What changed in this filing

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Item 1. Financial Statements

2022-02-28 compared with 2022-01-14 · 410 added, 336 removed, 565 unchanged (57% of the section changed)

4 unchanged sentences

(In thousands except share data)

June 30, 2021

September 30, 2021

December 31, 2020

10 unchanged sentences

Convertible promissory notes, related parties, in default

Advances on future cash receipts

Accounts payable

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and 8 shares designated Series A, Series B, Series C and Series D, respectively;

no shares issued and outstanding at June 30 , 2021 and December 31 , 2020

no shares issued and outstanding at September 30 ,

2021 and December 31 ,

Common Stock, par value $ 0.001 , 800,000,000 shares authorized;

and 470,694,621 issued and outstanding at June 30 , 2021 and December 31 , 2020 , respectively

and 470,694,621 issued and outstanding at September 30 , 2021 and December 31 , 2020 , respectively

Additional Paid-in Capital

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE LOSS

(In thousands except share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Accessory and parts revenue

12 unchanged sentences

Interest expense, related party

Partnership fee income

Loss on issuance of debt

Gain / (loss) on extinguishment of debt

Gain / (loss) on foreign currency exchange

11 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

CONDENSED CONSOLIDATED

STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands except share data)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Preferred Stock

1 unchanged sentence

Comprehensive

Balances as of March 31, 2021

Foreign currency translation adjustment

Balances as of June 30, 2021

Three Months Ended June 30, 2020

Balances as of September 30, 2021

Three Months Ended September 30, 2020

Preferred Stock

1 unchanged sentence

Comprehensive

Balances as of March 31, 2020

Conversion of short term notes and convertible notes payable

Conversion of advances from related parties

Shares issued for services

Balances as of June 30, 2020

Proceeds from PIPE offering, net of offering costs

Proceeds from stock option exercise

Beneficial conversion feature on convertible debt

LGH Warrant Liability

Series C Preferred Conversion

Series D Preferred Conversion

Shares issued for services

Inducement shares issued

Conversion of short-term notes and settlements

Conversion of notes payable, related parties

Foreign currency translation adjustment

Balances as of June 30, 2020

Balances as of September 30, 2020

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

1 unchanged sentence

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

CONDENSED CONSOLIDATED STATEMENTS OF S TOCKHOLDERS’ DEFICIT

(In thousands except share data)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Preferred Stock

5 unchanged sentences

Foreign currency translation adjustment

Balances as of June 30, 2021

Six Months Ended June 30, 2020

Balances as of September 30, 2021

Nine Months Ended September

Preferred Stock

4 unchanged sentences

Conversion of short term notes and convertible notes payable

Conversion of notes payable, related parties

Conversion of advances from related parties

Series C Preferred Conversion

Series D Preferred Conversion

Shares issued for services

Inducement shares issued

Proceeds from PIPE offering, net of offering costs

LGH Warrant Liability

Stock-based compensation

2 unchanged sentences

Foreign currency translation adjustment

Balances as of June 30, 2020

Balances as of September 30, 2020

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

1 unchanged sentence

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows - Operating Activities:

2 unchanged sentences

Bad debt expense

Share-based payment

Shares issued for services

Shares issued for inducement

Deferred taxes

1 unchanged sentence

Loss on issuance of debt

Loss (Gain) on extinguishment of debt

Amortization of debt issuance costs

6 unchanged sentences

Operating leases

Financing leases

Accounts payable

2 unchanged sentences

Contract liabilities

Net Cash Used in Operating Activities

Net Cash Used by Operating Activities

Cash Flows - Investing Activities

Acquisition of UltraMIST, net of $ 4,000,000 note payable to seller

Purchases of property and equipment

Net Cash Flows Used in Investing Activities

Net Cash Flows Used by Investing Activities

Cash Flows - Financing Activities

3 unchanged sentences

Proceeds from PIPE offering, net of offering costs

Proceeds from senior promissory notes

Proceeds from stock option exercises

2 unchanged sentences

Proceeds from related party advances

Payments of principal on convertible promissory notes, related parties, convertible promissory notes and SBA loans

Payments of principal on finance leases

8 unchanged sentences

Reclassification of warrant liability due to cashless warrant exercise

Acquisition of UltraMIST partially financed with convertible promissory note

Conversion of short-term notes payable to equity

1 unchanged sentence

Additions to right of use assets from new finance lease liabilities

Embedded conversion option with issuances of convertible debt

Embedded conversion feature on convertible debt

Warrant issuance in conjunction with convertible notes

3 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

September 30, 2021

Nature of the Business and Basis of Presentation

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GAAP for comprehensive financial statements.

financial information as of June 30 , 2021 and for the three and six month ended June 30 , 2021 and 2020 is unaudited;

however, in the opinion of management,

all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may

be expected for any other interim period or for the year ending December 31, 2021.

financial information as of September 30 , 2021, and for the three and nine month ended September 30 , 2021 and 2020 is unaudited;

however, in the opinion of

management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and nine months ended September 30, 2021, are not necessarily indicative of

the results that may be expected for any other interim period or for the year ending December 31, 2021.

The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited Consolidated Financial Statements at that date

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been reclassified to conform to the presentation of the current year Condensed Consolidated Financial Statements.

Accessory and parts revenue for the three and six months ended June 30, 2020, respectively, contains $ 76 thousand and $ 13 thousand of revenue

that was reclassified from other revenue.

In addition, $ 53 thousand and $ 94 thousand of depreciation expense related to rental devices was reclassified from operating expenses to cost of revenues for the three and six months ended June 30, 2020,

respectively.

These reclassifications had no effect on the previously reported operating results.

COVID-19 – The worldwide spread of the COVID-19 virus has resulted and is expected

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These possibilities, to the extent available, may be on terms that result in significant dilution to our existing shareholders.

In addition, there can be

no assurances that our plans to obtain additional capital will be successful on the terms or timeline we expect, or at all.

In addition, there can be no

assurances that our plans to obtain additional capital will be successful on the terms or timeline we expect, or at all.

Although no assurances can be given, management believes that potential additional issuances of equity or other potential

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accordance with U.S.

Because a precise determination of assets and liabilities, and correspondingly revenues and expenses, depend on future events, the preparation of consolidated financial statements for any period necessarily involves

the use of estimates and assumptions.

use of estimates and assumptions.

Actual amounts may differ from these estimates.

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Fair value of financial

instruments - The carrying values of accounts payable, and other short-term obligations approximate their fair values, because of the short-term maturities of these instruments.

instruments – The carrying values of accounts payable, and other short-term obligations approximate their fair values, because

of the short-term maturities of these instruments.

utilizes the guidance of ASC Topic 820-10, Fair Value Measurements (“ASC 820-10”), which defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements.

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Level 1 – Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets and liabilities:

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or

Level 3 – Unobservable inputs that are not corroborated by market data, therefore requiring the Company to develop its own assumptions.

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conversion option is based on a binomial pricing model at issuance and thereafter.

The fair values of the NH and Leviston warrant liabilities are based on a Black Scholes model at issuance and thereafter.

The Company’s usage of the Black

Scholes model approximates the bionomial approach pricing model.

Each of the pricing models includes the use of unobservable inputs such as the expected term, anticipated volatility and risk-free

interest rate, and therefore, is classified within Level 3 of the fair value hierarchy.

The fair values of the NH, Leviston, Five Institutions’ and GCF warrant liabilities are based on a Black Scholes model at issuance and thereafter.

Company’s usage of the Black Scholes model approximates the bionomial approach pricing model.

Each of the pricing models includes the use of unobservable inputs such as the expected term,

anticipated volatility and risk-free interest rate, and therefore, is classified within Level 3 of the fair value hierarchy.

Recent Accounting Pronouncements – In August 2020, Financial Accounting Standards

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The net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares

outstanding for the three and six months ended June 30, 2021 and 2020.

outstanding for the three and nine months ended September 30, 2021, and 2020.

In accordance with ASC Topic 260-10-45-13, Earnings Per Share , the weighted average of number of shares outstanding includes

outstanding common stock and shares issuable for nominal consideration.

Accordingly, warrants issued with a $ 0.01 per share exercise

price, are included in weighted average shares outstanding as follows:

Accordingly, warrants issued with a $ 0.01 per share exercise price, are included

in weighted average shares outstanding as follows:

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

Weighted average shares outstanding

2 unchanged sentences

Weighted average shares outstanding

Nine Months Ended

September 30, 2021

September 30, 2020

Weighted average shares outstanding

Common shares

Common shares issuable assuming exercise of nominally priced warrants

Weighted average shares outstanding

Diluted net loss per share would be computed by dividing the net loss attributable to common stockholders by the weighted average number of

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As a result of the net loss for the three and

six months ended June 30, 2021 and 2020, all potentially dilutive shares were anti-dilutive and therefore excluded from the computation of diluted net loss per share.

Anti-dilutive equity securities consist of the following at June 30, 2021 and 2020, respectively (in

nine months ended September 30, 2021 and 2020, all potentially dilutive shares were anti-dilutive and therefore excluded from the computation of diluted net loss per share.

Anti-dilutive equity securities consist of the following at September 30, 2021 and 2020,

respectively (in thousands):

Common stock options

1 unchanged sentence

Convertible notes payable

Short-term notes payable

Convertible preferred stock

Inventory consists of the following at June 30, 2021 and December 31, 2020 (in thousands):

Inventory consists of the following at September 30, 2021 and December 31, 2020 (in thousands):

Inventory - finished goods

2 unchanged sentences

Accrued Expenses

Accrued expenses consist of the following at June 30, 2021 and December 31, 2020 (in thousands):

Accrued expenses consist of the following at September 30, 2021 and December 31, 2020 (in thousands):

Outside services

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There was no activity in the

warranty reserve during the three and six months ended June 30, 2021.

warranty reserve during the three and nine months ended September 30, 2021.

Disaggregation of Revenue - The disaggregation of revenue is based on geographical

The following tables present

revenue from contracts with customers for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

All revenue is recognized at the point in time when control is transferred to our clients.

The following tables present revenue from contracts with customers for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30, 2021

Three Months Ended September 30, 2020

United States

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License fees and other

Six Months Ended June 30, 2021

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

United States

4 unchanged sentences

License fees and other

Contract liabilities - As of June 30, 2021 and December 31, 2020, the Company has contract liabilities from contracts

with customers as follows (in thousands):

Contract liabilities - As of September 30, 2021 and December 31, 2020, the Company has contract liabilities from

contracts with customers as follows (in thousands):

September 30,

Service agreements

3 unchanged sentences

Non-current contract liabilities

During the three months ended June 30, 2021 and 2020, the Company recognized revenue related to these contract liabilities of $ 8 thousand and $ 17 thousand,

During the three months ended September 30, 2021 and 2020, the Company recognized revenue related to these contract liabilities of $ 8 thousand and $ 11 thousand,

respectively, that were included in the beginning contract liability balances for each of those periods.

During the six months ended June 30, 2021 and 2020, the Company recognized revenue related to these contract liabilities of $ 16 thousand and $ 39 thousand, respectively, that were included in the

During the nine months ended September 30, 2021 and 2020, the Company recognized revenue related to these contract liabilities of $ 24 thousand and $ 50 thousand, respectively, that were included in the

beginning contract liability balances for each of those periods .

The following table summarizes the changes in contract liabilities during the six months ended June 30, 2021 (in thousands):

Six Months Ended

June 30, 2021

The following table summarizes the changes in contract liabilities during the nine months ended September 30, 2021 (in thousands):

Nine Months ended

September 30, 2021

Beginning balance

Service agreement additions

New service agreement additions

Deposit on future equipment purchases

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accounts receivable, or sales individually consist of more than ten percent of total trade receivables or total sales, respectively.

The percentage of accounts receivable and sales from major customers of the Company for

the periods indicated were as follows:

June 30, 2021

The percentage of accounts receivable from major customers of the Company for the periods

indicated were as follows:

September 30, 2021

December 31, 2020

Accounts Receivable:

Three Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

The Company currently purchases most of its

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The percentage of purchases from major vendors of the Company that exceeded ten

percent of total purchases for the three and six months ended June 30, 2021 and 2020 were as follows:

percent of total purchases for the three and nine months ended September 30, 2021 and 2020 were as follows:

Three Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Accounts Receivable Factoring

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The agreement’s term is one month and automatically renews for additional one-month periods, unless either party provides 30 days ’ notice of

The accounts receivable are sold with recourse back to the Company, which means that the Company bears the risk of non-payment by the account debtor.

As of June 30, 2021, the Company had transferred to Goodman approximately $ 1.3 million of accounts receivable balances.

The accounts receivable are sold with recourse back to the Company, therefore the Company accounts for the arrangement as traditional financing.

At September 30, 2021, the Company had transferred to Goodman approximately $ 1.5 million of accounts receivable balances.

Notes payable

The following two tables summarize outstanding notes payable as of June 30, 2021 and December 31, 2020, respectively (in thousands):

The following two tables summarize outstanding notes payable as of September 30, 2021 and December 31, 2020 (in thousands):

Kind Interest

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Leviston Note issued 5/14/2021

Total convertible promisory notes payable, in default

Leviston Note issued 9/3/2022

Five Institutions' Notes issued 9/3/2021

Total convertible promissory notes payable, in default

Convertible promissory notes payable, related parties, in default:

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Convertible promissory notes (Stolarski), related parties

Total convertible promisory notes payable, related parties, in default

Total convertible promissory notes payable, related parties, in default

February 20, 2026

Total SBA loans outstanding

Advances on future cash receipts

March 11, 2022

Total debt outstanding, including amounts in default

current maturities, including notes in default

Total long-term debt as of June 30, 2021

Total long-term debt as of September 30 , 2021

Kind Interest

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Convertible promissory notes (Stolarski), related parties

Total convertible promisory notes payable, related parties, in default

Total convertible promissory notes payable, related parties, in default

Total debt outstanding, including amounts in default

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Company entered into a Note and Warrant Purchase and Security Agreement (the “NWPSA”), with NH Expansion Credit Fund Holdings LP, as noteholder and agent.

In accordance with the NWPSA, the Company issued a $ 15 million Senior Secured Promissory Note Payable (the “Senior Secured Note”) and a warrant exercisable into shares of the Company’s common stock (the

“NH Expansion Warrant”) in exchange for cash to support operations, repay outstanding debt and close on the acquisition of the UltraMIST assets from Celularity, among other transactions.

As of December 31, 2020, the Company was in default of the

minimum liquidity provisions on the Senior Secured Note.

As of June 30, 2021, the Company remains in default of the minimum liquidity provisions on the Senior Secured Note, and, as a result, it is classified in current liabilities in the

accompanying Condensed Consolidated Balance Sheets.

(the “NH Expansion Warrant”) in exchange for cash to support operations, repay outstanding debt and close on the acquisition of the UltraMIST® assets from Celularity, among other transactions.

As of December 31, 2020, the Company was in default

of the minimum liquidity provisions on the Senior Secured Note.

As of September 30, 2021, the Company remains in default of the minimum liquidity provisions on the Senior Secured Note, and, as a result, it is classified in current liabilities

in the accompanying Condensed Consolidated Balance Sheets.

As a result of the default, the Company is accruing interest at the default interest note of an incremental 5 %.

The debt issuance costs and debt discount related to the Senior Secured Note were capitalized as a reduction in the principal amount and are being

amortized to interest expense over the life of the Senior Secured Note.

The amortization of the debt issuance costs and debt discount for the three and six months ended June 30, 2021 was $ 227 thousand and $ 445 , respectively, and is included in interest expense.

Accrued interest related to the Senior Secured Note was $ 950 thousand and $ 642 thousand at June 30, 2021 and December 31, 2020, respectively.

Interest expense on the Senior Secured Note was $ 773 thousand and $ 1.5 million for the three months and six months ended June

30, 2021, respectively.

The debt issuance costs and debt discount related to the Senior Secured Note were capitalized as a reduction in the principal amount and are

being amortized to interest expense over the life of the Senior Secured Note.

The amortization of the debt issuance costs and debt discount for the three and nine months ended September 30, 2021 was $ 228 thousand and $ 683 thousand, respectively, and is included

in interest expense.

Accrued interest related to the Senior Secured Note was $ 1.3 million and $ 642 thousand at September 30, 2021 and December 31, 2020, respectively.

Interest expense on the Senior Secured Note was $ 804 thousand and $ 2.3 million for the three months and nine

months ended September 30, 2021, respectively.

Convertible promissory notes payable, in default (“Seller Note”) - On August 6, 2020, the Company entered

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in addition to the 12.0 % initial rate, as of the date of the default.

As of June 30, 2021 and December 31, 2020, the Seller Notes had

outstanding accrued interest of $ 432 thousand and $ 192 thousand, respectively.

As of September 30, 2021 and December 31, 2020, the Seller Notes

had outstanding accrued interest of $ 587 thousand and $ 192 thousand, respectively.

The Company evaluated embedded conversion features within the convertible promissory note and determined that the conversion feature does not require to be

Upon adoption of ASC 2020-6 effective January 1, 2021, the convertible promissory note is accounted for as a single liability due to the elimination of the beneficial conversion feature accounting model.

April 2021 Securities Purchase Agreement and

Warrants (In default) - On April 20, 2021, the Company entered into a Securities Purchase Agreement (the “Leviston Purchase Agreement”), with Leviston Resources, LLC, an

accredited investor (“Leviston”) for the sale by the Company in a private placement (the “Private Placement”) of (i) the Company’s future advance convertible promissory note in an aggregate principal amount of up to $ 3.4 million (the “Leviston Note”) and (ii) a warrant to purchase an additional 16,666,667 shares of common stock of the Company (the “Leviston Warrant”).

April 2021 Securities Purchase Agreement

and Warrants (In default) - On April 20, 2021, the Company entered into a Securities Purchase Agreement (the “Leviston Purchase Agreement”), with Leviston Resources, LLC,

an accredited investor (“Leviston”) for the sale by the Company in a private placement (the “Private Placement”) of (i) the Company’s future advance convertible promissory note in an aggregate principal amount of up to $ 3.4 million (the “Leviston Note”) and (ii) a warrant to purchase an additional 16,666,667 shares of common stock of the Company (the “Leviston Warrant”).

The Leviston Warrant has an exercise price of $ 0.18 per share and a four-year term.

The closing of the Private

Placement occurred on April 20, 2021 (the “Leviston Closing Date”).

The closing of the

Private Placement occurred on April 20, 2021 (the “Leviston Closing Date”).

As noted above, on April 20, 2021, the Company issued the Leviston Note to the Purchaser in an aggregate principal amount of up to $ 3.4 million (the “Aggregate Amount”), which shall be advanced in disbursements by the Purchaser (“Leviston Disbursements”), as set forth in the

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On May 14, 2021, the Purchaser advanced a second Leviston Disbursement of $ 750 thousand, also net of an original issue discount of 8 %.

A $ 250 thousand Leviston Disbursement was made on September 3, 2021, which was subject to the same terms and conditions of the April and May Leviston

Disbursements.

Warrant issuances to Leviston in April and May 2021

On each of April

20, 2021 and May 14, 2021, the Company also issued 3,968,254 warrants to Leviston for a total of 7,936,508 shares of common stock.

The Leviston Warrants contain certain ratchet provisions with respect to subsequent issuances of securities

by the Company at a price below the exercise price of such warrants.

As a result, the Company determined that these warrants meet the definition of a derivative liability.

See details of the associated warrant issuances at Note 11 – Warrants.

Embedded Conversion Option

The disbursements made in April and May 2021 under the

Leviston Notes included a Conversion Option that meets the definition of a derivative liability and, accordingly, is required to be bifurcated.

The fair value of Conversion Option liability was determined by using a binomial pricing model.

A $ 250 thousand Leviston Disbursement was made on September 3, 2021, which was subject to the same terms and conditions of the

April and May Leviston Disbursements.

In addition, a $ 500 thousand disbursement was made on September 3, 2021 in accordance with

notes issued to five institutional investors (the “Five Institutions’ Notes”), which were subject to substantially the same terms

and conditions as the Leviston Disbursements.

Warrant issuances to Leviston and Five Institutions’ in April, May and September 2021

2021, May 14, 2021 and September 3, 2021, respectively, Leviston was issued 3,968,254 , 3,968,254 and 1,322,751 , warrants for shares of common

On September 3, 2021, the Company also issued a total of 2,772,751 warrants for shares of common stock to Five

Institutions.

After evaluating the terms of the warrants, the Company determined that these warrants meet the definition of a derivative liability and accordingly, were recorded as additional discount against the debt at issuance.

of the associated warrant issuances at Note 11 – Warrants.

Embedded Conversion Option Liability

The disbursements made in April, May and September

2021 under the Leviston Notes and the Five Institutions’ Notes included a Conversion Option that meets the definition of a derivative liability and, accordingly, is required to be bifurcated.

The fair value of Conversion Option liability was

determined by using a binomial pricing model.

(dollars in thousands):

Issuance date (1)

Binomial Assumptions

April 20, 2021

June 30, 2021

September 3, 2021

September 30, 2021

Conversion Price (1)

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Fair Value of Conversion Option

(1) Based on the terms provided in Convertible Promissory notes dated April 20 and May 14, 2021.

(1) Based on the terms provided in the warrant agreement to purchase common stock of the Company on the stated issuance dates.

(2) Interest rate for U.S.

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(3) Based on the historical daily volatility of the Company as of each presented period ending date.

Interest rates on Leviston Notes, Conversion Option, and Loss on Issuance

The Leviston Disbursements in April and May 2021 bear interest at the rate of 5 % per annum and the default rate of 15 %.

The Leviston Note contains a conversion option (“Conversion Option”) and because it is in default, the Leviston Note it is convertible into common shares of the Company at a conversion price of 75 % of the lowest VWAP during the ten trading days ending on

the conversion date.

The Conversion Option within the Leviston Note is required to be bifurcated at fair value, which was approximately $ 1.4

million on the April disbursement and $ 1.4 million on the May disbursement, and which resulted in additional debt discount being

recorded at each disbursement date.

Because the combined fair value of the Leviston Warrants and the Conversion Option exceed the face value of the note, the additional amount beyond the face value is recorded as a loss on issuance of $ 1.4 million on the April disbursement and $ 1.1

million on the May disbursement.

Interest rates on Leviston and Five Institutions’ Notes, Conversion Option, and Loss on Issuance

The Leviston Disbursements and Five Institutions’ Disbursements in April, May

and September 2021, bear interest at the rate of 5 % per annum and the default rate of 15 %.

The Leviston Note and Five Institutions’ Notes contains a conversion option (“Conversion Option”) and because they are in default, the Leviston and Five Institutions’

Notes are convertible into common shares of the Company at a conversion price of 75 % of the lowest VWAP during the ten trading days ending on the conversion date.

The Conversion Option within the Leviston and Five Institutions’ Notes are required to be bifurcated

at fair value, which was approximately $ 1.4 million on the April disbursement and $ 1.4 million on the May disbursement and $ 1.4 million on the

September disbursements, which resulted in additional debt discounts being recorded at each disbursement date.

For the Five Institutions’ Note this conversion rate shall be no lower than $ 0.01 .

Because the combined fair value of the applicable warrants and conversion option exceeded the face value of the note, the additional amount beyond the face value is recorded as a

loss on issuance of $ 1.4 million on the April disbursement and $ 1.1 million on the May disbursement and $ 1.1 million on the

September disbursement.

The remaining disbursements up to the Aggregate Amount are subject to the satisfaction of certain terms and conditions set forth in the

Leviston Note.

Leviston Disbursements bear an interest at a rate of five percent ( 5 %) per annum and have a maturity date of twelve ( 12 ) months from the date of issuance.

The Leviston Note is convertible at the option of the holder into shares of the common stock of the Company at

a conversion price per share equal to the lesser of (i) $ 0.18 , and (ii) ninety percent ( 90 %) of the closing price for a share of common stock reported on the OTCQB on the effective date of the Registration Statement (as defined below).

The Leviston Note contains customary events of default and covenants, including limitations on incurrences of indebtedness and liens.

applicable notes.

The disbursements bear an interest at a rate of five percent ( 5 %) per annum and have a maturity date of twelve ( 12 ) months from the date of issuance.

The Leviston and Five Institutions’ Notes are convertible at the option of the holder into shares of the

common stock of the Company at a conversion price per share equal to the lesser of (i) $ 0.18 , and (ii) ninety percent ( 90 %) of the closing price for a share of common stock reported on the OTCQB on the effective date of the Registration Statement (as defined

The Leviston and Five Institutions’ Note contains customary events of default and covenants, including limitations on incurrences of

indebtedness and liens.

Pursuant to the

Leviston Purchase Agreement, the Company has agreed, within a reasonable period of time following the Leviston Closing Date, and in any event prior to any Leviston Disbursement under the Leviston Note subsequent to the initial Leviston

Disbursement, to enter into a security agreement in favor of the Leviston, securing the Company’s obligations under the Leviston Note.

The rights of Leviston to receive payments under the Leviston Note are subordinate to the rights of North Haven Expansion pursuant to a

subordination agreement, that the Company and Leviston entered into with North Haven Expansion on April 20, 2021, in connection with the Private Placement (the “Subordination Agreement”).

Leviston Purchase Agreement and purchase agreements with the Five Institutions (the “Five Institutions’ Purchase Agreements”), the Company has agreed, within a reasonable period of time following the applicable closing date, and in any event

prior to any Leviston Disbursement under the Leviston Note subsequent to the initial Leviston Disbursement, to enter into a security agreement in favor of the Leviston or the Five Institutions, as applicable, securing the Company’s

obligations under the applicable notes.

The rights of Leviston and the Five Institutions to receive payments under the applicable notes are subordinate to the rights of North Haven

Expansion pursuant to the subordination agreements that the Company and Leviston, and the Company and the Five Institutions entered into with North Haven Expansion on April 20, 2021 and September 3, 2021, respectively, in connection with the

Private Placement (the “Subordination Agreement”).

In connection with the Leviston Purchase Agreement, the Company entered into a registration rights agreement with the Leviston on April 20,

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registration of 100% of the maximum number of the shares issuable upon conversion of the Leviston Note and exercise of the Leviston Warrants issued pursuant to the Leviston Purchase Agreement (the “Leviston Registrable Securities”).

shall use its best efforts to keep the Registration Statement continuously effective under the Securities Act of 1933, as amended (the “Securities Act”), until all Leviston Registrable Securities have been sold, or may be sold without the

requirement to be in compliance with Rule 144(c)(1) of the Securities Act and otherwise without restriction or limitation pursuant to Rule 144 of the Securities Act, as determined by the counsel to the Company.

The Company has yet to file the

Registration Statement and, under the terms of the Leviston Registration Rights Agreement, it is obligated to pay in cash a one-time aggregate amount of $ 250 thousand to the holders of the Leviston Notes, plus 1% of the outstanding principal for each 30-day period during which the Company continues not to have in-place an effective

Registration Statement.

Company shall use its best efforts to keep the Registration Statement continuously effective under the Securities Act of 1933, as amended (the “Securities Act”), until all Leviston Registrable Securities have been sold, or may be sold without

the requirement to be in compliance with Rule 144(c)(1) of the Securities Act and otherwise without restriction or limitation pursuant to Rule 144 of the Securities Act, as determined by the counsel to the Company.

The Company has yet to file

the Registration Statement and, under the terms of the Leviston Registration Rights Agreement, it is obligated to pay in cash a one-time aggregate amount of $ 250 thousand to the holders of the Leviston Notes, plus 1% of the outstanding principal for each 30-day period during which the Company continues not to have in-place an effective Registration Statement.

August 31, 2021, Leviston notified the Company that it was in default of the Leviston Purchase Agreement effective June 11, 2021, for failure to timely file a Registration Statement.

From the date of the default, interest on the amounts due

to Leviston is calculated at the default interest rate of 15 % in addition to the registration penalties stated above.

Convertible promissory notes payable (HealthTronics), in default – On August 6,

2020, the Company issued to HealthTronics, Inc.

a convertible note payable in the amount of $ 1.4 million (the “HealthTronics

From the date of the default, interest on the amounts

due to Leviston is calculated at the default interest rate of 15 % in addition to the registration penalties stated above.

Company also entered into registration rights agreements with each of the Five Institutions on September 3, 2021.

The terms and conditions of the Five Institutions’ registration rights agreements are substantially similar to the Leviston

Registration Rights Agreement, with two exceptions:

(1) the Five Institutions may be entitled to a pro-rata share of the $ 250

thousand one-time aggregate amount (approximately $ 56 thousand) and (2) the 1% of outstanding principal payment amount for each

30-day period is capped at 5 % of outstanding principal.

Convertible promissory notes payable (HealthTronics), in default - On Augu st 6, 2020, the Company issued to HealthTronics, Inc.

a convertible note payable in the amount of $ 1.4 million (the “HealthTronics Note”).

The HealthTronics Note matured on August 6, 2021 and was not repaid.

The Company’s failure to pay the outstanding

principal balance when due constituted an event of default under the terms of the HealthTronics Note and, accordingly, it began accruing additional interest of 2.0 % in addition to the 12.0 % stated interest rate, as of the date of

The Company’s failure to pay the outstanding principal balance when due constituted an event of default under the terms of the HealthTronics Note and, accordingly, it began accruing additional

interest of 2.0 % in addition to the 12.0 % stated interest rate, as of the date of the default.

The convertible promissory note is expressly subordinate to the Senior Secured Notes.

The Company may prepay the outstanding principal balance, together with any accrued but unpaid interest without premium or penalty.

2021 and December 31, 2020 accrued interest of $ 148 thousand and $ 66 thousand, respectively, remained outstanding on the HealthTronics Note.

As the Seller Note (as defined in Note 10) was not repaid prior to January 1, 2021, HealthTronics may elect to convert the outstanding

principal amount plus any accrued but unpaid interest thereon into shares of the Company’s common stock, at a conversion price of $ 0.10

The Company evaluated embedded conversion features within the convertible promissory note and determined that the conversion feature does not require to be bifurcated.

Upon adoption of ASC 2020-6 effective January 1, 2021, the

convertible promissory note is accounted for as a single liability due to the elimination of the beneficial conversion feature accounting model.

Convertible promissory notes payable (Stolarski), in default – On August 6,

2020, the Company issued to A.

Michael Stolarski, a member of the board of directors and an existing shareholder, a convertible promissory note in the principal amount of $ 223 thousand (the “Stolarski Note”).

The Stolarski Note matured on August 6, 2021

and was not repaid.

The Company’s failure to pay the outstanding principal balance when due constituted an event of default under the terms of the Stolarski Note and, accordingly, it began accruing additional interest of 2.0 % in addition to the 12.0 %

initial rate, as of the date of the default.

On June 30, 2021 and December 31, 2020 accrued interest of $ 24 thousand and $ 11 thousand, respectively, remained outstanding on the Stolarski Note.

The Company may prepay the outstanding principal balance,

together with any accrued but unpaid interest without premium or penalty.

On September 30, 2021 and December 31, 2020, accrued interest of $ 196

thousand and $ 66 thousand, respectively, remained outstanding on the HealthTronics Note.

As the Seller Note was not repaid prior to January 1, 2021, HealthTronics may elect to convert the outstanding principal amount plus any

accrued but unpaid interest thereon into shares of the Company’s common stock, at a conversion price of $ 0.10 per share.

Company evaluated embedded conversion features within the convertible promissory note and determined that the conversion feature does not require to be bifurcated.

Upon adoption of ASC 2020-6 effective January 1, 2021, the convertible

promissory note is accounted for as a single liability due to the elimination of the beneficial conversion feature accounting model.

Convertible promissory notes payable (Stolarski), in default - On Augus t 6 , 2020, the Company issued to A.

Michael Stolarski, a member of the board of directors and an

existing shareholder, a convertible promissory note in the principal amount of $ 223 thousand (the “Stolarski Note”).

Stolarski Note matured on August 6, 2021 and was not repaid.

The Company’s failure to pay the outstanding principal balance when

due constituted an event of default under the terms of the Stolarski Note and, accordingly, it began accruing additional interest of 2.0 %

in addition to the 12.0 % initial rate, as of the date of the default.

On September 30, 2021 and December 31, 2020 accrued

interest of $ 32 thousand and $ 11

thousand, respectively, remained outstanding on the Stolarski Note.

The Stolarski Note is expressly subordinate to the Senior Secured Notes.

The Company may prepay the outstanding principal balance, together with any accrued but unpaid interest without premium or penalty.

The Company may prepay the outstanding principal balance, together with any accrued but unpaid

interest without premium or penalty.

As the Stolarski Note was not repaid prior to January 1, 2021, the holder may elect to convert the outstanding principal amount plus any accrued but unpaid interest

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elimination of the beneficial conversion feature accounting model.

SBA Loan #1 - The Company received a letter from the Small Business Administration

(“SBA”) dated August 27, 2021 forgiving approximately $ 454 thousand of the SBA Loan #1 principal and $ 6 thousand of interest.

As of June 30, 2021, all of the $ 464

thousand balance outstanding is classified as current.

As of December 31, 2020, $ 320 thousand is classified as current and $ 142 thousand is classified as non-current.

SBA Loan #2 – On February 20, 2021, the Company received proceeds from a second SBA

loan (“SBA Loan #2”) in the amount of $ 1.03 million from Northeast Bank, as lender, pursuant to the Paycheck Protection Program (“PPP”)

under the CARES Act.

September 2021 Advances on Future Receipts Financing – On September 27, 2021, the Company received $ 703 thousand in cash proceeds related to its entry into a non-recourse agreement for the sale of $ 1.0 million of future receipts to GCF Resources LLC (“GCF”).

In conjunction with the 24 -week agreement, the Company is obligated to remit to GCF a minimum of $ 59

thousand of receipts each week, with the sum of the first four payments occurring at closing, which was September 27, 2021.

taking into account the payments made at closing, the Company recorded an initial liability of $ 763 thousand and a debt discount of

approximately $ 60 thousand, which represents the original issue discount and the fees paid in conjunction with the financing.

discount will be amortized to interest expense over the life of the agreement.

The Company began making the required minimum weekly payments October 25, 2021.

At closing, the Company also issued warrants to purchase 5,555,556 shares of the Company’s common stock to affiliates of GCF.

The warrants have an exercise price of $ 0.18 per share and expire four years after issuance.

The Company has evaluated the terms of the warrants and after review has determined that these warrants meet the

definition of a derivative liability and accordingly, were recorded as additional discount against the debt at issuance.

SBA Loan #1 - The Company received a letter from the Small Business

Administration (“SBA”) dated August 27, 2021 forgiving approximately $ 454 thousand of the SBA Loan #1 principal and $ 6 thousand of interest, which resulted in the Company recognizing a gain on extinguishment of debt of $ 460 thousand during the third quarter of 2021.

SBA Loan #2 – On February 20, 2021, the Company received proceeds from a second

SBA loan (“SBA Loan #2”) in the amount of $ 1.03 million from Northeast Bank, as lender, pursuant to the Paycheck Protection Program

(“PPP”) under the CARES Act.

SBA Loan #2 is evidenced by a promissory note that matures on February 20, 2026 and bears interest of 1 % per annum.

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of principal and interest commence in June 2022, after both a 24 -week “covered period” and a 10 -month “deferment period,” as defined in the promissory note and current SBA regulations.

The SBA Loan #2 contains customary events of default relating to, among other

things, payment defaults and breaches of representations, warranties and covenants.

The SBA Loan #2 contains customary events of default

relating to, among other things, payment defaults and breaches of representations, warranties and covenants.

The SBA Loan #2 may be prepaid by the Company at any time prior to maturity with no penalties.

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regulations or it is otherwise determined that the Company was ineligible to receive SBA Loan #2, the Company may be required to repay SBA Loan #2 in its entirety and/or be subject to additional penalties.

In the event SBA Loan #2, or any portion

thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal.

As of June 30, 2021, $ 23 thousand

is included in current liabilities and the remainder of the $ 1.0 million loan balance is included in non-current liabilities in the

accompanying Condensed Consolidated Balance Sheets.

A summary of the warrant activity during the six months ended June 30, 2021 is as follows:

In the event SBA Loan #2, or any

portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal.

As of September 30, 2021, $ 91

thousand is included in current liabilities and the remainder of the $ 1.0 million loan balance is included in non-current liabilities

in the accompanying Condensed Consolidated Balance Sheets.

Common Stock Purchase Warrants

A summary of the warrant activity during the nine months ended September 30, 2021 is as follows:

Warrant class

September 30,

Class E Warrants

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Leviston Warrants - May 2021

Leviston Warrants - September 2021

Five Institutions Warrants - September 2021

September 2025

GCF Warrants - September 2021

September 2025

On February 3, 2021, the Company issued 10,925,000

shares of its common stock to LGH upon the cashless exercise of 11,400,000 of the LGH Warrants under the terms of the warrant

After this cashless exercise, 23,600,000 of LGH Warrants remain outstanding.

Warrant Liabilities

A summary of the warrant liability activity for the six months ended June 30, 2021 is as follows:

A summary of the warrant liability activity for the nine months ended September 30, 2021 is as follows:

Balance December 31, 2020

Cashless exercise of LGH Warrants

Warrants classified as liabilities

Warrants reclassified as liabilities

Gain on remeasurement of warrant liability

Balance June 30, 2021

Balance September 30, 2021

NH Expansion Warrants -- Significant Black Scholes valuation model inputs related to

the NH Expansion Warrants at June 30, 2021 and December 31, 2020 are as follows:

the NH Expansion Warrants at September 30, 2021 and December 31, 2020 are as follows:

Black Scholes option pricing model

June 30, 2021

September 30, 2021

December 31, 2020

Exercise Price (1)

Warrant Expiration Date (1)

August 6, 2030

Interest Rate (annual) (2)

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Warrants”), among other things.

The LGH Warrants contain certain ratchet provisions with respect to subsequent issuances of securities by the Company at a price below the exercise price of such warrants.

As a result of certain dilutive issuances

of securities by the Company on August 6, 2020, the exercise price of the LGH Warrants decreased to $ 0.01 per share and the number of

shares subject to the LGH Warrants increased to 35,000,000 shares.

As a result, the Company determined that these warrants meet the

definition of a derivative liability.

The fair value of the LGH Warrant liabilities was determined using the Black-Scholes option pricing model which approximates the binomial pricing model.

Significant inputs into the model at June 30, 2021 and

December 31, 2020 are as follows:

As a result of certain dilutive issuances of securities by the Company on August 6, 2020, the exercise price of the LGH Warrants decreased to $ 0.01 per share and the number of shares subject to the LGH Warrants increased to 35,000,000

The Company has evaluated the terms of the warrants and after review has determined that these warrants meet the definition of a derivative liability.

The fair value of the LGH Warrant liabilities was determined using the Black-Scholes

option pricing model which approximates the binomial pricing model.

Significant inputs into the model at September 30, 2021 and December 31, 2020 are as follows:

Black Scholes option pricing model

June 30, 2021

September 30, 2021

December 31, 2020

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presented period ending date.

Leviston Warrants – As disclosed in Note 11 -Warrants, on each of April 20, 2021 and May 14, 2021, the Company issued 3,968,254 warrants to Leviston entitling them to acquire a total of 7,936,508

shares of common stock.

The Leviston Warrants contain certain ratchet provisions with respect to subsequent issuances of securities by the Company at a price below the exercise price of such warrants.

As a result, the Company determined that

these warrants meet the definition of a derivative liability.

Leviston Warrants – As disclosed in Note 11 -Warrants, on April 20, 2021, May 14, 2021, and September 3, 2021, respectively, Leviston was issued 3,968,254 , 3,968,254 and 1,322,751 warrants for shares of common stock.

The Company has evaluated the terms of the warrants and after review has determined that these

warrants meet the definition of a derivative liability.

The fair value of the Leviston Warrant liabilities was determined using the Black-Scholes option pricing model which approximates the binomial pricing model.

Significant inputs

into the model at June 30, 2021 and 2021 issuance dates are as follows:

Significant inputs into

the model at date of issuance and September 30, 2021:

Binomial Assumptions

Issuance date (1)

Black Scholes option pricing model

April 20, 2021

June 30, 2021

Issuance date (1)

September 3, 2021

September 30, 2021

Exercise Price (1)

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Calculated fair value per share

Based on the terms provided in the warrant agreement to purchase common

stock of the Company on the stated issuance dates.

Interest rate for U.S.

Treasury Bonds, as of each presented period

ending date, as published by the U.S.

Federal Reserve.

Based on the historical daily volatility of the Company as of each

presented period ending date.

Five Institutions’ Warrants –

As disclosed in Note 11 -Warrants on September 3, 2021, the Company also issued a total of 2,772,229 warrants for shares of common stock to Five Institutions.

The Company has evaluated the terms of the warrants and after review has determined that these warrants meet the

definition of a derivative liability.

The fair value of the Five Institutions’ Warrant liabilities was determined using the Black-Scholes option pricing model which approximates the binomial pricing model.

Significant inputs into the model at

September 3, 2021 and September 30, 2021 are as follows:

Binomial Assumptions

Issuance date (1)

September 3, 2021

September 30, 2021

Exercise Price (1)

Interest Rate (annual) (2)

Volatility (annual) (3)

Time to Maturity (Years)

Calculated fair value per share

Based on the terms provided in the warrant

agreement to purchase common stock of the Company dated April 20, 2021.

agreement to purchase common stock of the Company dated September 3, 2021.

Interest rate for U.S.

Treasury Bonds, as of each presented period ending date, as published by the U.S.

Treasury Bonds, as of each

presented period ending date, as published by the U.S.

Federal Reserve.

Based on the historical daily volatility of the Company as of each presented period ending date.

Based on the historical daily volatility of the

Company as of each presented period ending date.

GCF Warrants – As disclosed in Note 10- Notes Payable and Note 11- Warrants, on September 27,

2021, the Company issued warrants to GCF and affiliates to purchase 5,555,556 shares of the Company’s common stock.

has evaluated the terms of the warrants and after review has determined that these warrants meet the definition of a derivative liability.

The fair value of the GCF warrant liabilities was determined using the Black-Scholes option pricing

model which approximates the binomial pricing model.

Significant inputs into the model at both the issuance date and September 30, 2021 are as follows:

Binomial Assumptions

Issuance date (1)

Black Scholes option pricing model

June 30, 2021

September 27, 2021

September 30, 2021

Exercise Price (1)

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Calculated fair value per share

Based on the terms provided in the warrant agreement to purchase common

stock of the Company dated May 14, 2021.

Based on the terms provided in the warrant agreement to purchase

common stock of the Company dated September 27, 2021.

Interest rate for U.S.

Treasury Bonds, as of each presented period ending date, as published by the U.S.

Treasury Bonds, as of each presented period

ending date, as published by the U.S.

Federal Reserve.

Based on the historical daily volatility of the Company as of each presented period ending date.

The following is a summary of the Company’s right of use assets and lease liabilities at June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021

Based on the historical daily volatility of the Company as of each

presented period ending date.

The following is a summary of the Company’s right of use assets and lease liabilities at September 30, 2021 and December 31, 2020 (in

September 30, 2021

December 31, 2020

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Lease Liabilities

Total lease costs for the six months ended June 30, 2021 and 2020 are as follows (in thousands):

Total lease costs for the nine months ended September 30, 2021 and 2020 are as follows (in thousands):

Finance lease costs:

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The following summarizes cash paid for amounts included in the measurement of lease liabilities as well as the related right-of-use assets

obtained for the six months ended June 30, 2021 and 2020 (in thousands):

obtained for the nine months ended September 30, 2021 and 2020 (in thousands):

Cash paid for amounts included in measurement of lease liabilities:

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Operating cash flows from operating leases

Operating Leases - As of June 30, 2021, the maturities of the Company’s operating lease liability, which have

Operating Leases - As of September 30, 2021, the maturities of the Company’s operating lease liability, which have

initial or remaining lease terms in excess of one year, consist of the following (in thousands):

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Lease liability

As of June 30, 2021, the Company’s operating leases had a weighted average remaining lease term of 1.8 years and a weighted average discount rate of 10.4 %.

Rent expense for the three months ended June 30, 2021 and 2020 was $ 86 thousand and $ 52 thousand, respectively.

As of September 30, 2021, the Company’s operating leases had a weighted average remaining lease term of 1.4 years and a weighted average discount rate of 11.0 %.

Rent expense for the three months ended September 30, 2021 and 2020 was $ 94 thousand and $ 84 thousand, respectively.

Rent expense for

the six months ended June 30, 2021 and 2020 was $ 169 thousand and $ 118 thousand, respectively.

Financing Lease - As of June 30, 2021, the maturities of the Company’s financing lease liability, which have initial or

remaining lease terms in excess of one year, consist of the following (in thousands):

the nine months ended September 30, 2021 and 2020 was $ 263 thousand and $ 202 thousand, respectively.

Financing Lease - As of September 30, 2021, the maturities of the Company’s financing lease liability, which have

initial or remaining lease terms in excess of one year, consist of the following (in thousands):

Year ending December 31,

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Lease liability

As of June 30, 2021, the Company’s financing leases had a weighted average remaining lease term of 1.5 years based on annualized base payments expiring through 2023 and a weighted average discount rate of 13.2 %.

As of June 30, 2021, the Company did not have additional operating or financing leases that have yet commenced.

As of September 30, 2021, the Company’s financing leases had a weighted average remaining lease term of 2.0 years based on annualized base payments expiring through 2023 and a weighted average discount rate of 13.2 %.

As of September 30, 2021, the Company did not have additional operating or financing leases that have yet commenced.

Contingencies

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received notification alleging that it is not in compliance with the license agreement with Celularity entered into in connection with the acquisition of the UltraMIST® assets.

The Company has responded and asserted that the Company is not in

breach and that the supplier has breached various agreements.

The Company has responded and asserted that the Company is not in breach and that the supplier

has breached various agreements.

It is too early to determine the outcome of this matter.

Any potential impact to the Company cannot be fully determined at this time and

there is no guarantee that the dispute will be resolved in a manner beneficial to the Company or at all.

As part of the Asset Purchase Agreement on August 6, 2020, the Company assumed obligations for a purchase order for UltraMIST

devices from Celularity’s vendor Minnetronix.

Any potential impact to the Company cannot be fully determined at this time and there is no guarantee that the

dispute will be resolved in a manner beneficial to the Company or at all.

As part of the Asset Purchase Agreement on

August 6, 2020, the Company assumed obligations for a purchase order for UltraMIST® devices from Celularity’s vendor Minnetronix.

This purchase order had a remaining purchase commitment of approximately $ 1.1 million.

The purchase order also calls for production delay fees of 1.25 % of the committed inventory if the Company delays production.

is also a cancelation clause of 20 % of the remaining balance in the event that the Company delays production for more than six months .

There is also a cancelation clause of 20 % of the remaining balance in the event that the Company delays production for more than six months .

On September 23, 2021, Minnetronix notified the Company that it was cancelling the purchase order for the UltraMIST® devices as a result

of the Company delaying production more than six months.

This notification includes fees and charges for the cancellation of the purchase order of an additional $ 320 thousand.

This notification includes fees and charges for the cancellation of the purchase order of an additional $ 311 thousand, which the Company accrued during the third quarter of 2021.

The Company expects to be able to resume production upon paying this obligation.

While the Company is disputing certain aspects of this termination notice and

is continuing to engage with Minnetronix regarding resolution of this matter, including reinstatement of the purchase order, there is no guarantee that the dispute will be resolved in a manner beneficial to the Company or at all.

While the Company is

disputing certain aspects of this termination notice and is continuing to engage with Minnetronix regarding resolution of this matter, including reinstatement of the purchase order, there is no guarantee that the dispute will be resolved in a

manner beneficial to the Company or at all.

Related Party Transactions

On February 13, 2018, the Company entered into an Agreement for Purchase and Sale, Limited Exclusive Distribution and Royalties, and Servicing

and Repairs with Premier Shockwave Wound Care, Inc., a Georgia Corporation (“PSWC”), and Premier Shockwave, Inc., a Georgia Corporation (“PS”).

Each of PS and PSWC is owned by A.

Michael Stolarski, a member of the Company’s board of directors and

an existing shareholder of the Company The agreement provides for the purchase by PSWC and PS of dermaPACE System and related equipment sold by the Company along with limited but exclusive distribution rights to provide dermaPACE Systems to

certain governmental healthcare facilities and the agreement contains provisions whereby in the event of a change of control of the Company (as defined in the agreement), the stockholders of PSWC have the right and option to cause the Company to

purchase all of the stock of PSWC, and whereby the Company has the right and option to purchase all issued and outstanding shares of PSWC, in each case based upon certain defined purchase price provisions and other terms.

During the three months ended June 30, 2021 and 2020, the Company recorded $ 8 thousand and $ 13 thousand, respectively, in revenue from an

entity owned by this related party.

During the six months ended June 30, 2021 and 2020, respectively, the Company recorded $ 16 thousand

and $ 26 thousand in revenue from this entity.

In addition, contract liabilities includes a balance of $ 54 thousand at June 30, 2021 and $ 69

thousand at December 31, 2020 from this related party.

In March 2021, PSWC paid the Company $ 125

thousand as a deposit for future purchase of new medical equipment.

Please see Note 17 – Subsequent Events in the accompanying Condensed Consolidated Financial Statements for discussion of advances from member of our board of directors in

October 2021.

The provision for income taxes of $ 6 thousand and $ 22 thousand, for the three months and six months ended June

30, 2021 and the deferred tax liability are related to the goodwill of $ 7.3 million recorded as part of the acquisition of the

Celularity assets and is known as a “naked credit”.

February 2018 dermaPACE® Purchase - On February 13, 2018, the Company entered into an Agreement for

Purchase and Sale, Limited Exclusive Distribution and Royalties, and Servicing and Repairs with Premier Shockwave Wound Care, Inc., a Georgia Corporation (“PSWC”), and Premier Shockwave, Inc., a Georgia Corporation (“PS”).

Each of PS and PSWC

is owned by A.

Michael Stolarski, a member of the Company’s board of directors and a shareholder of the Company.

The agreement provides for the purchase by PSWC and PS of dermaPACE® System and related equipment sold by the Company along with

limited but exclusive distribution rights to provide dermaPACE® Systems to certain governmental healthcare facilities in exchange for the payment of certain royalties to the Company.

The agreement also contains provisions whereby in the event

of a change of control of the Company (as defined in the agreement), the stockholders of PSWC have the right and option to cause the Company to purchase all of the stock of PSWC, and whereby the Company has the right and option to purchase all

issued and outstanding shares of PSWC, in each case based upon certain defined purchase price provisions.

The purchase price for this agreement is 5.5

times the annualized EBITDA for the six months trailing the change of control plus the book value of the equipment and working capital.

During the three months ended September 30, 2021 and 2020, the Company recorded $ 8 thousand and $ 10 thousand, respectively, in revenue from this

related party.

During the nine months ended September 30, 2021 and 2020, respectively, the Company recorded $ 24 thousand and $ 36 thousand in revenue from this entity.

In addition, contract liabilities include a balance of $ 46 thousand at September 30, 2021 and $ 69 thousand at December

31, 2020 from this related party.

March 2021 Future Purchase of Equipment - In March 2021, PSWC paid the Company $ 125 thousand as a deposit in accounts payable for future purchase of new medical equipment.

Please see Note 17 – Subsequent Events in the accompanying Condensed

Consolidated Financial Statements for discussion of advances from member of our board of directors in October 2021.

July 2021 dermaPACE® Purchase - On July 1, 2021, the Company purchased unused DermaPACE® equipment and applicator inventory from PSWC for $ 127 thousand.

As of September 30, 2021, $ 127

thousand is included in accounts payable on the condensed consolidated balance sheets related to this transaction.

July 2021 Rental Equipment Agreement - Effective July 1, 2021, the Company entered into a short-term equipment rental agreement with PSWC,

whereby the Company obtained DermaPACE® equipment from PSWC for $ 3,600 per month.

The company recorded $ 99 thousand in revenue from this arrangement.

The provision for income taxes of $ 6 thousand and $ 28 thousand, for the three months and nine months ended

September 30, 2021 and the deferred tax liability are related to the goodwill of $ 7.3 million recorded as part of the acquisition of

the Celularity assets and is known as a “naked credit”.

The goodwill was assigned an indefinite life for book purposes but is deductible for income tax purposes over a fifteen-year life.

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Subsequent Events

September 2021 Securities Purchase Agreement and Warrants (In default) - On

September 3, 2021, the Company entered into Securities Purchase Agreements (the “September 2021 Purchase Agreements”), with certain accredited investors (collectively, the “September 2021 Purchasers”) for the sale by the Company in a private

placement (the “September 2021 Private Placement”) of (i) the Company’s future advance convertible promissory notes in an aggregate principal amount of up to $ 543 thousand (the “September 2021 Notes”) and (ii) warrants to purchase an additional 2,777,779

shares of common stock of the Company (the “September 2021 Warrants”).

The September 2021 Warrants have an exercise price of $ 0.18 per

share and a five-year term.

The closing of the September 2021 Private Placement occurred on September 7, 2021 (the “September 2021

Purchasers Closing Date”).

Under the terms of the September 2021 Purchase Agreements, the aggregate principal amount of the September 2021 Notes of up to $ 543 thousand (the “Aggregate Amount”), may be advanced in disbursements by the September 2021 Purchasers (“September 2021 Purchasers Disbursements”),

as set forth in the September 2021 Notes.

The September 2021 Purchasers Disbursements bear an interest at a rate of five percent ( 5 %) per annum and have a maturity date of twelve ( 12 )

months from the date of issuance.

Each September 2021 Note is convertible at the option of the holder into shares of common stock of the Company at a conversion price per share equal to (A) until the date of effectiveness of the Registration

Statement, $ 0.18 and (B) after the date of effectiveness of the Registration Statement, the lesser of (i) $ 0.18 , (ii) ninety percent ( 90 %) of the closing price for a share of common stock reported on the OTCQB on the effective date of the Registration Statement or (iii) 75 % of the lowest volume weighted average price, as defined,, which shall be no lower than $ 0.01 .

The September 2021 Notes contain customary events of default and covenants, including limitations on incurrences of indebtedness and liens.

Pursuant to each September 2021 Purchase Agreement, the Company entered into a security agreement in favor of the applicable September 2021

Purchaser, securing the Company’s obligations under the applicable September 2021 Note.

The rights of each September 2021 Purchaser to receive payments under their respective note is subordinate to the rights of North Haven Expansion pursuant to

a Subordination Agreement, that the Company and each September 2021 Purchaser entered into with North Haven Expansion in connection with the September 2021 Private Placement.

In connection with each September 2021 Purchase Agreement, the Company entered into a registration rights agreement with the September 2021

Purchasers on September 3, 2021 (the “September 2021 Purchasers Registration Rights Agreement”) pursuant to which the Company has agreed to file a Registration Statement no later than ninety (90) days following the September 2021 Purchasers

Closing Date for the registration of 100% of the maximum number of the shares issuable upon conversion of the September 2021 Notes and exercise of the September 2021 Warrants issued pursuant to such September 2021 Purchase Agreement (the

“September 2021 Purchasers Registrable Securities”).

The Company shall use its best efforts to keep the Registration Statement continuously effective under the Securities Act of 1933, as amended, until all September 2021 Purchasers Registrable

Securities have been sold, or may be sold without the requirement to be in compliance with Rule 144(c)(1) of the Securities Act and otherwise without restriction or limitation pursuant to Rule 144 of the Securities Act, as determined by the

counsel to the Company.

The September 2021 Notes were in default as of October 25, 2021 and, accordingly, on that date, interest began accruing at the default rate of 15 % in addition to registration penalties per the September 2021 Purchasers Registration Rights Agreement.

The Company has yet to file the Registration Statement, and under the terms of the September 2021 Registration Rights Agreement, it is

obligated to pay in cash a one-time aggregate amount of $250 thousand to the holders of the September 2021 Notes, plus 1% of the outstanding principal for each 30-day period during which the Company continues not to have in-place an effective

Registration Statement.

As a result of this breach of the September 2021 Registration Rights Agreement, interest on the September 2021 Notes accrues at the default interest rate of 15 %.

September 2021 and December 2021 Advances on Future Receipts Financing – On

September 27, 2021, the Company received $ 703 thousand in cash proceeds related to its entry into a non-recourse agreement for the sale

of $ 1.0 million of future receipts to GCF Resources LLC (“GCF”).

In conjunction with the 24 -week agreement, the Company is obligated to remit to GCF a minimum of $ 59

thousand of receipts each week, with the sum of the first four payments occurring at closing, which was September 27, 2021.

taking into account the payments made at closing, the Company will record an initial liability of $ 763 thousand and a debt discount of

approximately $ 60 thousand, which represents the original issue discount and the fees paid in conjunction with the financing.

discount will be amortized to interest expense over the life of the agreement.

The Company began making the required minimum weekly payments October 25, 2021.

At closing, the Company also issued warrants to purchase 5,555,556 shares of the Company’s common stock to affiliates of GCF.

The warrants have an exercise price of $ 0.18 per share and expire four years after issuance.

On December 22, 2021, the Company paid off the remaining balance of $ 650

thousand from the September 27, 2021 advance and received $ 758 thousand in cash proceeds related to its entry into a non-recourse

agreement for the sale of $ 1.5 million of future receipts to GCF.

In conjunction with the 24 -week agreement, the Company is obligated to remit to GCF a minimum of $ 59

thousand of receipts each week for the first six weeks and receipts of $ 98 thousand for the remaining 18 weeks.

After considering

the payments made at closing, the Company will record an initial liability of $ 1.5 million and a debt discount of approximately $ 90 thousand, which represents the original issue discount and the fees paid in conjunction with the financing.

The debt discount will be amortized

to interest expense over the life of the agreement.

The Company will begin making the required minimum weekly payments January 3, 2022 and is obligated to continue through June 13, 2022.

At closing, the Company also issued warrants to

purchase 8,333,334 shares of the Company’s common stock to affiliates of GCF.

The warrants have an exercise price of $ 0.18 per share and expire four years after issuance.

October 2021 Advances from Directors - On October 27, 2021 the Company received $ 50 thousand in advances from related parties;

October 2021 Advances from Directors - On October 27, 2021 the Company received

$ 50 thousand in advances from related parties;

$ 25 thousand from NightWatch Capital Advisors, LLC, a company controlled by John Nemelka, a shareholder and member of the Company’s board of directors, (the “Nemelka Advance”) and $ 25 thousand from A.

2 unchanged sentences

The Nemelka Note matures on June 30, 2022 and accrues interest at a rate equal to 15.0 % per annum.

exchange for the Stolarski Advance, as well as the $ 125 thousand deposit received in March 2021 by the Company (see Note 16), the

Company issued to Mr.

In exchange for the Stolarski Advance, as well as the $ 125 thousand deposit received in March 2021 by the Company (see Note 16),

the Company issued to Mr.

Stolarski a promissory note in the principal amount of $ 150 thousand (“Stolarski Note #2”).

Stolarski Note #2

matures on June 30, 2022 and accrues interest at a rate equal to 15.0 % per annum.

Note #2 matures on June 30, 2022 and accrues interest at a rate equal to 15.0 % per annum.

December 2021 Advance on Future Receipts Financing – On December 22, 2021, the Company paid of the remaining balance of $ 650 thousand from the September 27, 2021 advance and received $ 758

thousand in cash proceeds related to its entry into a non-recourse agreement for the sale of $ 1.5 million of future receipts to

In conjunction with the 24 -week agreement, the Company is obligated to remit to GCF a minimum of $ 59 thousand of receipts each week for the first six

weeks and receipts of $ 98 thousand for the remaining 18 weeks.

After considering the payments made at closing, the Company will record an initial liability of $ 1.5 million and a debt discount of approximately $ 90

thousand, which represents the original issue discount and the fees paid in conjunction with the financing.

The debt discount will be amortized to interest expense over the life of the agreement.

The Company will begin making the required minimum weekly payments January 3,

2022 and is obligated to continue through June 13, 2022.

At closing, the Company also issued warrants to purchase 8,333,334

shares of the Company’s common stock to affiliates of GCF.

The warrants have an exercise price of $ 0.18 per share and expire four

years after issuance.

The Company has evaluated the terms of the warrants and after review has determined that these warrants meet the definition of a derivative liability and accordingly, were recorded as additional discount against the debt

January 2022 Warrant Exercises – On January 25, 2021, the Company received

$ 100 thousand in cash related to the exercise of Class O warrants for 909,091 shares of common stock.

On January 28,

2022, the Company issued 14,000,000 shares of its common stock to LGH upon the cashless exercise of 15,000,000 of the LGH Warrants under the terms of the warrant agreement.

After this cashless exercise, 8,600,000 of the LGH warrants remain outstanding.

February 2022

Master Equipment Agreement - On February 17, 2022, the Company entered into a Master Equipment and Contracts Purchase Agreement (the “Agreement”) with ABF Sanuwave, LLC, a Delaware limited liability company (“ABF”).

The agreement

provides for the purchase by ABF, from the Company, of all rights, title, and interest of certain designated UltraMIST® medical devices currently leased by the Company to various customers under the terms of any contract.

Under the agreement,

the Company is responsible for the servicing and repairs of such UltraMIST® medical devices and equipment.

The net purchase price of this Agreement is approximately $ 798 thousand.

The company also has entered into a service agreement with ABF to provide certain billing account management services related to the sold assets.

February 2022 Second Amendment to

Note and Warrant Purchase and Security Agreement - On February 25, 2022, the Company entered into a Second Amendment to Note and Warrant Purchase and Security Agreement (the “Amendment”), which amends that certain Note and Warrant

Purchase and Security Agreement, dated as of August 6, 2020 (as amended, the “NWPSA”), with the noteholder party thereto and NH Expansion Credit Fund Holdings LP, as agent.

The Amendment provides for (i) the sale and purchase of incremental

secured notes in an aggregate original principal amount of $ 3 million, (ii) the issuance of 20,666,993 Advisor Shares and (iii) the amendment and restatement of the existing warrant issued to the noteholder party to the NWPSA to permit

such warrant to be exercisable for an additional 2.0 % of the fully-diluted Common Stock of the Company as of the amendment

effective date.

The warrant has an exercise price of $ 0.18 per share, subject to adjustment in certain circumstances, and a 10 year term from August 6, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements