ | |||
September 1, 2026 to August 31, 2027 | $ |
Base | ||||
Rent Periods | Rent | |||
February 1, 2022 to January 1, 2023 | $ | |||
February 1, 2023 to January 1, 2024 | $ | |||
February 1, 2024 to January 1, 2025 | $ | |||
February 1, 2025 to January 1, 2026 | $ | |||
February 1, 2026 to August 30, 2026 | $ |
The Company has an equipment lease commencing on January 1, 2021 through December 1, 2023. The contract requires payments of $179 per month.
Operating lease right-of-use asset and liability are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 7.5%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Since the common area maintenance expenses are expenses that do not depend on an index or rate, they are excluded from the measurement of the lease liability and recognized in other general and administrative expenses on the statements of operations.
Right-of-use asset is summarized below:
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Office lease | $ | $ | ||||||
Equipment lease | ||||||||
Less: accumulated amortization | ( | ) | ( | ) | ||||
Right-of-use asset, net | $ | $ |
13
Operating lease liability is summarized below:
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Office lease | $ | $ | ||||||
Equipment lease | ||||||||
Less: current portion | ( | ) | ( | ) | ||||
Long term portion |
Maturity of the lease liability is as follows:
March 31, | ||||
2023 | ||||
Fiscal year ending December 31, 2023 | $ | |||
Fiscal year ending December 31, 2024 | ||||
Fiscal year ending December 31, 2025 | ||||
Fiscal year ending December 31, 2026 | ||||
Fiscal year ending December 31, 2027 | ||||
Present value discount | ( | ) | ||
Lease liability | $ |
4. Going concern
The Company’s consolidated financial statements
are prepared using the GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities
in the normal course of business. At March 31, 2023 and December 31, 2022, the Company had $
In view of the matters described in the preceding
paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheets is dependent
upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain
financing and to succeed in its future operations. These factors raise substantial doubt about the Company’s ability to continue
as a going concern within
The Company has operating costs and expenses at the present time for development of its business activities. The Company, however, will be required to raise additional capital over the next twelve months to meet its current administrative expenses, and it may do so in connection with or in anticipation of possible acquisition transactions. This financing may take the form of additional sales of its equity securities and/or convertible notes. There is no assurance that additional financing will be available, if required, or on terms favorable to the Company.
14
5. Reverse merger
Optimus Healthcare Services, Inc.
On December 28, 2020, the Company (Optimus Healthcare
Services, Inc – a Florida corporation) acquired
On November 6, 2020, Optimus acquired
On November 25, 2020, CRAAC acquired
The Series A Preferred Stock votes and is convertible
at a rate of
In connection with this transaction, the Company filed a certificate of amendment to its Articles of Incorporation with the State of Florida changing its name to “Optimus Healthcare Services, Inc.” (January 24, 2021).
The transaction has been accounted for as a reverse merger with Optimus Healthcare Services, Inc. as the accounting acquirer and Between Dandelions, Inc. as the accounting acquiree. The financial reporting will reflect the accounting from the perspective of Optimus (“accounting acquirer”), except for the legal capital, which has been retroactively adjusted to reflect the capital of Between Dandelions (“accounting acquiree”) in accordance with ASC 805-40-45-1. As such, the historical financial information presented are those of CRA as the beneficial accounting acquirer in the above transaction.
6. Business acquisition
VitailityRx
On January 28, 2022, the Company entered into
a stock purchase agreement with Worker’s Health Rx, Inc. (“VitalityRx”) and Marc Wiener, the sole shareholder, who was
also our President, until his resignation on April 26, 2023, pursuant to which we acquired
Vitality Rx is an early stage pharmacy dedicated to serving the pharmacy needs of patients in the community and residing in Long-Term Care facilities in the tri-state area. It will maintain inventory of brand and generic medications needed to meet the needs of this population. In addition, Vitality Rx is exploring the possibility of providing Intravenous Immunoglobulin (“IVIG”) to a number of physician offices in the community: including but not limited to: neurologists, Ob/Gyn & infectious disease. This offering is in a preliminary stage as a business plan is being constructed.
15
Consideration | ||||
$ | ||||
Notes payable | ||||
Total consideration | $ | |||
Fair value of net identifiable assets (liabilities) acquired | ||||
Cash | $ | |||
Furniture and equipment | ||||
Capitalized start up costs | ||||
Intangible assets – website | ||||
Fair value of net identifiable assets (liabilities) acquired | $ | |||
Initial goodwill | $ |
The initial goodwill has been adjusted to $
7. Disposition of wholly-owned subsidiary
On December 7,
2022, the Company entered into a stock acquisition agreement with its wholly-owned subsidiary Painscript and certain shareholders of
Painscript pursuant to which the Company agreed to exchange
The Company has accounted for the transaction as follows:
December 7, | ||||
2022 | ||||
Common stock consideration | $ | |||
Reduced by cash paid to Painscript to cover liabilities | ( | ) | ||
Net consideration | ||||
Net assets of Painscript on December 7, 2022 | ||||
Loss on disposition of Painscript | $ | ( | ) |
8. Notes receivable
Notes receivable consisted of the following at March 31, 2023 and December 31, 2022:
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Notes receivable | $ | $ | ||||||
As mentioned in Note 7, the Company provided a loan in the aggregate
principal amount of $
16
9. Property, plant and equipment
Property, plant and equipment consisted of the following at March 31, 2023 and December 31, 2022:
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Furniture and fixtures | $ | $ | ||||||
Computer equipment | ||||||||
Less: Accumulated depreciation | ( | ) | ( | ) | ||||
Property, plant and equipment - net | $ | $ |
Depreciation expense was $
10. Intangible assets
Intangible assets consisted of the following at March 31, 2023 and December 31, 2022:
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Website | $ | $ | ||||||
Less: Accumulated amortization | ( | ) | ( | ) | ||||
Intangible assets - net | $ | $ |
Amortization expense was $
10. Marketable securities and other investments
Our marketable securities are stated at fair value in accordance with ASC Topic 321, Investments- Equity Securities. Any changes in the fair value of the Company’s marketable securities are included in net income under the caption of net loss from investments. The market value of the securities is determined using prices as reflected on an established market. Realized and unrealized gains and losses are determined on an average cost basis. The marketable securities are investments predominately in shares of large publicly traded securities which are being invested until such time the funds are needed for operations.
The value of these marketable securities at March 31, 2023 and December 31, 2022 is as follows:
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Cost | $ | $ | ||||||
Gross unrealized loss | ( | ) | ( | ) | ||||
Fair value | $ | $ |
The above marketable
securities are reflected as level 1 assets as the securities prices are quotes in an established market. The Company has reflected $
17
11. Line of credit
As of March 31, 2023 and December 31, 2022, the
balance of the line of credit was $
12. Notes payable, related party
As of March 31, 2023 and December 31, 2022, the
balance of the notes payable, related party was $
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Notes payable, related party | ||||||||
$ | $ | $ | ||||||
Total long-term notes payable, related party | $ | $ |
On July 1, 2022, the Company entered into an agreement
whereby the Company agreed to issue
13. Paycheck protection program loan
PPP Loans
The Company received loan proceeds in the amount
of approximately $
The Company was granted forgiveness of $
As of March 31, 2023, the non-current portion
is $
In November 2021, the Company was granted forgiveness
on the full $
During the three months ended March 31, 2023,
the Company repaid $
14. Convertible notes payable
The carrying value of convertible notes payable,
net of discount, as of March 31, 2023 and December 31, 2022 was $
18
May 2021 Financing $
On May 25, 2021, the Company entered into a securities
purchase agreement with certain institutional investors (collectively, the “May 2021 Investors”) pursuant to which the Company
issued convertible notes in an aggregate principal amount of $
Each Warrant is exercisable for a period
of
June 2022 Financing $
On June 7, 2022, the Company entered into a securities
purchase agreement with certain institutional investors (collectively, the “June 2022 Investors”) pursuant to which the Company
issued convertible notes in an aggregate principal amount of $
Each Warrant is exercisable for a period of
The Company has accounted for the May 2021 Notes and June 2022 Notes as a financing transaction, wherein the net proceeds that were received were allocated to the financial instrument issued. Prior to making the accounting allocation, the Company evaluated the notes under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis of embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. There were no embedded instruments which required bifurcation.
19
We did analyze the detachable Warrants under ASC 480-10 and ASC 815. The Warrants did not fall under the guidance of ASC 480-10. After analyzing the Warrants under ASC 815, it was determined that the Warrants did meet all the requirements for equity classification under guidance of ASC 815-40-25-1 through 6.
For the three months ended March 31, 2023 and
2022, the Company recorded $
15. Equity
Sale of Securities
In August 2021, the Company
commenced an offering of up to
During 2022, the Company
raised $
Preferred Stock
The Company has
Series A —The Company has 1,102 shares of Series A Preferred outstanding as of March 31, 2023 and December 31, 2022, respectively. The Series A Preferred has the following designations:
● | Convertible at option of holder with unanimous Board of Directors’ approval. |
● | Convertible into 1.25 shares of common stock. |
● | Voting: The holders of this series of Preferred are entitled to 1.25 votes per share, and all such holders will vote together as a single class except as otherwise required by applicable law |
In connection with the December 28, 2020 merger
with Optimus Healthcare Services, Inc., a Delaware corporation (“Optimus”), the Company issued
Series B —
The Company has
● | Convertible at option of holder with unanimous Board of Directors’ approval. |
● | Convertible such that one share of common stock shall be issuable for each twenty (20) shares of Series B Preferred Stock then outstanding. |
● | Voting: The holders of this Series of Preferred are entitled to whole number of votes equal to the number of shares of common stock. |
20
2021 Omnibus Equity Incentive Plan
On May 25, 2021, our Board of Directors and a majority of our stockholders adopted the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), and other stock-based awards. Items described above in the Section called “Shares Available; Certain Limitations” are incorporated herein by reference.
Stock options
The Company selected the Black-Scholes-Merton (“BSM”) valuation technique to calculate the grant date fair values for the stock options because it believes that this technique is reflective of all the inputs that market participants would likely consider in transactions involving warrants. The inputs include the strike price, underlying price, term to expiration, volatility, and risk-free interest rate.
During the three months ended March 31, 2023,
the Company granted
The weighted average range of inputs to the Black-Scholes Model for the grants issued during the three months ended March 31, 2023 is as follows:
Stock Price | $ | |||
Exercise Price | $ | |||
Dividend yield | % | |||
Expected volatility | % | |||
Risk-Free interest rate | % | |||
Expected life (in years) |
Stock option activity for the period ended March 31, 2023 is summarized as follows:
Weighted | Weighted | |||||||||||
Average | Average | |||||||||||
Shares | Exercise Price | Remaining Term | ||||||||||
Options outstanding January 1, 2023 | $ | |||||||||||
Options granted | $ | |||||||||||
Options exercised | ||||||||||||
Options cancelled | ||||||||||||
Options outstanding at March 31, 2023 | $ | |||||||||||
Options exercisable at March 31, 2023 | $ |
During the three months ended March 31, 2023 and
2022, the Company recorded a total of $
21
Restricted Stock Units
Restricted stock unit (“RSU”) activity is summarized as follows:
Shares | ||||
RSUs outstanding at December 31, 2022 | ||||
RSUs granted | ||||
RSUs released | ||||
RSUs forfeited | ||||
RSUs outstanding at March 31, 2023 |
The RSUs vest
During the three months ended March 31, 2023,
the Company recorded $
Warrants
Warrant activity is summarized as follows:
Weighted | Weighted | |||||||||||
Average | Average | |||||||||||
Shares | Exercise Price | Remaining Term | ||||||||||
Warrants outstanding January 1, 2023 | $ | |||||||||||
Issued | ||||||||||||
Exercised | ||||||||||||
Expired | ||||||||||||
Warrants outstanding at March 31, 2023 | $ | |||||||||||
Warrants exercisable at March 31, 2023 | $ |
16. Commitments and contingencies
During the normal course of business, the Company may be exposed to litigation. If the Company becomes aware of potential litigation, it will evaluate the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company will evaluate its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it will establish the necessary accruals. As of March 31, 2023 and December 31, 2022, the Company is not aware of any contingent liabilities that should be reflected in the consolidated financial statements.
17. Subsequent events
In May 2023, the Company received a related party loan from KORR Acquisitions
Group, Inc. in the amount of $
On April
26, 2023, Marc Weiner resigned as president of the Company, as If as CEO and president of Worker’s Health Rx, Inc., effective
immediately. Mr. Weiner will continue to serve as a director of the Company. Mr. Weiner agreed to continue to provide consulting services
to the Company and on May 2, 2023, the Company entered into a consulting agreement with Mr. Weiner to reflect this mutual understanding. The
consulting agreement has a twelve-month term and either party may terminate immediately in the event of material breach, or
otherwise upon 15 days prior written notice. Under the consulting agreement, Mr. Weiner will receive $
22
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion and analysis of our financial condition and plan of operations together with “Summary Financial Data” and our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023. All amounts in this Quarterly Report on Form 10-Q are in U.S. dollars, unless otherwise noted.
Throughout this Quarterly Report on Form 10-Q, references to “we,” “our,” “us,” “Company,” “Optimus,” or “Optimus Healthcare Services” refer to Optimus Healthcare Services, Inc.., individually, or as the context requires, collectively with its subsidiaries.
Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of the Company’s financial condition and results of operations is based on the Company’s condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. In accordance with U.S. GAAP, the Company bases its estimates on historical experience and on various other assumptions the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
For information on the Company’s significant accounting policies and estimates refer to Note 2 to the Company’s consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 and to Note 2 “Summary of Significant Accounting Policies” in the unaudited condensed consolidated financial statements.
Overview
The Company is dedicated to: (1) advancing access to clinical trial research; and (2) improving and simplifying access to vaccines and pharmaceutical products. Currently the Company provides these services through its portfolio companies, Clinical Research Alliance, Inc. (“CRA”), and Worker’s Health Rx (d/b/a “Vitality Rx”).
Our vision for the Company is to continue to grow by acquiring controlling interests in healthcare-related businesses with strong leadership teams, innovative products and services, and proven technologies or processes that expand access to high quality healthcare and improve overall health outcomes and physical well-being. Our goal at Optimus is to empower physicians and patients with the information, guidance and tools needed to make informed health care choices. The Company seeks synergies among its portfolio companies and facilitates access to its management team which has extensive industry experience and its network of financial and business partners to help finance growth and accelerate business market trajectories.
23
Clinical Research Alliance
On December 28, 2020, the Company acquired 100% of the outstanding equity interests in Optimus Healthcare Services, Inc., a Delaware corporation (“Optimus”), in exchange for 9,998,899 shares of its Series A convertible preferred stock and 18,000,000 shares of its common stock. In connection with the transaction all prior officers and directors of the Company resigned (except for Michael Pruitt) and new officers and directors were appointed as officers and directors of the Company. On November 25, 2020, Clinical Research Alliance Acquisition Corp. (“CRAAC”), an entity 99% owned by Optimus, acquired 100% of the outstanding equity interests in CRA in exchange for 70 shares of its common stock.
CRA provides services to a world-class team of dedicated oncologists across the Tri-State area that are united by a shared commitment to conduct clinical research. CRA provides independent, community-based oncology practices and hospitals in diverse communities with the necessary infrastructure and support to enroll their patients in cutting edge clinical trials without the patients having to leave their physicians’ offices, hospitals or their local communities.
CRA currently supports a number of community-based oncology practices and has signed an agreement with its first acute care hospital in Brooklyn, New York. CRA’s current focus is with oncologists in private practice, as well as rural and small hospitals in diverse communities.
CRA contracts with pharmaceutical companies and Contract Research Organizations (“CRO”) to conduct clinical trials (Phases I-IV) for investigational new drugs, biologics and medical devices, and has worked with over 40 pharmaceutical companies since inception. CRA’s customers consist primarily of large and mid-sized pharmaceutical and biotech companies. In the last 12 years, CRA has conducted approximately 180 clinical trials. As CRA was the highest enroller in many of these clinical trials, many of those clinical trials led to FDA approval for the trial compounds used to treat various cancers. Depending on the clinical trial design, CRA invoices the pharmaceutical manufacturer for some or all of the following services: startup fees, diagnostic tests, laboratory tests, patient stipends, pharmacy fees, patient visits, document storage and the reporting of serious adverse events.
CRA also contracts with independent community-based oncology practices and hospitals in diverse communities to assist in the conduct of the clinical trials. CRA’s services to the community-based practices and hospitals in diverse communities include:
(1) |
maintaining the documentation necessary for the conduct of the clinical trial; |
(2) |
obtaining Internal Review Board (“IRB”) approval; |
(3) |
collecting data required by the trial protocol; |
(4) |
filing regulatory and compliance related documentation; and |
(5) | dispensing drugs necessary to conduct the clinical trial. |
Our contracts with the community-based oncology practices and hospitals include specific budgets for particular services rendered. The contracts may range in duration from a few months to several years or longer depending on the nature of the work performed. In some cases, a portion of the contract fee is paid at the time the contract is executed with the balance of the contract fee payable either monthly or in installments upon the achievement of milestones over the study duration. Our contracts generally may be terminated or reduced in scope either immediately or upon short notice. Our contracts with our community-based oncology practices and hospitals result in the payment of fees for services rendered to the principal investigator that is conducting a particular clinical trial. The COVID-19 pandemic did not impact any open trials that were ongoing as CRA was able to conduct business remotely instead of through on-site visits. However, it did impact the number of new trials that were initiated in 2020 and 2021. The number of oncology trials rebounded in 2022.
24
CRA employs experienced Clinical Research Coordinators that travel to the community-based oncology practices and hospitals for required study visits. Additionally, CRA’s principal investigator for a specific clinical trial is in contact with the oncology practices and hospitals to provide the necessary oversight. Community-based oncology practices and hospitals choose CRA because we provide the opportunity to conduct and conveniently enroll their patients in important clinical trials often unavailable to those community-based oncology practices and hospitals. In addition, CRA is committed to increasing clinical trial access to patients from diverse and underserved communities that will better represent the real-world population. Although CRA’s historical focus has been in the area of oncology, in the future we intend to expand our therapeutic reach into other therapeutic areas, including possibly gastroenterology, dermatology, cardiology, urology and ophthalmology. The National Institutes of Health estimate that there are currently 126,164 active clinical studies in these therapeutic areas.
The clinical research industry is fragmented, consisting of many small, niche service providers, a number of medium-sized providers and a number of large CROs that are differentiated by the scale of their global operations, breadth of service portfolios and supporting technology infrastructure. Companies like CRA generally compete on the basis of previous product experience, the ability to recruit patients, the depth of therapeutic and scientific expertise, the strength of project teams, price and increasingly on the ability to apply new innovation that can drive significant time and cost savings throughout the development process.
Vitality Rx
On January 28, 2022, the Company entered into a stock purchase agreement with Worker’s Health Rx, Inc., d/b/a Vitality Rx (“Vitality Rx”) and Marc Wiener, the sole shareholder, who was also our President, until his resignation on April 26, 2023, pursuant to which we acquired 100% of the outstanding equity interests of Vitality Rx in exchange for the issuance of 250,000 shares of our common stock and $350,000. The cash portion of the purchase price has been paid in full.
Vitality Rx is an early-stage pharmacy dedicated to serving the pharmacy needs of patients in the community and residing in Assisted Living and Independent Living facilities throughout the tristate area. The pharmacy anticipates maintaining an inventory of brand and generic medications needed to meet the needs of this population. In addition, Vitality Rx is exploring the possibility of providing IVIG to a number of physician offices in the community: including but not limited to: neurologists, Ob/Gyn & infectious disease. This offering is in a preliminary stage as a business plan is being constructed.
Recent Developments
On December 7, 2022, the Company entered into a stock acquisition agreement (the “Dec 2022 Agreement”) by and among the Company, Optimus Health, PainScript and certain shareholders of the Company pursuant to which the Company agreed to exchange 100% of the outstanding shares of PainScript for 1,600,000 shares of the Company’s common stock, which shares were then cancelled. The transactions contemplated by the Dec 2022 Agreement closed on December 15, 2022. In connection with the closing of the Dec 2022 Agreement, the 400,000 earnout shares issued to the former shareholders of PainScript were also cancelled. In addition, at closing, the Company provided a loan in the aggregate principal amount of $200,000 to PainScript to cover employee liabilities and general working capital. The loan bears interest at a rate of 8% per annum and matures on the one-year anniversary of the original issuance date. To date, all interest payments have been made. The loan is secured by a pledge of a majority of the voting capital stock of PainScript held by certain PainScript shareholders. The Company also contributed $100,000 to PainScript in order to cover outstanding liabilities.
25
On June 7, 2022, we entered into a securities purchase agreement with certain accredited investors pursuant to which we issued senior secured convertible notes in an aggregate principal amount of $2.2 million for an aggregate purchase price of $2.0 million (the “June 2022 Notes”). In connection with the issuance of the June 2022 Notes, we issued to the investors warrants to purchase an aggregate of 1,540,000 shares of common stock and 200,000 shares of common stock.
The June 2022 Notes rank pari passu with the senior secured convertible notes issued in a May 2021 financing (the “May 2021 Notes”) and senior to all current and future indebtedness of the Company and are secured by substantially all of the assets of the Company. In addition, some of the Company’s subsidiaries entered into a subsidiary guaranty agreement and guaranteed the obligations owed to investors under the Notes.
The May 2021 and June 2022 Notes each have a term of twenty-four months and mature on May 25, 2024, and June 7, 2024, respectively, unless earlier converted. The Notes accrue interest at a rate of 9% per annum, subject to increase to 20% per annum upon and during the occurrence of an event of default. Interest is payable in cash on a quarterly basis. The Notes are convertible at any time, at the holder’s option, into shares of our common stock at an initial conversion price of $1.00 per share, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%). The conversion price is also subject to adjustment due to certain events, including stock dividends, stock splits and in connection with the issuance by the Company of common stock or common stock equivalents at an effective price per share lower than the conversion price then in effect.
Each warrant is exercisable for a period of five years from the date of issuance at an initial exercise price of $1.25 per share, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%). The exercise price is also subject to adjustment due to certain events, including stock dividends, stock splits and in connection with the issuance by the Company of common stock or common stock equivalents at an effective price per share lower than the exercise price then in effect. The investors may exercise the warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement. In the event the investors exercise the warrants on a cashless basis, then we will not receive any proceeds.
Registration Rights Agreements were executed in connection with the issuance of the May 2021 and June 2022 Notes, the warrants and the common stock. If we fail to have it filed with the SEC within 180 days following the date of the financing, or if the Company fails to maintain the effectiveness of the registration statement until all of such shares of common stock have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act of 1933, as amended, without any volume or manner of sale restrictions, then the Company will be obligated to pay to the holders of the May 2021 and June 2022 Notes then, in addition to any other rights the holders may have hereunder or under applicable law, until the applicable event of default is cured, liquidated damages equal to an amount in cash, their pro rata portion of $20,000, on the date of such event of default and on every thirtieth (30th) day (pro-rated for periods totaling less than thirty days) thereafter. If the Company is not 144 eligible and if all the securities included by this Registration Statements and the May 2021 Notes and June 2022 Notes are not subject to one or more registration statements declared effective by the Commission within 180 days of the date hereof, the following partial liquidated damages shall apply: (i) if none of the registrable securities are so registered, $40,000 per month; and (ii) if only the registrable securities covered by the May 2021 Registration Rights Agreement are subject to a registration statement declared effective by the Commission within the applicable time period, $20,000 per month, in each case until cured.
On January 28, 2022, the Company entered into a stock purchase agreement with Worker’s Health Rx, Inc. (d/b/a “Vitality Rx”) and Marc Wiener, the sole shareholder, who was also our President, until his resignation on April 26, 2023, pursuant to which we acquired 100% of the outstanding equity interests of Vitality Rx in exchange for the issuance of 250,000 shares of our common stock and $350,000. The cash portion of the purchase price has been paid in full.
26
On April 26, 2023, Marc Weiner resigned as president of the Company, as well as CEO and president of Worker’s Health Rx, Inc., effective immediately. Mr. Weiner will continue to serve as a director of the Company. Mr. Weiner agreed to continue to provide consulting services to the Company and on May 2, 2023, the Company entered into a consulting agreement with Mr. Weiner to reflect this mutual understanding. The consulting agreement has a twelve-month term and either party may terminate immediately in the event of material breach, or otherwise upon 15 days prior written notice. Under the consulting agreement, Mr. Weiner will receive $20,833.33 on a monthly basis, reimbursement for 75% of his health insurance and standard expense reimbursement.
We entered into a securities purchase agreement dated May 25, 2021, with funds affiliated with Arena Investors LP (“Arena”) pursuant to which we issued convertible notes in an aggregate principal amount of $2.2 million for an aggregate purchase price of $2.0 million (the “Notes”). In connection with the issuance of the Notes, we issued Arena warrants to purchase an aggregate of 165,000 shares of common stock (the “May 2021 Warrants”) and 1,727,859 shares of common stock.
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
UNAUDITED
2023 | 2022 | |||||||
Net Revenue | $ | 271,642 | $ | 309,629 | ||||
Cost of sales | 80,024 | 68,177 | ||||||
Gross profit | 191,618 | 241,452 | ||||||
Operating expenses: | ||||||||
Stock based compensation | 1,417,943 | 2,481,510 | ||||||
Personnel expenses | 886,256 | 457,536 | ||||||
General and administrative expenses | 426,553 | 647,450 | ||||||
Professional fees | 141,279 | 186,467 | ||||||
Total operating expenses | 2,872,031 | 3,772,963 | ||||||
Loss from operations | (2,680,413 | ) | (3,531,511 | ) | ||||
Other income (expense): | ||||||||
Amortization of debt discount | (284,985 | ) | (271,232 | ) | ||||
Interest expense | (103,788 | ) | (50,559 | ) | ||||
Net gain (loss) from investments | 110,721 | (13,765 | ) | |||||
Interest income | 4,000 | - | ||||||
Total other income (expense) | (274,052 | ) | (335,556 | ) | ||||
Loss before income tax benefit (expense) | (2,954,465 | ) | (3,867,067 | ) | ||||
Income tax benefit (expense) | - | 223,009 | ||||||
Net loss | $ | (2,954,465 | ) | $ | (3,644,058 | ) |
27
Results of Operations
Comparison of the Quarter Ended March 31, 2023 and 2022
Net Revenues
Net Revenues were $271,642 for the quarter ended March 31, 2023 and $309,629 for the quarter ended March 31, 2022, a decrease of $37,987. Revenues consist primarily of services to pharmaceutical companies for the execution of oncology clinical trials. The decrease in Revenues were the result of timing of services provided.
Cost of Sales
Cost of Sales were $80,024 for the quarter ended March 31, 2023 and $68,177 for the quarter ended March 31, 2022, an increase of $11,847. Cost of Sales consist primarily of outside physician services. The increase in cost of sales was a result of the mix of revenue and related costs.
Gross Profit
Gross profit was $191,618 for the quarter ended March 31, 2023 and $241,452 for the quarter ended March 31, 2022, a decrease of $49,834. The decrease in gross profit was a result of decreased sales in 2023 of $37,987, as well as the revenue mix and the related higher costs.
Stock-Based Compensation
Stock based compensation was $1,417,943 for the quarter ended March 31, 2023 and $2,481,510 for the quarter ended March 31, 2022, a decrease of $1,063,567. Stock based compensation consists of stock options and RSU’s issued to employees and consultants. The Decrease was due primarily to the timing of terminated options during the fourth quarter of 2022.
Personnel Expenses
Personnel expenses were $886,256 for the quarter ended March 31, 2023 and $457,536 for the quarter ended March 31, 2022, an increase of $428,720. Personnel expenses consist primarily of executive employment agreements, and employee salaries and payroll taxes related to CRA and Vitality Rx due to increased operating activities.
General and Administrative Expenses
General and administrative expenses were $426,553 for the quarter ended March 31, 2023 and $647,450 for the quarter ended March 31, 2022, a decrease of $220,897. General and administrative expenses consist primarily of insurance, rent, study expenses and other corporate expenses to generally support the current and future anticipated operations. The decrease was primarily the result of decreased sales, marketing and advertising costs, computer services and amortization expenses totaling approximately $372,000 related to its Painscript activities during the quarter ended March 31, 2022, as compared to none during the quarter ended March 31, 2023. This was offset in part by increases in consulting fees related to its filing requirements with the Securities and Exchange Commission and other administrative activities.
Professional Fees
Professional Fees were $141,279 for the quarter ended March 31, 2023 and $186,467 for the quarter ended March 31, 2022, a decrease of $45,188. Professional Fees consist primarily of legal and accounting fees related to services performed by outside vendors supporting the Company’s filing requirements with the Securities and Exchange Commission related to its quarterly Form 10-Q, annual Form 10-K, registration statements and other reporting and filing requirements.
28
Loss from Operations
The Company had a loss from operations of $2,680,413 for the quarter ended March 31, 2023 and $3,531,511 for the quarter ended March 31, 2022, a decrease of $851,098 as a result of the foregoing factors.
Amortization of Debt Discount
Amortization of Debt Discount was $284,985 for the quarter ended March 31, 2023 and $271,232 for the quarter ended March 31, 2022, an increase of $13,753.
Interest Expense
Interest expense was $103,788 for the quarter ended March 31, 2023 and $50,559 for the quarter ended March 31, 2022, an increase of $53,229. Interest expense consists primarily of interest on convertible debt. The increase was a result of new convertible debt issued in 2022 and the resultant interest expense.
Net Gain (loss) from Investments
Net gain (loss) from investments was $110,721 for the quarter ended March 31, 2023 and ($13,765) for the quarter ended March 31, 2022, an increase of $124,486. Net loss from investments consists of realized and unrealized gains from marketable securities purchased. For the quarter ended March 31, 2023, the net loss from investments consisted of $161,269 in unrealized gains and $50,548 of realized losses. For the quarter ended March 31, 2022, the net loss from investments consisted of $63,572 in unrealized losses and $49,807 of realized gains.
Interest Income
Interest income was $4,000 for the quarter ended March 31, 2023 and $0 for the quarter ended March 31, 2022, an increase of $4,000. Interest income consists primarily of interest on a short-term loan receivable.
Income Taxes
The income tax expense was $0 for the quarter ended March 31, 2023 and the income tax benefit was $223,009 for the quarter ended March 31, 2022. As of December 31, 2022, and for the quarter ended March 31, 2023, we have provided a full valuation allowance against all of the net deferred tax assets. This was based on management’s assessment, including its cumulative operating losses, that it is more likely than not that the net deferred tax assets may not be realized in the future. We continue to evaluate for potential utilization of our deferred tax asset, which has been fully reserved for, on a quarterly basis, reviewing our economic models, including projections and timing of orders, cost containment measures and other factors.
Net Loss
As a result of the foregoing factors, net loss was $2,954,465 for the quarter ended March 31, 2023 and $3,644,058 for the quarter ended March 31, 2022, a decrease of $689,593.
Liquidity and Capital Resources
The Company’s current operations have been focused on business planning and raising capital. The Company has sustained operating losses since inception and expects such losses to continue over the foreseeable future. In May 2021, the Company issued approximately $2.2 million aggregate principal amount of convertible notes and in June 2022, the Company issued an additional $2.2 million aggregate principal amount of convertible notes on the same terms as the Notes issued in May 2021. Any outstanding amounts of these convertible notes mature on May 25, 2024 and June 7, 2024, respectively. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its services. Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include but are not limited to: private offerings of Common Stock, public offerings of equity and/or debt securities, payments from potential strategic research and development and licensing and/or marketing arrangements. Management believes that these ongoing and planned financing endeavors, if successful, will provide adequate financial resources to continue as a going concern for at least the next six months from the date the financial statements are issued; however, there can be no assurance in this regard. If the Company is unable to secure adequate additional funding, its business, operating results, financial condition and cash flows may be materially and adversely affected.
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The independent auditors’ report accompanying our December 31, 2022 and 2021 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements of the Company have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments that might be necessary should the Company be unable to continue in existence. The Company has incurred substantial losses and negative cash flows from operations since its inception and has an accumulated deficit of $21,986,607 as of March 31, 2023. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales or revenue from its services. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
As of March 31 2023 and December 31, 2022, we had cash of $221,679 and $751,017, respectively, and working capital (deficit) of ($332,023) and $193,033, respectively. We will, however, in the future require additional cash resources to fund operating losses, due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans for the Company’s operating businesses provide the opportunity for the Company to continue as a going concern.
On January 10, 2023 and March 31, 2023, the Company sold 675,000 and 50,000 shares of common stock, respectively, for $1.00 per share in the total amount of $725,000.
During the quarter ended March 31, 2023, we had net cash flow used in operating activities of $1,251,746. The cash flow used in operating activities resulted primarily from the net loss for the period, as partially offset by non-cash charges for stock-based compensation and stock issuance costs, and amortization of debt discounts.
We had net cash flow provided by investing activities of $0 for the quarter ended March 31, 2023. The cash provided by investing activities was primarily the result of net sales and purchases of marketable securities.
We had net cash flow provided by financing activities of $722,408 for the quarter ended March 31, 2023. The cash provided by financing activities was primarily the result of proceeds from sales of the Company’s Common Stock in the amount of $725,000.
As a result of the foregoing, the Company had a net decrease in cash of $529,338 during the quarter ended March 31, 2023.
Subsequent to March 31, 2023, the Company received a related party loan from KORR Acquisitions Group, Inc. in the amount of $100,000, payable on demand, with an interest rate of 1% per annum.
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Inflation
We believe that inflation has not had a material adverse impact on our business or operating results during the periods presented.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as of the date of this Annual Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our principal executive officer and principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” as of March 31, 2023, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Based on the evaluation of our disclosure controls and procedures as of March 31, 2023, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control
There have been no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS.
Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our other filings with the SEC, the occurrence of any one of which could have a material adverse effect on our actual results. There have been no material changes to the Risk Factors previously disclosed in our other filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the quarter ended March 31, 2023, the Company sold 725,000 shares of common stock to an unaffiliated third party for an aggregate purchase price of $725,000.
We deemed the issuances of the securities described above to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, relative to transactions by an issuer not involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
* | Filed herewith. |
** | Furnished herewith |
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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.
OPTIMUS HEALTHCARE SERVICES, INC. | ||
Date: May 12, 2023 | By: | /s/ John Sganga |
John Sganga Chief Executive Officer (Principal Executive Officer) |
Date: May 12, 2023 | By: | /s/ Thomas McNeill |
Thomas McNeill Senior Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) |
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