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Item 7. Management’s Discussion and Analysis

2024-03-28 compared with 2023-03-20 · 142 added, 118 removed, 94 unchanged (73% of the section changed)

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FORWARD-LOOKING STATEMENTS” above.

We are a clinical-stage medical diagnostics company developing rapid,

tests using whole blood on our Symphony platform (“Symphony”) to improve patient outcomes in critical care settings.

technology platform is an exclusively licensed, patented system that consists of a mobile device and single-use test cartridges that if

cleared, authorized, or approved by the U.S.

Food and Drug Administration (“FDA”), can provide a solution to a significant

market need in the United States.

Clinical trials indicate Symphony produces laboratory-quality results in less than 20 minutes in critical

care settings, including Intensive Care Units (“ICUs”) and Emergency Rooms (“ERs”), where rapid and reliable results

are required.

We are a clinical-stage medical diagnostics company

developing rapid, tests using whole blood on our Symphony platform (“Symphony”) to improve patient outcomes in critical care

Our Symphony technology platform is an exclusively licensed, patented system that consists of a mobile device and single-use

test cartridges that if cleared, authorized, or approved by the U.S.

Food and Drug Administration (“FDA”), can provide a solution

to a significant market need in the United States.

Clinical trials indicate Symphony produces laboratory-quality results in less than

20 minutes in critical care settings, including Intensive Care Units (“ICUs”) and Emergency Rooms (“ERs”), where

rapid and reliable results are required.

Since inception, we have incurred net losses from

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activities of approximately $8.3 million and $7.7 million for the years ended December 31, 2023 and 2022, respectively, and had an accumulated

deficit of approximately $17.0 million as of December 31, 2022.

deficit of approximately $26.9 million and $17.0 million as of December 31, 2023 and 2022, respectively.

Results of Operations

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ended December 31, 2023 and 2022:

For Years Ended

Cost of sales

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General and administrative

Marketing and business development

Sales and marketing

Total operating expenses

Operating loss

(10,311,217 )

Other income (expense):

Interest expense, net of amortization of premium

Impairment of property and equipment

State grant revenue

Interest income

Other income, net

Total other income (expense), net

Total other income

$ (9,953,888 )

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Revenue and Gross Profit

Revenue and gross profit increased approximately

$250,000 and $49,000 respectively, for the year ended December 31, 2022, as compared to 2021.

We recognized a small, non-recurring sale

to a foreign development partner in the second quarter of 2022, which we do not consider an entry to the market or indicative of expected

As expected, there were no sales in the remainder of 2022.

Revenue and gross profit decreased approximately

$0.2 million and $0.1 million respectively, for the year ended December 31, 2023, as compared to 2022.

The decrease was due to a minor

sale of five Symphony analyzers to our business partner, Toray, during 2022.

Future sales to Toray after 2022 are not anticipated.

Research and Development

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$1.6 million, or 38%, for the year ended December 31, 2023, as compared to 2022.

This was due primarily to an increase in personnel;

costs incurred for clinical trials necessary to support or our de novo FDA submission;

and product design, testing, and manufacturing

scale-up related to our Symphony device and cartridges.

The increase in research and development expenses was

primarily due to an approximately $0.2 million increase in personnel related costs, approximately $0.6 million of additional product development

costs related to bringing the Symphony analyzer and cartridges in compliance with the FDA manufacturing standards, and approximately $0.6

million of additional depreciation expense associated with the acceleration of depreciation of certain assets used for research and development

We expect increases in our future research and

development expenses which will be focused on our clinical trial program and any necessary manufacturing improvements.

General and Administrative

General and administrative expenses increased

General and administrative expenses decreased

approximately $0.5 million, or 9%, for the year ended December 31, 2023, as compared to 2022.

The increase was primarily attributable

to administrative costs necessary to operate as a public company, totaling approximately $1.6 million.

In addition, employee compensation

and benefits increased by $1.3 million due to an increase in personnel.

Marketing and Business Development

Marketing and business development expenses increased approximately

$162,000, or 56%, for year ended December 31, 2022, as compared to 2021.

The increase was primarily attributable to pre-launch activities,

including the attendance of various industry conferences in 2022 introducing our Symphony platform to the market.

Total Other Income (Expense), net

Total other income (expense) increased approximately

$279,000, or 108%, for the year ended December 31, 2022 as compared to 2021.

The increase primarily related to income earned under the

agreement with NanoHybrids, as discussed in Note 11, partially offset by an impairment charge recognized in September 2022 of $210,000

related to certain Allereye research and development equipment.

Liquidity and Capital Resources

Since our inception, we have financed our operations

primarily through proceeds from our IPO, debt financings, private placements, interest income earned on cash and cash equivalents, and

At December 31, 2022, we had cash and cash equivalents of approximately $10.1 million.

As of February

28, 2023 , we had cash and cash equivalents of approximately $7.6 million.

Primary Sources of and Uses of Cash

The decrease in general and administrative

expenses is primarily due to the cost reduction efforts focused on reducing personnel and insurance costs.

We expect to monitor and continue to reduce our

general and administrative spend, as necessary, to optimize operational alignment.

Sales and Marketing

Sales and marketing expenses decreased approximately

$0.2 million, or 37%, for year ended December 31, 2023, as compared to 2022.

The decrease was primarily attributable to the Company’s

cost savings efforts as the Company seeks to limit marketing costs.

Total other income increased approximately $0.3

million, or 1,616%, for the year ended December 31, 2023 as compared to 2022.

The increase primarily related to increases in interest

income from the Company’s sweep account due to increased interest rates as compared to the prior period, as well as no material

impairment charge being recognized during 2023 as compared to 2022, which had an impairment charge of approximately $0.2 million.

Summary Statement of Cash Flows

The following table sets forth the primary sources

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Operating activities

$ (7,741,593 )

$ (4,366,758 )

Investing activities

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Net (decrease) increase in cash and cash equivalents

$ (8,932,788 )

Net cash used in operating activities

During 2022, we used $7.7 million in cash for operating activities,

an increase of $3.4 million from 2021.

The increase in net cash used in operating activities was primarily due to increases in personnel

costs, product development costs, and expenses incurred for public company operations.

During 2023, we used approximately $8.3 million

in cash for operating activities, an increase of approximately $0.6 million from 2022.

The increase in net cash used in operating activities

was primarily due to increases in personnel and product development costs, which ultimately led to the reduction of personnel in the second

and third quarters of 2023.

Net cash used in investing activities

During 2022, we used $1.2 million in cash for

investing activities, a $1.2 million increase from 2021.

The increase in cash used in investing activities was primarily due to the purchase

of lab and manufacturing equipment to support the development of the Symphony product line.

During 2023, we used approximately $0.7 million

in cash for investing activities, an approximately $0.5 million decrease from 2022.

The Company acquired laboratory equipment and manufacturing

equipment for the development of the Symphony devices in both 2022 and 2023.

Net cash provided by financing activities

During 2022, we generated $8,000 in cash from

financing activities, as compared to approximately $22.5 million in 2021.

The $22.5 million decrease was primarily due to our IPO in November

2021, which provided net proceeds of $18.9 million.

Additionally in 2021, we received $4.5 million from the issuance of convertible

debentures, offset by issuance costs of approximately $563,000.

During 2023, we generated approximately $1.1 million

in cash from financing activities, as compared to less than $0.1 million in 2022.

The increase in net cash provided by financing activities

was primarily due to the proceeds from the August 2023 Financing.

Contractual Obligations

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Liquidity and Going Concern

We had cash and cash equivalents of $10.1 million

at December 31, 2022.

We continue to develop the Symphony device and its first cartridge for the measurement of IL-6.

We remain committed

to obtaining FDA clearance and have expanded clinical trials to obtain additional data to support our de novo FDA submission, while

also continuing to build our manufacturing operations with our CMOs.

Current cash resources and expected operating expenses are considered

in determining our liquidity requirement;

as well as $1.6 million of current liabilities on our balance sheet at December 31, 2022 and

capital commitments of approximately $2 million during 2023 (see Notes 12 and 13).

As of the filing of this report, we expect to need

additional capital to fund our planned operations for the next twelve months.

We may seek to raise such additional capital through

public or private equity offerings, grant financing and support from governmental agencies, convertible debt, collaborations, strategic

alliances and distribution arrangements.

Additional funds may not be available when we need them on terms that are acceptable to us, or

If adequate funds are not available, we may be required to delay or reduce the scope of our research or development programs,

our commercialization efforts or our manufacturing commitments and capacity.

In addition, if we raise additional funds through collaborations,

strategic alliances or distribution arrangements with third parties, we may have to relinquish valuable rights to its technologies or

future revenue streams.

If we are unsuccessful in our efforts to raise

additional capital, based on our current and expected levels of operating expenses, our current capital will not be sufficient to fund

our operations for the next twelve months.

These conditions raise substantial doubt about our ability to continue as a going concern.

Recent Financings

Convertible Debentures

On June 8, 2021, we entered into an agreement

to issue a total of $4.5 million of 7.5% Senior Secured Convertible Debentures (the “Convertible Debentures”) to Sabby

Volatility Master Fund, Ltd (“Sabby”), of which $3.0 million of the Convertible Debentures were issued at closing and

$1.5 million in principal amount of the Convertible Debentures were issued in August 2021.

Initial Public Offering

We completed our IPO on November 10, 2021, whereby

we sold 2,160,000 Units at a price of $10.00, with each Unit consisting of one share of common stock, one warrant to purchase one share

of common stock at an exercise price of $7.00 per share (“Class A Warrant”), and one warrant to purchase one share of common

stock at an exercise price of $10.00 (“Class B Warrant”) (collectively, a “Unit”).

Each warrant contained within

the Units is exercisable until the fifth anniversary of the IPO Date, however, holders of Class B Warrants may exercise such warrants

on a “cashless” basis after the earlier of:

(i) 10 trading days from closing date of the offering, or (ii) the time when $10.0

million of volume is traded in our common stock, if the volume weighted average price of our common stock on any trading day on or after

the closing date of the offering fails to exceed the exercise price of the Class B Warrants (subject to adjustments as described in the

warrant agreement).

Additionally, the underwriter of the IPO exercised their overallotment option, solely with respect to the Class A

Warrants and Class B Warrants, shortly after the IPO Date, which resulted in an additional issuance of 324,000 Class A Warrants and 324,000

Class B Warrants.

The gross proceeds from the IPO were approximately $21.6 million and were offset by $2.8 million in offering costs.

Indemnification

We have certain agreements with service providers

with which we do business that contain indemnification provisions pursuant to which we typically agree to indemnify the party against

certain types of third-party claims.

We accrue for known indemnification issues when a loss is probable and can be reasonably estimated.

We would also accrue for estimated incurred but unidentified indemnification issues based on historical activity.

As we have not incurred

any indemnification losses to date, there were no accruals for or expenses related to indemnification issues for any period presented.

The Company had cash and cash equivalents of

$2,208,516, as of December 31, 2023.

The Company has incurred net losses since its inception, and has negative cash flows from

operations and had the accumulated deficit of $26,950,990 as of December 31, 2023.

The Company continues to develop the Symphony

device and its first test for the measurement of IL-6.

The Company remains committed to obtaining FDA clearance and will conduct

clinical trials to obtain sufficient data to support its FDA submission, while also continuing to build its manufacturing operations

with its contract manufacturing organizations.

Current cash resources and expected operating expenses are considered in determining

its liquidity requirement;

as well as $1,771,375 of current liabilities on its balance sheet as of December 31, 2023.

Company estimates cash resources will be sufficient to fund its operations through the second quarter of 2024.

will need additional capital to fund its planned operations for the next 12 months.

These conditions raise substantial doubt about

the Company’s ability to continue as a going concern.

The consolidated financial statements for the

years ended December 31, 2023 and 2022 were prepared under the assumption that the Company will continue as a going concern, which contemplates

that the Company will be able to realize assets and discharge liabilities in the normal course of business.

The Company expects that it will seek to raise

such additional capital through public or private equity offerings, grant financing and support from governmental agencies, convertible

debt, collaborations, strategic alliances and distribution arrangements.

Additional funds may not be available when it needs them on terms

that are acceptable to them, or at all.

If adequate funds are not available, it may be required to delay its FDA regulatory strategy,

and to delay or reduce the scope of its research or development programs, its commercialization efforts or its manufacturing commitments

and capacity.

In addition, if it raises additional funds through collaborations, strategic alliances or distribution arrangements with

third parties, it may have to relinquish valuable rights to its technologies or future revenue streams.

Recent Offerings

August 2023 Offering

On August 24, 2023, the Company entered into a

securities purchase agreement with certain institutional and accredited investors (the “Purchase Agreement”) relating to the

registered direct offering and sale of 216,000 shares of the Company’s common stock at a purchase price of $7.365 per share (the

In a concurrent private placement, the Company

also issued to such institutional and accredited investors unregistered warrants to purchase up to 216,000 shares of Common Stock (the

Pursuant to the terms of the Purchase Agreement, for each share of Common Stock issued in this offering an accompanying

Warrant was issued to the purchaser thereof.

Each Warrant is exercisable for one share of Common Stock (the “Warrant Shares”)

at an exercise price of $7.24 per share, will be immediately exercisable upon issuance and will expire five years from the date of issuance.

The Warrants were offered and sold at a purchase price of $0.125 per underlying warrant share, which purchase price is included in the

offering price per share of Common Stock issued in the Offering (the “Private Placement”).

Pursuant to an engagement letter, dated as of

August 7, 2023 (the “Engagement Letter”), between the Company and H.C.

Wainwright & Co., LLC, or the placement agent,

the Company agreed to pay the placement agent a total cash fee equal to 7.0% of the gross proceeds received in the Offering and the Private

The Company also agreed to pay the placement agent in connection with the Offering and the Private Placement a management fee

equal to 1.0% of the gross proceeds raised in the Offering and Private Placement, $45,000 for non-accountable expenses, and $15,950 for

clearing fees.

In addition, the Company agreed to issue to the placement agent, or its designees, warrants to purchase up to 15,120 shares

of Common Stock (the “Placement Agent Warrants”), which represents 7.0% of the aggregate number of shares of Common Stock

sold in the Offering.

The Placement Agent Warrants have substantially the same terms as the Warrants, except that the Placement Agent

Warrants have an exercise price equal to $ 9.2063, or 125% of the offering price per share of Common Stock sold in the Offering, and a

term of five years from the commencement of the sales pursuant to the Offering.

The gross proceeds to the Company from the Offering

and the Private Placement are $1,590,840.

The Company incurred offering costs of $413,544.

January 2024 Offering

On January 2, 2024, the Company sold in a public

offering (such transaction, the “January 2024 Offering”) (i) 537,768 shares of the Company’s common stock, par value

$0.0001 per share and (ii) prefunded warrants to purchase up to an aggregate 2,154,540 shares of Common Stock (the “Prefunded Warrants”).

The Shares and Prefunded Warrants were sold together with warrants to purchase up to an aggregate of 2,692,308 shares of Common Stock

at an exercise price of $1.30 per share (the “January 2024 Warrants”).

The combined public offering price was $1.30 per share

of Common Stock and related January 2024 Warrant and $1.2999 per Prefunded Warrant and related January 2024 Warrant.

The Company intends

to use the net proceeds from the January Offering to fund matters related to obtaining FDA approval (including clinical studies related

thereto), as well as for other research and development activities, and for general working capital needs.

The Prefunded Warrants are immediately exercisable

and may be exercised at any time until all of the Prefunded Warrants are exercised in full.

The January 2024 Warrants are exercisable

immediately upon issuance for a period of five years following the date of issuance.

Pursuant to an engagement letter, dated as of

August 7, 2023, as amended October 11, 2023 (the “Amended Engagement Letter”), by and between the Company and the Placement

Agent, the Company paid the Placement Agent a total cash fee of $245,000 equal to 7.0% of the gross proceeds received in the January 2024

The Company also paid the Placement Agent in connection with the January Offering a management fee of $35,000 equal to 1.0%

of the gross proceeds raised in the January 2024 Offering and certain expenses incurred in connection with the January Offering.

the Company issued to the Placement Agent, warrants to purchase up to an aggregate 188,462 shares of Common Stock (the “January

2024 Placement Agent Warrants”), which represents 7.0% of the aggregate number of shares of Common Stock and Prefunded Warrants

sold in the January 2024 Offering.

The January 2024 Placement Agent Warrants have substantially the same terms as the January 2024 Warrants,

except that the January 2024 Placement Agent Warrants have an exercise price equal to $1.6250, or 125% of the offering price per share

of Common Stock and related January 2024 Warrant sold in the January Offering and expire on the fifth anniversary from the date of the

commencement of sales in the January 2024 Offering.

Concurrently with the closing of the January 2024

Offering, certain purchasers have elected to exercise Prefunded Warrants to purchase 174,770 shares of Common Stock.

Critical Accounting Policies and Estimates

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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-K

Item 7. Management’s Discussion and Analysis