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) | |
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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. Yes ☐
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. ☐
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No
Number of common shares outstanding as of June
17, 2024 was
i
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Notes receivable | ||||||||
| Deposits and prepaid expenses | ||||||||
| Total current assets | ||||||||
| Right-of-use asset | ||||||||
| Property, plant and equipment, net | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities & Stockholders’ Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Line of credit | ||||||||
| Notes payable, related party | ||||||||
| Convertible notes payable, net of discount | ||||||||
| Paycheck protection program loan, current | ||||||||
| Operating lease liability, current | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability, non-current | ||||||||
| 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, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Stockholders’ 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 | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
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, 2024 AND 2023
(UNAUDITED)
| 2024 | 2023 | |||||||
| Net Revenue | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Stock based compensation | ( | ) | ||||||
| Personnel expenses | ||||||||
| General and administrative expenses | ||||||||
| Professional fees | ||||||||
| Total operating expenses | ( | ) | ||||||
| Income (loss) from operations | ( | ) | ||||||
| Other income (expense): | ||||||||
| Amortization of debt discount | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss on extinguishment of debt | ( | ) | ||||||
| Net gain from investments | ||||||||
| Interest income | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Loss before income tax benefit | ( | ) | ( | ) | ||||
| Income tax benefit | ||||||||
| 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’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2024
(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, 2023 | | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Sale of common stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Stock issued for accrued interest | ||||||||||||||||||||||||||||||||||||||||||||||||
| Warrant repricing | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
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’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2023
(UNAUDITED)
| Series
A Preferred Stock | Series
B Preferred Stock | Common Stock | Common
Stock | 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.
5
OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(UNAUDITED)
| 2024 | 2023 | |||||||
| 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 income from investments | ( | ) | ||||||
| Loss on extinguishment of debt | ||||||||
| Amortization of debt discount | ||||||||
| Amortization of right-of-use asset | ||||||||
| 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: | ||||||||
| Sales of marketable securities | ||||||||
| Purchase of marketable securities | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Sale of common stock | ||||||||
| Proceeds from notes payable | ||||||||
| (Payments) proceeds from PPP loan | ( | ) | ( | ) | ||||
| Payments on line of credit | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Decrease 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, 2024 AND 2023 (Continued)
(UNAUDITED)
| 2024 | 2023 | |||||||
| Supplemental Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Common stock issued for payment of accrued interest | $ | $ | ||||||
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 advancing access to clinical trial research through its portfolio company Clinical Research Alliance, Inc. (“CRA”), and until December 2023 when it discontinued operations of its early stage pharmacy operation, through its portfolio company 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, 2023. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these consolidated financial statements have been included. All adjustments are of a normal recurring nature. 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.
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. As of March 31, 2024 and December 31, 2023, the Company does not have any assets and liabilities measured at fair value on a recurring basis.
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 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 in excess of FDIC limits at March 31, 2024 and December 31, 2023 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, 2024, and December 31, 2023, there were no customers that exceeded 10% of accounts receivables.
Sales Concentrations
Revenue
to a single customer in any one year can exceed 10% of our total sales. During the three months ended March 31, 2024,
there was one customer exceeding 10% of our revenues, representing
10
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
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. In December 2023, as a result of management’s actions to close the
operations of its early-stage Vitality RX operations, goodwill was determined to be impaired and recorded a loss on impairment of goodwill
of $
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. Stock compensation expense for the three months ended March 31, 2024, included stock option
expense of $
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. For the three months ended March 31, 2024 and 2023, there were no advertising expenses.
11
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.
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.
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| 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, 2024 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 | $ | |||
The Company has an equipment lease commencing
on December 1, 2023 through December 1, 2026. The contract requires payments of $
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
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Office lease | $ | $ | ||||||
| Equipment lease | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Right-of-use asset, net | $ | $ | ||||||
13
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Office lease | $ | $ | ||||||
| Equipment lease | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Long term portion | ||||||||
| March 31, | ||||
| 2024 | ||||
| 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, 2024 and December 31, 2023, 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 one year of the date these financial statements are issued. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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. 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 was 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. In addition, Vitality Rx was 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.
| 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 $
During the year ended December 31, 2023, as a
result of management’s actions to close the operations of its early-stage Vitality RX operations, goodwill was determined to be
impaired and resulted in an expense related to the full impairment of goodwill in the amount of $
15
6. 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
| 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 | $ | ( | ) | |
7. Notes receivable
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Notes receivable | $ | $ | ||||||
As mentioned above, the Company provided a loan
in the aggregate principal amount of $
16
8. Property, plant and equipment
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Furniture and fixtures | $ | $ | ||||||
| Computer equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment - net | $ | $ | ||||||
Depreciation expense was $
9. Line of credit
As of March 31, 2024 and December 31, 2023, the
balance of the line of credit was $
10. Notes payable, related party
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Notes payable, related party | ||||||||
| $ | $ | $ | ||||||
| $ | ||||||||
| Total notes payable, related party | $ | $ | ||||||
During the year ended December 31, 2023, the Company
received a related party loan from KORR Acquisitions Group, Inc. in the total amount of $
During the three months ended March 31, 2024,
the Company received a related party loan from KORR Acquisitions Group, Inc. in the total amount of $
17
11. Paycheck protection program loan
PPP Loans
The Company received loan proceeds in the amount
of approximately $
The Company was granted forgiveness of $
In November 2021, the Company was granted forgiveness
on the full $
During the three months ended March 31, 2024,
the Company repaid $
12. Convertible notes payable
The carrying value of convertible notes payable,
net of discount, as of March 31, 2024 and December 31, 2023 was $
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
18
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.
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.
Interest expense for the three months ended March
31, 2024 and 2023 was $
March 8, 2024 Modification
On March 8, 2024 (the “Effective
Date”), Optimus Healthcare Services, Inc. (the “Company”) entered into a forbearance agreement (the
“Forbearance Agreement”) by and among the Company and Arena Investors, LP, as agent (“Agent”) for the
purchasers of the Company’s senior secured convertible notes (collectively, the “Purchasers”) issued in May 2021
(the “May 2021 Notes”) and June 2022 (the “June 2022 Notes” and collectively with the May 2021 Notes, the
“Notes”), pursuant to which, among other things: (i) the Agent and the Purchasers agreed to forbear from exercising
their rights and remedies with respect to the Specified Events of Default (as defined in the Forbearance Agreement) under the Notes
until that date which is the earliest to occur of: (a) April 22, 2024; (b) the date on which any event of default under the Notes
(other than the Specified Events of Default) occurs; and (c) the date on which the Company or any of its subsidiaries fails to
comply with any term set forth in the Forbearance Agreement; (ii) the Company and its subsidiaries agreed it shall not allow
acceleration or make any cash principal or interest payment on account of any indebtedness held by KORR Acquisition Group, Inc.
(“Subordinated Lender”); (iii) the Company agreed it would use commercially reasonable best efforts to consummate a sale
of some or all of the assets of its CRA business, a sale of some or all of the equity interests of the CRA business, or a merger of
the CRA business, in each case, to an independent, non-affiliated third party in an arms’ length transaction, subject to
satisfaction of certain milestones; (iv) the Company agreed it would use commercially reasonable best efforts to consummate an
equity financing that results in gross proceeds of at least $
19
In connection with the Forbearance Agreement,
the Company acknowledged that accrued and unpaid interest through January 1, 2024, fees, costs, and other amounts due to the Agent and
the Purchasers under the Notes and the other transaction documents entered into between the parties was equal to $
Subordination Agreement
In connection with the Forbearance Agreement, the Company, Agent and Subordinated Lender entered into a subordination agreement (the “Subordination Agreement”) pursuant to which Subordinated Lender agreed to, among other things: (i) subordinate and make junior the payment of any and all of the principal amount or interest on, and any fees, costs, expenses, or any other payment in respect of the debt held by the Subordinated Lender (the “Subordinated Debt”) until 91 days after the indefeasible payment of the Senior Debt or after the conversion in full of the Notes; and (ii) upon the consummation of a Qualified Subsequent Financing, the Subordinated Lender agreed to convert the entire Subordinated Debt into a junior class of preferred stock of the Company, which such class, among other limitations, is junior as to the liquidation rights of any more senior class of preferred stock, in such form and with such content as the Agent and the Company may agree.
Amended and Restated Notes
On the Effective Date, the Company entered into
amended and restated Notes with the Purchasers (the “Amended Notes”) pursuant to which, the Company agreed, among other things:
(i) to pay interest to the Purchasers on the aggregate unconverted and then outstanding principal amount of this Note at the rate of twelve
percent (
20
Amended and Restated Warrants
In connection with (i) the issuance of the May
2021 Notes, and (ii) the issuance of the June 2022 Notes, the Company issued the Purchasers: (i) warrants to purchase an aggregate of
Registration Rights Agreements
On the Effective Date, the Company entered into
an Amended and Restated Registration Rights Agreement with the Purchasers related to the shares of common stock held by the Purchasers
and the shares of common stock issuable upon exercise of the Amended Warrants pursuant to which we agreed to file a registration statement
for such securities on the 30th calendar day following the date the Company’s independent public accountants have completed
their audit for the fiscal year ended December 31, 2023 and the Company has filed its Annual Report on Form 10-K including such financial
statements, or if later, June 15, 2024. If the Company fails to have it filed by such date, declared effective 60 calendar days thereafter
or if we fail to maintain the effectiveness of the registration statement until all of such securities have been sold or are otherwise
able to be sold pursuant to Rule 144 under the Securities Act, without any volume or manner of sale restrictions, then we will be obligated
to pay liquidated damages to the holders of such securities of $
On the Effective Date, the Company also entered
into an Amended and Restated Registration Rights Agreement with the Purchasers related to the shares of common stock (or shares of a to-be-issued
class of preferred stock) issuable upon conversion of the Notes pursuant to which we agreed to file a registration statement for such
securities on the 30th calendar day following the earliest of: (i) the first anniversary of the Effective Date and no Qualified
Subsequent Financing has been consummated; (ii) the consummation of a Qualified Subsequent Financing and the Company has filed its Annual
Report on Form 10-K for the fiscal year ended December 31, 2023, or if later, June 15, 2024; and (iii) the occurrence and continuance
of an Event of Default (as defined under the Notes). If we fail to have it filed by such date, declared effective 45 calendar days
thereafter or if we fail to maintain the effectiveness of the registration statement until all of such securities have been sold or are
otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any volume or manner of sale restrictions, then we will
be obligated to pay liquidated damages to the holders of such securities of $
Side Letter
On the Effective Date, the Company and the Agent entered into a side letter pursuant to which the Agent acknowledged and agreed that any to-be-issued shares of preferred stock to be issued upon conversion of the Notes shall include the general parameters as set forth below, subject to execution of definitive documentation: (i) senior preferred will be first, prior to and superior to any other class of preferred stock or any other security, with a liquidation preference, which is to be paid in full before any other class of securities receives any distribution in liquidation or otherwise, (ii) no PIK or interest, no voting rights (except as required by law, no restrictions on future debt/equity raises (still have MFN for one year and the customary adjustment rights), (iii) convertible into shares of the common stock and (iv) non-redeemable.
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The Company tested the modification under ASC
470-50-40 to determine if the modification resulted in an extinguishment. It was determined the present value of the cash flows under
the terms of the new debt instrument was at least 10 percent different from the present value of the remaining cash flows under the terms
of the original instrument. The difference between the reacquisition price of the debt in the amount of $
On June 4, 2024, the Company entered into an amendment to the Forbearance Agreement and Registration Rights Agreements. See footnote 15 for the provisions of that agreement.
13. Equity
Sale of Securities
In August 2021, the Company
commenced an offering of up to
During 2023, the Company
raised $
Preferred Stock
The Company has
Series A —The
Company has
| ● | Convertible at option of holder with unanimous Board of Directors’ approval. |
| ● | Convertible into |
| ● | Voting: The holders of this series of Preferred are entitled to |
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. |
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Stock Redemption
On May 5, 2023, the Company entered into an agreement
with Marc Weiner where he agreed to return
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 up to
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, 2024,
the Company granted
| Stock Price | $ | |||
| Exercise Price | $ | |||
| Dividend yield | % | |||
| Expected volatility | % | |||
| Risk-Free interest rate | % | |||
| Expected life (in years) |
| Weighted | Weighted | |||||||||||
| Average | Average | |||||||||||
| Shares | Exercise Price | Remaining Term | ||||||||||
| Options outstanding January 1, 2024 | $ | |||||||||||
| Options granted | $ | |||||||||||
| Options exercised | - | |||||||||||
| Options cancelled | ( | ) | $ | - | ||||||||
| Options outstanding at March 31, 2024 | $ | |||||||||||
| Options exercisable at March 31, 2024 | $ | |||||||||||
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During the three months ended March 31, 2024,
the Company incurred new stock-based compensation expense of $
Restricted Stock Units
| Shares | ||||
| RSUs outstanding at December 31, 2023 | ||||
| RSUs granted | ||||
| RSUs released | ||||
| RSUs forfeited | ( | ) | ||
| RSUs outstanding at March 31, 2024 | ||||
The RSUs vest
During the three months ended March 31, 2024,
the remaining
Warrants
| Weighted | Weighted | |||||||||||
| Average | Average | |||||||||||
| Shares | Exercise Price | Remaining Term | ||||||||||
| Warrants outstanding January 1, 2024 | $ | |||||||||||
| Issued | ||||||||||||
| Exercised | - | |||||||||||
| Expired | - | |||||||||||
| Warrants outstanding at March 31, 2024 | $ | |||||||||||
| Warrants exercisable at March 31, 2024 | $ | |||||||||||
Effective March 8, 2024,
the warrants exercise prices were amended to $
14. 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, 2024 and December 31, 2023, the Company is not aware of any contingent liabilities that should be reflected in the consolidated financial statements.
24
15. Subsequent events
On June 4, 2024, the
Company entered into an amendment to the Forbearance Agreement and Registration Rights Agreements. The Forbearance Agreement was amended
such that the Agent and the Purchasers agreed to forbear from exercising their rights and remedies with respect to the Specified
Events of Default (as defined in the Amendment) under the Notes until that date which is the earliest to occur of: (a) August 30, 2024;
(b) the date on which any event of default under the Notes (other than the Specified Events of Default) occurs; and (c) the date on which
the Company or any of its subsidiaries fails to comply with any term set forth in the Forbearance Agreement; (ii) the definition of “Filing
Date” in the Amended and Restated Registration Rights Agreements (as defined in the Amendment) was amended such that we agreed
to file a registration statement for such securities on the 30th calendar day following the date the Company’s independent
public accountants have completed their audit for the fiscal year ended December 31, 2023 and the Company has filed its Annual Report
on Form 10-K including such financial statements, or if later, June 30, 2024 and (iii) the parties agreed to issue new Amended Warrants
(as defined in the Amendment) to reflect an erroneous change to the expiration date in the Amended Warrants from
In connection with the
Amendment, the Company agreed to issue to the Purchasers such number of shares of a to-be-created class of preferred stock having a stated
value equal to $
During the quarter ended June 30, 2024, the Company
issued an additional
As of March 31, 2024, the Company received a non
interest bearing bridge loan from KORR in the total amount of $
25
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, 2023 and to Note 2 “Summary of Significant Accounting Policies” in the unaudited condensed consolidated financial statements.
Overview
The Company is dedicated to advancing access to clinical trial research through its portfolio company Clinical Research Alliance, Inc. (“CRA”), and until December 2023 when it discontinued operations of its early stage pharmacy operation, through its portfolio company 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.
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.
26
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 and 2023.
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.
27
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 was 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. In addition, Vitality Rx was 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 was in a preliminary stage until the Company decided to discontinue its operations in December 2023.
Recent Developments
On March 8, 2024 (the “Effective Date”), Optimus Healthcare Services, Inc. (the “Company”) entered into a forbearance agreement (the “Forbearance Agreement”) by and among the Company and Arena Investors, LP, as agent (“Agent”) for the purchasers of the Company’s senior secured convertible notes (collectively, the “Purchasers”) issued in May 2021 (the “May 2021 Notes”) and June 2022 (the “June 2022 Notes” and collectively with the May 2021 Notes, the “Notes”), pursuant to which, among other things: (i) the Agent and the Purchasers agreed to forbear from exercising their rights and remedies with respect to the Specified Events of Default (as defined in the Forbearance Agreement) under the Notes until that date which is the earliest to occur of: (a) April 22, 2024; (b) the date on which any event of default under the Notes (other than the Specified Events of Default) occurs; and (c) the date on which the Company or any of its subsidiaries fails to comply with any term set forth in the Forbearance Agreement; (ii) the Company and its subsidiaries agreed it shall not allow acceleration or make any cash principal or interest payment on account of any indebtedness held by KORR Acquisition Group, Inc. (“Subordinated Lender”); (iii) the Company agreed it would use commercially reasonable best efforts to consummate a sale of some or all of the assets of its CRA business, a sale of some or all of the equity interests of the CRA business, or a merger of the CRA business, in each case, to an independent, non-affiliated third party in an arms’ length transaction, subject to satisfaction of certain milestones; (iv) the Company agreed it would use commercially reasonable best efforts to consummate an equity financing that results in gross proceeds of at least $2,000,000 to the Company on or prior to February 28, 2025, subject to consent of the Purchasers, which consent will not be unreasonably withheld (a “Qualified Subsequent Financing”); (v) subject to approval by the Company’s Board of Directors (the “Board”) or appropriate committee thereunder, the Company agreed to promptly appoint to the Company’s Board a nominee suggested by the Agent; and (vi) the Agent and the Purchasers provided their conditional consent to allow the Company to sell up to $350,000 of subordinated bridge notes, subject to certain conditions.
In connection with the Forbearance Agreement, the Company acknowledged that accrued and unpaid interest through January 1, 2024, fees, costs, and other amounts due to the Agent and the Purchasers under the Notes and the other transaction documents entered into between the parties was equal to $197,816.64 (exclusive of liquidated damages under Section 4.24 of the Security Purchase Agreements (as defined in the Forbearance Agreement) (the “Owed Amount”). The Company agreed to issue to the Purchasers an aggregate of 3,165,066 shares of common stock in satisfaction of such Owed Amount. The securities issued and sold in this transaction were not registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. The Purchasers are each an “accredited investor” as such term is defined in Regulation D promulgated under the Securities Act.
28
Subordination Agreement
In connection with the Forbearance Agreement, the Company, Agent and Subordinated Lender entered into a subordination agreement (the “Subordination Agreement”) pursuant to which Subordinated Lender agreed to, among other things: (i) subordinate and make junior the payment of any and all of the principal amount or interest on, and any fees, costs, expenses, or any other payment in respect of the debt held by the Subordinated Lender (the “Subordinated Debt”) until 91 days after the indefeasible payment of the Senior Debt or after the conversion in full of the Notes; and (ii) upon the consummation of a Qualified Subsequent Financing, the Subordinated Lender agreed to convert the entire Subordinated Debt into a junior class of preferred stock of the Company, which such class, among other limitations, is junior as to the liquidation rights of any more senior class of preferred stock, in such form and with such content as the Agent and the Company may agree.
Amended and Restated Notes
On the Effective Date, the Company entered into amended and restated Notes with the Purchasers (the “Amended Notes”) pursuant to which, the Company agreed, among other things: (i) to pay interest to the Purchasers on the aggregate unconverted and then outstanding principal amount of this Note at the rate of twelve percent (12%) per annum beginning on or after May 2, 2023; (ii) commencing with the January 1, 2024 interest payment and thereafter, the Company, at its option may make interest payments and payment of other amounts due and payable under Amended Notes in shares of Common Stock of the Company at a price per share equal to the lesser of (a) $0.0625 or (b) 100% of the closing sale price on the day that is immediately prior to the applicable payment date or in cash; (iii) to allow the Amended Notes to be convertible into shares of Common Stock or, upon prior written notice, such number of shares of a to-be-issued class of preferred stock of the Company on the earliest of: (a) the occurrence and continuance of an Event of Default (as defined in the Amended Notes), (b) consummation of a Qualified Subsequent Financing, and (c) on or after the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information; (iv) the conversion price in the Amended Notes shall now be equal to the lower of (a) $0.0625 or (b) the price of the securities issued in a Qualified Subsequent Financing completed within the one (1) year anniversary of the Current Issue Date, subject to adjustment; and (v) upon consummation of a Qualified Subsequent Financing, the outstanding principal amount of the Amended Notes plus all accrued but unpaid interest thereon and any other payment due thereunder, shall automatically, without any further action required by the Purchasers, be converted into shares of a class of the Company’s, yet-to-be-issued senior convertible preferred stock, in a form reasonably acceptable to the Purchasers, at the conversion price then in effect.
Amended and Restated Warrants
In connection with (i) the issuance of the May 2021 Notes, and (ii) the issuance of the June 2022 Notes, the Company issued the Purchasers: (i) warrants to purchase an aggregate of 165,000 shares of Common Stock with an exercise price of $1.25 per share (the “May 2021 Warrants”), and (ii) warrants to purchase an aggregate of 1,540,000 shares of Common Stock with an exercise price of $1.25 per share (the “June 2022 Warrants” and together with the May 2021 Warrants, the “Warrants”), respectively. In connection with the Forbearance Agreement, the Company and the Purchasers entered into amended and restated warrants (the “Amended Warrants”) pursuant to which, among other things: (i) the exercise price of the Warrants was reduced to $0.01 per share and (ii) the term of the Warrants was changed from 5 years to 7 years.
Registration Rights Agreements
On the Effective Date, the Company entered into an Amended and Restated Registration Rights Agreement with the Purchasers related to the shares of common stock held by the Purchasers and the shares of common stock issuable upon exercise of the Amended Warrants pursuant to which we agreed to file a registration statement for such securities on the 30th calendar day following the date the Company’s independent public accountants have completed their audit for the fiscal year ended December 31, 2023 and the Company has filed its Annual Report on Form 10-K including such financial statements, or if later, June 15, 2024. If the Company fails to have it filed by such date, declared effective 60 calendar days thereafter or if we fail to maintain the effectiveness of the registration statement until all of such securities have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any volume or manner of sale restrictions, then we will be obligated to pay liquidated damages to the holders of such securities of $20,000, in addition to any other rights such holders may have, upon the occurrence of any such event and on each monthly anniversary thereafter until the event is cured.
29
On the Effective Date, the Company also entered into an Amended and Restated Registration Rights Agreement with the Purchasers related to the shares of common stock (or shares of a to-be-issued class of preferred stock) issuable upon conversion of the Notes pursuant to which we agreed to file a registration statement for such securities on the 30th calendar day following the earliest of: (i) the first anniversary of the Effective Date and no Qualified Subsequent Financing has been consummated; (ii) the consummation of a Qualified Subsequent Financing and the Company has filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, or if later, June 15, 2024; and (iii) the occurrence and continuance of an Event of Default (as defined under the Notes). If we fail to have it filed by such date, declared effective 45 calendar days thereafter or if we fail to maintain the effectiveness of the registration statement until all of such securities have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any volume or manner of sale restrictions, then we will be obligated to pay liquidated damages to the holders of such securities of $20,000, in addition to any other rights such holders may have, upon the occurrence of any such event and on each monthly anniversary thereafter until the event is cured.
Side Letter
On the Effective Date, the Company and the Agent entered into a side letter pursuant to which the Agent acknowledged and agreed that any to-be-issued shares of preferred stock to be issued upon conversion of the Notes shall include the general parameters as set forth below, subject to execution of definitive documentation: (i) senior preferred will be first, prior to and superior to any other class of preferred stock or any other security, with a liquidation preference, which is to be paid in full before any other class of securities receives any distribution in liquidation or otherwise, (ii) no PIK or interest, no voting rights (except as required by law, no restrictions on future debt/equity raises (still have MFN for one year and the customary adjustment rights), (iii) convertible into shares of the common stock and (iv) non-redeemable.
On June 4, 2024, the Company entered into an amendment to the Forbearance Agreement and Registration Rights Agreements. The Forbearance Agreement was amended such that the Agent and the Purchasers agreed to forbear from exercising their rights and remedies with respect to the Specified Events of Default (as defined in the Amendment) under the Notes until that date which is the earliest to occur of: (a) August 30, 2024; (b) the date on which any event of default under the Notes (other than the Specified Events of Default) occurs; and (c) the date on which the Company or any of its subsidiaries fails to comply with any term set forth in the Forbearance Agreement; (ii) the definition of “Filing Date” in the Amended and Restated Registration Rights Agreements (as defined in the Amendment) was amended such that we agreed to file a registration statement for such securities on the 30th calendar day following the date the Company’s independent public accountants have completed their audit for the fiscal year ended December 31, 2023 and the Company has filed its Annual Report on Form 10-K including such financial statements, or if later, June 30, 2024 and (iii) the parties agreed to issue new Amended Warrants (as defined in the Amendment) to reflect an erroneous change to the expiration date in the Amended Warrants from 7 years to 5 years.
In connection with the Amendment, the Company agreed to issue to the Purchasers such number of shares of a to-be-created class of preferred stock having a stated value equal to $100,000 in the same class and on the same terms and conditions as the preferred stock to be issued to such Purchasers upon consummation of a Qualified Subsequent Financing (as defined in the Notes). The securities to be issued and sold in this transaction will not registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. The Purchasers are each an “accredited investor” as such term is defined in Regulation D promulgated under the Securities Act.
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OPTIMUS HEALTHCARE SERVICES, INC.
(FORMERLY BETWEEN DANDELIONS, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(UNAUDITED)
| 2024 | 2023 | |||||||
| Net Revenue | $ | 344,465 | $ | 271,642 | ||||
| Cost of sales | 62,182 | 80,024 | ||||||
| Gross profit | 282,283 | 191,618 | ||||||
| Operating expenses: | ||||||||
| Stock based compensation | (1,132,067 | ) | 1,417,943 | |||||
| Personnel expenses | 465,491 | 886,256 | ||||||
| General and administrative expenses | 349,732 | 426,553 | ||||||
| Professional fees | 86,632 | 141,279 | ||||||
| Total operating expenses | (230,212 | ) | 2,872,031 | |||||
| Income (loss) from operations | 512,495 | (2,680,413 | ) | |||||
| Other income (expense): | ||||||||
| Amortization of debt discount | (484,268 | ) | (284,985 | ) | ||||
| Interest expense | (193,008 | ) | (103,788 | ) | ||||
| Loss on extinguishment of debt | (263,857 | ) | ||||||
| Net gain from investments | - | 110,721 | ||||||
| Interest income | 5,134 | 4,000 | ||||||
| Total other income (expense) | (935,999 | ) | (274,052 | ) | ||||
| Loss before income tax benefit (expense) | (423,504 | ) | (2,954,465 | ) | ||||
| Income tax benefit (expense) | 17 | - | ||||||
| Net loss | $ | (423,487 | ) | $ | (2,954,465 | ) | ||
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Results of Operations
Comparison of the Quarter Ended March 31, 2024 and 2023
Net Revenues
Net Revenues were $344,465 for the quarter ended March 31, 2024 and $271,642 for the quarter ended March 31, 2023, an increase of $72,823. Revenues consist primarily of services to pharmaceutical companies for the execution of oncology clinical trials. The increase in revenues were primarily the result of adding new trials and timing of services provided.
Cost of Sales
Cost of Sales were $62,182 for the quarter ended March 31, 2024 and $80,024 for the quarter ended March 31, 2023, a decrease of $17,842. Cost of Sales consist primarily of outside physician services. The decrease in cost of sales was a result of the mix of revenue and related costs.
Gross Profit
Gross profit was $282,283 for the quarter ended March 31, 2024 and $191,618 for the quarter ended March 31, 2023, an increase of $90,665. The increase in gross profit was a result of increased sales in 2023 of $72,823, as well as the revenue mix.
Stock-Based Compensation
Stock based compensation was ($1,132,067) for the quarter ended March 31, 2024 and $1,417,943 for the quarter ended March 31, 2023, a decrease of $2,550,010. Stock based compensation consists of stock options and RSU’s issued to employees and consultants. The decrease was due primarily to terminated stock options and RSU’s during the first quarter of 2024 resulting in a recovery of $2,557,487.
Personnel Expenses
Personnel expenses were $465,491 for the quarter ended March 31, 2024 and $886,256 for the quarter ended March 31, 2023, a decrease of $420,765. Personnel expenses consist primarily of executive employment agreements, and employee salaries and bonuses and payroll taxes related. The decrease was primarily related to the termination of its former CEO in July 2023 and the reduction in his related salary and bonus.
General and Administrative Expenses
General and administrative expenses were $349,732 for the quarter ended March 31, 2024 and $426,553 for the quarter ended March 31, 2023, a decrease of $76,821. 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 payroll and payroll related costs due to the discontinuance of its Vitality Rx early-stage pharmacy for which the operations were discontinued in December 2023.
Professional Fees
Professional Fees were $86,632 for the quarter ended March 31, 2024 and $141,279 for the quarter ended March 31, 2023, a decrease of $54,647. 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. Commencing in the second quarter of 2023 a portion of these services are now provided internally.
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Loss from Operations
The Company had income (loss) from operations of $512,495 for the quarter ended March 31, 2024 and ($2,680,413) for the quarter ended March 31, 2023, an increase of $3,192,908 as a result of the foregoing factors.
Amortization of Debt Discount
Amortization of Debt Discount was $484,268 for the quarter ended March 31, 2024 and $284,985 for the quarter ended March 31, 2023 as a result of the debt discount being fully amortized at March 31, 2024 as a result of the amendment of its loan agreements.
Interest Expense
Interest expense was $193,008 for the quarter ended March 31, 2024 and $103,788 for the quarter ended March 31, 2023, an increase of $89,220. Interest expense consists primarily of interest on convertible debt and its demand note. The increase was a result of higher interest rates on its convertible debt of $4.4 million(12% as compared to 9% in prior year quarter), as well as additional debt of $1.820 million as compared to none in the prior year quarter, and the resultant interest expense.
Loss on extinguishment of debt
As a result of the amendment to the Company’s convertible debt, it recorded a loss on extinguishment of debt in the amount of $263,857 for the three months ended March 31, 2024 as compared to none in the three months ended March 31, 2023.
Net Gain (loss) from Investments
Net gain (loss) from investments was $0 for the quarter ended March 31, 2024 and $110,721 for the quarter ended March 31, 2023, a decrease of $110,721 due to no investing activities during the quarter ended March 31, 2024, the result of the Company closing its investing account in April 2023. 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.
Interest Income
Interest income was $5,134 for the quarter ended March 31, 2024 and $4,000 for the quarter ended March 31, 2023, an increase of $1,134. Interest income consists primarily of interest on a short-term loan receivable.
Income Taxes
The income tax benefit was $17 for the quarter ended March 31, 2024 and $0 for the quarter ended March 31, 2023. Since 2022, 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 $423,487 for the quarter ended March 31, 2024 and $2,954,465 for the quarter ended March 31, 2023, a decreased loss of $2,530,978.
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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. During the three months ended March 31, 2024, the Company received a related party bridge loan from KORR Acquisitions Group, Inc. (“KORR”) in the total amount of $100,000, non-interest bearing and subject to the terms of the June 4, 2024 amendment with Arena Investors, LP. Subsequent to March 31, 2024, the Company received additional bridge loans from KORR, in the amount of $170,000 and outstanding bridge loans received from KORR now total $270,000, in addition to the existing $1,720,000 loans from KORR.
Substantial additional financing will continue to 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, may provide adequate financial resources to continue as a going concern for at least the next twelve 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.
On March 8, 2024 (the “Effective Date”), Optimus Healthcare Services, Inc. (the “Company”) entered into a forbearance agreement (the “Forbearance Agreement”) by and among the Company and Arena Investors, LP, as agent (“Agent”) for the purchasers of the Company’s senior secured convertible notes (collectively, the “Purchasers”) issued in May 2021 (the “May 2021 Notes”) and June 2022 (the “June 2022 Notes” and collectively with the May 2021 Notes, the “Notes”), pursuant to which, among other things: (i) the Agent and the Purchasers agreed to forbear from exercising their rights and remedies with respect to the Specified Events of Default (as defined in the Forbearance Agreement) under the Notes until that date which is the earliest to occur of: (a) April 22, 2024; (b) the date on which any event of default under the Notes (other than the Specified Events of Default) occurs; and (c) the date on which the Company or any of its subsidiaries fails to comply with any term set forth in the Forbearance Agreement; (ii) the Company and its subsidiaries agreed it shall not allow acceleration or make any cash principal or interest payment on account of any indebtedness held by KORR Acquisition Group, Inc. (“Subordinated Lender”); (iii) the Company agreed it would use commercially reasonable best efforts to consummate a sale of some or all of the assets of its CRA business, a sale of some or all of the equity interests of the CRA business, or a merger of the CRA business, in each case, to an independent, non-affiliated third party in an arms’ length transaction, subject to satisfaction of certain milestones; (iv) the Company agreed it would use commercially reasonable best efforts to consummate an equity financing that results in gross proceeds of at least $2,000,000 to the Company on or prior to February 28, 2025, subject to consent of the Purchasers, which consent will not be unreasonably withheld (a “Qualified Subsequent Financing”); (v) subject to approval by the Company’s Board of Directors (the “Board”) or appropriate committee thereunder, the Company agreed to promptly appoint to the Company’s Board a nominee suggested by the Agent; and (vi) the Agent and the Purchasers provided their conditional consent to allow the Company to sell up to $350,000 of subordinated bridge notes, subject to certain conditions.
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In connection with the Forbearance Agreement, the Company acknowledged that accrued and unpaid interest through January 1, 2024, fees, costs, and other amounts due to the Agent and the Purchasers under the Notes and the other transaction documents entered into between the parties was equal to $197,816.64 (exclusive of liquidated damages under Section 4.24 of the Security Purchase Agreements (as defined in the Forbearance Agreement) (the “Owed Amount”). The Company agreed to issue to the Purchasers an aggregate of 3,165,066 shares of common stock in satisfaction of such Owed Amount. The securities issued and sold in this transaction were not registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. The Purchasers are each an “accredited investor” as such term is defined in Regulation D promulgated under the Securities Act.
Subordination Agreement
In connection with the Forbearance Agreement, the Company, Agent and Subordinated Lender entered into a subordination agreement (the “Subordination Agreement”) pursuant to which Subordinated Lender agreed to, among other things: (i) subordinate and make junior the payment of any and all of the principal amount or interest on, and any fees, costs, expenses, or any other payment in respect of the debt held by the Subordinated Lender (the “Subordinated Debt”) until 91 days after the indefeasible payment of the Senior Debt or after the conversion in full of the Notes; and (ii) upon the consummation of a Qualified Subsequent Financing, the Subordinated Lender agreed to convert the entire Subordinated Debt into a junior class of preferred stock of the Company, which such class, among other limitations, is junior as to the liquidation rights of any more senior class of preferred stock, in such form and with such content as the Agent and the Company may agree.
Amended and Restated Notes
On the Effective Date, the Company entered into amended and restated Notes with the Purchasers (the “Amended Notes”) pursuant to which, the Company agreed, among other things: (i) to pay interest to the Purchasers on the aggregate unconverted and then outstanding principal amount of this Note at the rate of twelve percent (12%) per annum beginning on or after May 2, 2023; (ii) commencing with the January 1, 2024 interest payment and thereafter, the Company, at its option may make interest payments and payment of other amounts due and payable under Amended Notes in shares of Common Stock of the Company at a price per share equal to the lesser of (a) $0.0625 or (b) 100% of the closing sale price on the day that is immediately prior to the applicable payment date or in cash; (iii) to allow the Amended Notes to be convertible into shares of Common Stock or, upon prior written notice, such number of shares of a to-be-issued class of preferred stock of the Company on the earliest of: (a) the occurrence and continuance of an Event of Default (as defined in the Amended Notes), (b) consummation of a Qualified Subsequent Financing, and (c) on or after the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information; (iv) the conversion price in the Amended Notes shall now be equal to the lower of (a) $0.0625 or (b) the price of the securities issued in a Qualified Subsequent Financing completed within the one (1) year anniversary of the Current Issue Date, subject to adjustment; and (v) upon consummation of a Qualified Subsequent Financing, the outstanding principal amount of the Amended Notes plus all accrued but unpaid interest thereon and any other payment due thereunder, shall automatically, without any further action required by the Purchasers, be converted into shares of a class of the Company’s, yet-to-be-issued senior convertible preferred stock, in a form reasonably acceptable to the Purchasers, at the conversion price then in effect.
Amended and Restated Warrants
In connection with (i) the issuance of the May 2021 Notes, and (ii) the issuance of the June 2022 Notes, the Company issued the Purchasers: (i) warrants to purchase an aggregate of 165,000 shares of Common Stock with an exercise price of $1.25 per share (the “May 2021 Warrants”), and (ii) warrants to purchase an aggregate of 1,540,000 shares of Common Stock with an exercise price of $1.25 per share (the “June 2022 Warrants” and together with the May 2021 Warrants, the “Warrants”), respectively. In connection with the Forbearance Agreement, the Company and the Purchasers entered into amended and restated warrants (the “Amended Warrants”) pursuant to which, among other things: (i) the exercise price of the Warrants was reduced to $0.01 per share and (ii) the term of the Warrants was changed from 5 years to 7 years.
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Registration Rights Agreements
On the Effective Date, the Company entered into an Amended and Restated Registration Rights Agreement with the Purchasers related to the shares of common stock held by the Purchasers and the shares of common stock issuable upon exercise of the Amended Warrants pursuant to which we agreed to file a registration statement for such securities on the 30th calendar day following the date the Company’s independent public accountants have completed their audit for the fiscal year ended December 31, 2023 and the Company has filed its Annual Report on Form 10-K including such financial statements, or if later, June 15, 2024. If the Company fails to have it filed by such date, declared effective 60 calendar days thereafter or if we fail to maintain the effectiveness of the registration statement until all of such securities have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any volume or manner of sale restrictions, then we will be obligated to pay liquidated damages to the holders of such securities of $20,000, in addition to any other rights such holders may have, upon the occurrence of any such event and on each monthly anniversary thereafter until the event is cured.
On the Effective Date, the Company also entered into an Amended and Restated Registration Rights Agreement with the Purchasers related to the shares of common stock (or shares of a to-be-issued class of preferred stock) issuable upon conversion of the Notes pursuant to which we agreed to file a registration statement for such securities on the 30th calendar day following the earliest of: (i) the first anniversary of the Effective Date and no Qualified Subsequent Financing has been consummated; (ii) the consummation of a Qualified Subsequent Financing and the Company has filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, or if later, June 15, 2024; and (iii) the occurrence and continuance of an Event of Default (as defined under the Notes). If we fail to have it filed by such date, declared effective 45 calendar days thereafter or if we fail to maintain the effectiveness of the registration statement until all of such securities have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any volume or manner of sale restrictions, then we will be obligated to pay liquidated damages to the holders of such securities of $20,000, in addition to any other rights such holders may have, upon the occurrence of any such event and on each monthly anniversary thereafter until the event is cured.
Side Letter
On the Effective Date, the Company and the Agent entered into a side letter pursuant to which the Agent acknowledged and agreed that any to-be-issued shares of preferred stock to be issued upon conversion of the Notes shall include the general parameters as set forth below, subject to execution of definitive documentation: (i) senior preferred will be first, prior to and superior to any other class of preferred stock or any other security, with a liquidation preference, which is to be paid in full before any other class of securities receives any distribution in liquidation or otherwise, (ii) no PIK or interest, no voting rights (except as required by law, no restrictions on future debt/equity raises (still have MFN for one year and the customary adjustment rights), (iii) convertible into shares of the common stock and (iv) non-redeemable.
On June 4, 2024, the Company entered into an amendment to the Forbearance Agreement and Registration Rights Agreements. The Forbearance Agreement was amended such that the Agent and the Purchasers agreed to forbear from exercising their rights and remedies with respect to the Specified Events of Default (as defined in the Amendment) under the Notes until that date which is the earliest to occur of: (a) August 30, 2024; (b) the date on which any event of default under the Notes (other than the Specified Events of Default) occurs; and (c) the date on which the Company or any of its subsidiaries fails to comply with any term set forth in the Forbearance Agreement; (ii) the definition of “Filing Date” in the Amended and Restated Registration Rights Agreements (as defined in the Amendment) was amended such that we agreed to file a registration statement for such securities on the 30th calendar day following the date the Company’s independent public accountants have completed their audit for the fiscal year ended December 31, 2023 and the Company has filed its Annual Report on Form 10-K including such financial statements, or if later, June 30, 2024 and (iii) the parties agreed to issue new Amended Warrants (as defined in the Amendment) to reflect an erroneous change to the expiration date in the Amended Warrants from 7 years to 5 years.
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In connection with the Amendment, the Company agreed to issue to the Purchasers such number of shares of a to-be-created class of preferred stock having a stated value equal to $100,000 in the same class and on the same terms and conditions as the preferred stock to be issued to such Purchasers upon consummation of a Qualified Subsequent Financing (as defined in the Notes). The securities to be issued and sold in this transaction will not registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. The Purchasers are each an “accredited investor” as such term is defined in Regulation D promulgated under the Securities Act.
The independent auditors’ report accompanying our December 31, 2023 and 2022 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 $30,557,122 as of March 31, 2024. 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, 2024 and December 31, 2023, we had cash of $71,572 and $100,319, respectively. Our working capital (deficit) at March 31, 2024 was ($8,320,170). 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.
During the three months ended March 31, 2024, we had net cash flow used in operating activities of $126,954. The cash flow used in operating activities resulted primarily from the net loss and noncash stock based compensation for the period, as partially offset by amortization of debt discounts, increases in accounts payable and accrued liabilities and a decrease in accounts and notes receivable.
We had no net cash flow provided by investing activities as we had closed our investing account in April 2023 and also had no purchases of fixed assets.
We had net cash flow provided by financing activities of $98,207 for the three months ended March 31, 2024. The cash provided by financing activities was primarily the result of proceeds from bridge loans issued to KORR in the amount of $100,000.
As a result of the foregoing, the Company had a net decrease in cash of $28,747 during the three months ended March 31, 2024.
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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 Quarterly 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, 2024, 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, 2024, 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, 2024 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, 2024, their we no sales of the Company’s shares of common stock.
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.
During the three months ended March 31, 2024, the Company received a related party bridge loan from KORR Acquisitions Group, Inc. in the total amount of $100,000, in addition to prior loans of $1,720,000 outstanding. These loans are subordinated to and subject to the terms of the Senior Note Holder.
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ITEM 6. EXHIBITS.
| * | Filed herewith. |
| ** | Furnished herewith |
| *** | Certain personable identifiable information has been omitted pursuant to Item 601 (a) (6) of Regulation S-K. The Company hereby agrees to furnish the omitted information to the SEC upon request. |
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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: June 25, 2024 | By: | /s/ Cliff Saffron |
| Cliff Saffron | ||
| Interim Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: June 25, 2024 | By: | /s/ Thomas McNeill |
| Thomas McNeill | ||
| Senior Vice President, Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
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