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Item 7. Management’s Discussion and Analysis

2023-03-30 compared with 2022-03-24 · 222 added, 236 removed, 151 unchanged (75% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations .

We are a biomedical company focused on transforming women’s healthcare by developing novel solutions and next-generation advancements providing significant clinical impact to address severely

underserved areas.

Our mission is to provide women worldwide with superior minimally-invasive, non-surgical product technologies, accessible in the office, improving patient care and overall health economics.

We are a woman-founded and led

company with an expansive, internally created intellectual property portfolio with over 150 patents globally, in-house chemistry, manufacturing, and controls (CMC) and device manufacturing capabilities and proven ability to develop and

commercialize products.

Our suite of products and product candidates address what we believe are multi-billion dollar global market segments in which there has been little advancement for many years, helping women avoid pharmaceutical solutions,

implants and surgery that can be expensive and expose women to harm.

We are a biomedical company focused on transforming women’s healthcare by developing novel solutions and next-generation advancements providing significant clinical impact to address severely underserved areas.

mission is to provide women with superior minimally-invasive, non-surgical product technologies, accessible in the office, improving patient care and overall health economics.

We are a woman-founded and led company with an expansive, internally

created intellectual property portfolio with over 150 patents globally, in-house chemistry, manufacturing, and controls (CMC) and device manufacturing capabilities and proven ability to develop and commercialize products.

Our suite of products

and product candidates address what we believe are multi-billion dollar global market segments in which there has been little advancement for many years, helping women avoid pharmaceutical solutions, implants and surgery that can be expensive and

expose women to harm.

With an initial focus in the area of reproductive health, our two lead product candidates offer solutions for two ends of the spectrum:

FemBloc for permanent birth control and

FemaSeed as an artificial insemination infertility treatment.

FemBloc for permanent birth control and FemaSeed as an artificial insemination

infertility treatment.

FemBloc – Our Permanent Birth Control Solution .

Our permanent birth control solution in development includes our proprietary FemBloc system, which

features dual intrauterine directional delivery targeting both fallopian tubes simultaneously with a degradable biopolymer followed by an ultrasound confirmation test to confirm procedure success.

If approved, we expect FemBloc to be the first

and only non-surgical permanent birth control option, using a minimally invasive delivery system that locally instills a degradable biopolymer, which is designed to cause the fallopian tubes to close using the patient’s own scar tissue, resulting

in permanent birth control for the patient without a permanent implant.

We believe the FemBloc solution will be the safest and most natural approach for permanent birth control.

FemBloc has the potential to offer significant advantages over the

only existing option, surgical tubal ligation, or “having her tubes tied.” FemBloc is a procedure that can be completed in a physician’s office, with no anesthesia, no incisions or cannulation, no specialty skill set or capital equipment and

minimal pain and recovery time, and no residual implant remaining in the patient’s body after the scar tissue develops, which we believe will likely be at half the cost.

We believe there are also significant advantages over other temporary or

reversible methods that women may be using in lieu of the surgical tubal ligation option, as FemBloc does not use hormones or leave a long-term implant behind.

Our permanent birth control solution combines FemBloc with an ultrasound in-office

diagnostic test, which uses saline and air contrast to permit the same physician to evaluate the fallopian tubes in-office to confirm the success of FemBloc approximately three months after the FemBloc procedure, rather than requiring the patient

to visit another provider for a radiology-based exam, exposing the patient unnecessarily to radiation and the use of x-ray dye.

We have studied FemBloc in two clinical trials (a pilot safety study and a pivotal trial) pursuant to an FDA approved investigational device exemption (IDE) evaluating safety in a total of 183

Subjects are being followed for five years for safety, and for the initial 49 subject pilot study, three years of follow-up have been completed.

There have been no serious safety events reported to date in any of the subjects and over

90% of the events reported that were classified as related to the device, procedure or both, were on the day of the procedure or within seven days after the procedure.

The reported events were anticipated and the majority (80%) of these events

were bleeding or spotting and/or pain or cramps and over 75% were classified by the physician as mild.

Physicians observed that their subjects found the procedure to be highly tolerable, with subject self-reported pain scores similar to placement

Almost every case (96%) was assessed by the physician to be extremely simple or very simple to perform and 99% found it easier than tubal ligation surgery.

At the ultrasound confirmation test conducted three months following the FemBloc

procedure, there was no evidence of remaining biopolymer detected in subjects, which may indicate that the biopolymer completely degraded and likely exited the subject with possible menstruation.

Subjects found the FemBloc procedure and

confirmation test to be highly tolerable, with pain or discomfort scores similar to placement of other intrauterine devices, such as IUDs.

The mean score for FemBloc procedure was 4.3 and for the confirmation test was 3.0, on visual analog scale

(VAS) from 0-10 where 10 is the highest measure of pain/ discomfort.

During the conduct of these two clinical studies, unintended pregnancies occurred in subjects who were told to rely on FemBloc (six pregnancies for the pilot study and three pregnancies for the

pivotal trial).

Our permanent birth control solution in development includes our proprietary FemBloc system, which features dual intrauterine

directional delivery targeting both fallopian tubes simultaneously with a degradable biopolymer followed by an ultrasound confirmation test to confirm procedure success.

If approved, we expect FemBloc to be the first and only non-surgical

permanent birth control option, using a minimally invasive delivery system that locally instills a degradable biopolymer, which is designed to cause the fallopian tubes to close using the patient’s own scar tissue, resulting in permanent birth

control for the patient without a permanent implant.

FemBloc has the potential to offer significant advantages over the only existing option, surgical tubal ligation, or “having her tubes tied.” FemBloc is a procedure that can be completed in a

physician’s office, with no anesthesia, no incisions or cannulation, no specialty skill set or capital equipment and minimal pain and recovery time, and no residual implant remaining in the patient’s body after the scar tissue develops, which we

believe will likely be at half the cost.

We believe there are also significant advantages over other temporary or reversible methods that women may be using in lieu of the surgical tubal ligation option, as FemBloc does not use hormones or leave

a long-term implant behind.

Our permanent birth control solution combines FemBloc with an ultrasound in-office diagnostic test, which uses saline and air contrast to permit the same physician to evaluate the fallopian tubes in-office to confirm

the success of FemBloc approximately three months after the FemBloc procedure, rather than requiring the patient to visit another provider for a radiology-based exam, exposing the patient unnecessarily to radiation and the use of x-ray dye.

We have studied FemBloc in three clinical trials (a pilot safety study, a pivotal trial, and a validation study) pursuant to an FDA approved investigational device exemption (IDE) for each study with evaluation of

safety in a total of 228 subjects.

Subjects are being followed for five years for safety, and for the initial 49 subject pilot study, four years of follow-up have been completed.

There have been no serious safety events reported to date in any of

the subjects and over 90% of the events reported that were classified as related to the device, procedure or both, were on the day of the procedure or within seven days after the procedure.

The reported events were anticipated and the majority of

these events were bleeding or spotting and/or pain or cramps and over 75% were classified by the physician as mild.

Physicians observed that their subjects found the procedure to be highly tolerable, with subject self-reported pain scores similar

to placement of IUDs.

Almost every case (96%) was assessed by the physician to be extremely satisfied or very satisfied with the procedure and 96% found it easier than tubal ligation surgery.

At the ultrasound confirmation test conducted three

months following the FemBloc procedure, there was no evidence of remaining biopolymer detected in subjects, which may indicate that the biopolymer completely degraded and likely exited the subject with possible menstruation.

Subjects found the

FemBloc procedure and confirmation test to be highly tolerable, with pain or discomfort scores similar to placement of other intrauterine devices, such as IUDs.

The mean score for FemBloc procedure was 4.6 and for the confirmation test was 3.3,

on visual analog scale (VAS) from 0-10 where 10 is the highest measure of pain/ discomfort.

During the conduct of the first two clinical studies, unintended pregnancies occurred in subjects who were told to rely on FemBloc (six pregnancies for the pilot study and three pregnancies for the pivotal trial).

These pregnancies were due to misinterpretation of the ultrasound test using the FemChec device, as reviewed and confirmed by an independent clinical events committee.

FDA viewed these unintended pregnancies as a safety concern

and, as a result, in February 2019 we paused the pivotal clinical trial for FemBloc (although subjects are still followed for safety through 5 years).

Subsequently, the agency recommended conducting a small clinical study in a new cohort of

subjects to evaluate the adequacy of certain proposed mitigations and validate the ultrasound confirmation test.

We began this small study in June 2020 pursuant to an IDE approval, where up to 50 subjects at 5 U.S.

sites will receive two

confirmation tests (ultrasound and traditional radiology).

Subjects are informed to rely on FemBloc only if both tests confirm procedure success.

We plan to use the study data to support which of the two confirmation tests (ultrasound or

radiology) should be studied in a new pivotal trial to support a potential future application for PMA for FemBloc.

Results of the small study along with the trial design for the pivotal clinical trial is planned for submission to the FDA in the

first quarter of 2023.

FDA viewed these unintended pregnancies as a safety concern and, as a result,

in February 2019 we paused the pivotal clinical trial for FemBloc (although subjects are still followed for safety through 5 years).

Subsequently, the agency recommended conducting a small clinical study in a new cohort of subjects to evaluate

the adequacy of certain proposed mitigations and validate the ultrasound confirmation test.

The study enrollment concluded in September 2022, in which 45 subjects at five U.S.

sites received two confirmation tests (ultrasound and traditional

Subjects were informed to rely on FemBloc only if both tests confirm procedure success.

There were no pregnancies in subjects told to rely on FemBloc.

We plan to use the study data to support which of the two confirmation tests

(ultrasound or radiology) should be studied in a new pivotal trial to support a potential future application for PMA for FemBloc.

Results of the small study along with the trial design for the pivotal clinical trial is planned for submission to

the FDA in the first quarter of 2023.

FemaSeed – Our Artificial Insemination Solution .

Our artificial insemination solution in development includes our proprietary FemaSeed product candidate

for artificial insemination, which features single intrauterine directional delivery with sperm, offering significant advantages over existing artificial insemination solutions, including being the first and only approach that allows selective

delivery of sperm locally and directly to the fallopian tube where conception occurs.

Our artificial insemination solution combines FemaSeed with a diagnostic companion product, our FDA-cleared and marketed FemVue device, which, creates saline

and air contrast to safely assess the fallopian tubes for patency prior to treatment with FemaSeed.

Fallopian tube patency is necessary for successful fertilization, and we believe FemVue offers significant advantages over other existing

procedures, including being the first product for ultrasound evaluation of a woman’s fallopian tubes as part of a diagnostic infertility assessment.

The safety profile of FemaSeed to date is supported by data from our FemBloc clinical trials and

a post-market study of an identical single intrauterine directional delivery device design, for which we received FDA clearance for another indication.

In April 2021 we received an IDE approval from FDA that allowed us to initiate a pivotal trial

for the FemaSeed device.

The first subject was enrolled in July 2021, and we anticipate an analysis of interim data the fourth quarter of 2022.

Completion of enrollment is expected in the first half of 2023 followed by a planned submission of

the results from the trial to FDA in support of a future de novo classification request for FemaSeed.

Our FemVue product, a companion diagnostic to FemaSeed, currently has marketing clearances or

authorization in the United States, Europe, Canada, and Japan.

Our artificial insemination solution in development includes our proprietary FemaSeed product candidate for artificial

insemination, which features single intrauterine directional delivery with sperm, offering significant advantages over existing artificial insemination solutions, including being the only approach that allows selective delivery of sperm locally

and directly to the fallopian tube where conception occurs.

Our artificial insemination solution combines FemaSeed with a diagnostic companion product, our FDA-cleared and marketed FemVue device, which, creates saline and air contrast to safely

assess the fallopian tubes for patency prior to treatment with FemaSeed.

FemVue can be used with our FDA-cleared and marketed FemCath device, which allows for selective evaluation of the fallopian tube.

Fallopian tube patency is necessary for

successful fertilization, and we believe FemVue offers significant advantages over other existing procedures, including being able to provide ultrasound evaluation of a woman’s fallopian tubes as part of a diagnostic infertility assessment.

safety profile of FemaSeed to date is supported by data from our FemBloc clinical trials and a post-market study of an identical single intrauterine directional delivery device design, for which we received FDA clearance for another indication.

The FemaSeed pivotal trial began in July 2021, pursuant to an FDA-approved IDE received in April 2021, at multiple U.S.

In October 2022, we announced an updated study design for the pivotal trial, which will now focus on couples

experiencing male factor infertility.

This update reflects a revised strategy to address this underserved population experiencing infertility with a goal of facilitating accelerated enrollment.

Completion of enrollment is expected in the second

quarter of 2023 followed by a planned submission of the results from the trial to FDA in support of a future de novo classification request for FemaSeed.

Our FemVue product, a companion diagnostic to

FemaSeed, currently has marketing clearances or authorization in the United States, Canada, and Japan.

Our FemCath product, currently has marketing clearance in the United States.

Extenuating circumstances at clinical trial sites may result in a slowdown in enrollment due to consolidation activities and the aftermath of the

overturn of Roe v Wade.

It has been reported that there have been over 25 transactions since the start of 2021 in the infertility market, which is rapidly evolving into large commercial entities.

This rapidly changing market dynamics may be

disruptive to the practice and affect the conduct of clinical studies as integration occurs.

The American Society of Reproductive Medicine (ASRM) issued a statement March 17, 2023 on the abortion policy proposals affecting reproductive

ASRM stated, “At the crux of the issue many of the proposals to ban or otherwise limit access to abortion care fail to protect the use of assisted reproductive technologies, including IVF, and so-called “personhood” measures

(defining life as beginning at conception or fertilization) are multiplying across the nation, causing alarm bells to sound for medical practitioners and infertility patients alike.

Such proposals could, intentionally or not, limit and even ban

the use of IVF and routine, safe, and medically proven procedures, such as the removal of an embryo that fails to implant in a uterus, or the disposal of unused embryos.” This uncertainty may affect subject enrollment in clinical studies being

conducted at facilities providing infertility services.

Additional Women’s Health Solutions .

We have also developed a novel technology platform for tissue sampling intended to be marketed alongside our other

women-specific medical products in the physician’s office setting.

Our FDA-cleared FemCerv product is a biopsy device for endocervical curettage that can be used to sample cervical cells and tissue circumferentially with sample containment within

the device to minimize contamination.

We have also developed a novel technology platform for tissue sampling intended to be marketed alongside our other women-specific medical

products in the physician’s office setting.

Our FDA-cleared FemCerv product is a biopsy device for endocervical curettage that can be used to sample cervical cells and tissue circumferentially with sample containment within the device to minimize

contamination.

We sponsored a post-market study of FemCerv where subjects found the procedure to be relatively pain-free and the sample obtained was complete for analysis, which we believe may aid in reliable diagnosis.

FemEMB product candidate in development is designed to obtain a comprehensive and uncontaminated sample of the endometrial cells and tissue in an office procedure.

We believe there is a market opportunity for use of FemEMB in continuous

monitoring by multiple sampling procedures that may be employed by physicians during and after treatments for cancers, abnormal bleeding, or other uterine treatments, such as prior to an endometrial ablation.

In addition, we plan to explore

expanded indications for the single or dual intrauterine directional delivery to instill therapeutic drugs for the treatment of ailments of the fallopian tubes, for which we have issued patents.

There were no adverse

events reported.

We began commercializing the FemCerv product in September 2022.

Our FemEMB product candidate in development is designed to obtain a comprehensive and uncontaminated sample of the endometrial cells and tissue in an office

We believe there is a market opportunity for use of FemEMB in continuous monitoring by multiple sampling procedures that may be employed by physicians during and after treatments for cancers, abnormal bleeding, or other uterine

treatments, such as prior to an endometrial ablation.

In addition, we plan to explore expanded indications for the single or dual intrauterine directional delivery to instill therapeutic drugs for the treatment of ailments of the fallopian tubes,

for which we have issued patents.

Factors Affecting Our Business

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pivotal clinical trial for FemBloc, as well as our future products.

We must successfully recruit and enroll clinical trial participants in our clinical trials for FemBloc and FemaSeed, which is further complicated by the restrictions and

We must successfully recruit and enroll clinical trial participants in our clinical trials for FemBloc and FemaSeed, which is further complicated by the after effects and

public health concerns of the COVID-19 pandemic, in order to have the requisite data for regulatory submissions, both to the FDA and to international regulatory bodies, for marketing authorization.

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While these factors may present significant opportunities for us, they also pose significant risks and challenges that we must address.

See the section titled “Risk Factors” for more

See the section titled “Risk Factors” for more information.

Impact of COVID-19 on Our Business

In March 2020, the World Health Organization declared the outbreak of COVID-19 caused by a novel strain of coronavirus as a pandemic.

This contagious disease outbreak continues to spread

throughout the United States and around the world, including through new variants of the virus that have been identified both inside and outside the United States.

The worldwide COVID-19 pandemic has affected and may continue to affect our

ability to complete our current preclinical studies and clinical trial, initiate and complete our planned preclinical studies and clinical trials, disrupt regulatory activities or have other adverse effects on our business, results of operations,

financial condition and prospects.

In addition, the pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, both of which could adversely affect our business, operations and ability to

raise funds to support our operations.

To date, we have experienced delays in site initiation and subject enrollment in our clinical trials and we may continue to experience some delays in our clinical trials and delays in data collection and

These delays so far have had a severe impact, and the continued spread of COVID-19 globally could adversely impact our clinical trial operations further, including our ability to initiate sites, recruit and retain subjects and principal

investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography.

We are following, and plan to continue to follow, recommendations from federal, state and local

governments regarding workplace policies, practices and procedures.

In March 2020, we implemented a remote working policy for many of our employees and implemented a 30% reduction in force.

In addition, the pandemic has decreased the number of

elective surgical procedures, which, if sustained, could have an effect on our future business.

For example, tubal ligation procedures sustained an 18% decline in December 2020 compared to December 2019, according to a study published in the

publication Contraception in 2021.

We have no assurance that demand for elective reproductive surgery will return to pre-pandemic levels in the future, or at all.

We are continuing to monitor the

potential impact of the pandemic, but we cannot be certain what the overall impact will be on our business, financial condition, results of operations and prospects.

This contagious disease outbreak continues to spread throughout the United

States and around the world, including through new variants of the virus that have been identified both inside and outside the United States.

The worldwide COVID-19 pandemic has affected and may continue to affect our ability to complete our

current preclinical studies and clinical trial, initiate and complete our planned preclinical studies and clinical trials, disrupt regulatory activities or have other adverse effects on our business, results of operations, financial condition and

These delays so far

have had a severe impact, and the continued spread of COVID-19 globally could adversely impact our clinical trial operations further, including our ability to initiate sites, recruit and retain subjects and principal investigators and site staff

who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography.

The pandemic has decreased the number of elective surgical procedures, which, if sustained, could have an effect on our future

For example, tubal ligation procedures sustained an 18% decline in December 2020 compared to December 2019, according to a study published in the publication Contraception in 2021.

assurance that demand for elective reproductive surgery will return to pre-pandemic levels in the future, or at all.

We are continuing to monitor the potential impact of the pandemic, but we cannot be certain what the overall impact will be on

our business, financial condition, results of operations and prospects.

Components of Our Comprehensive Loss

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We sell our product to physician offices, primarily through direct customer service, as well as through distributors in selected international markets.

For the years ended December 31, 2021 and

2020 Bayer Yakuhin, Ltd.

For the years ended December 31, 2022 and 2021 Bayer Yakuhin,

accounted for approximately 10% and 15%, respectively, of our total revenue.

For products sold through direct customer service, control is transferred upon shipment to customers.

For products sold to distributors

internationally, control is transferred upon shipment or delivery to the customer’s named location, based on the contractual shipping terms.

For products sold to distributors internationally, control is

transferred upon shipment or delivery to the customer’s named location, based on the contractual shipping terms.

Cost of sales

Cost of sales consists primarily of costs of components for use in our product, the materials and labor that are used to produce our products, and the manufacturing overhead that directly

supports production.

We expect cost of sales to increase in absolute terms as our revenue grows.

Our gross margin has been and will continue to be affected by a variety of factors, primarily production volumes, the cost of direct materials, product mix, geographic mix, discounting

practices, manufacturing costs, product yields, headcount and cost-reduction strategies.

While we expect gross margin percentage to increase over the long term, it will likely fluctuate from quarter to quarter as we continue to introduce new

products and adopt new manufacturing processes and technologies.

Cost of sales consists primarily of costs of components for use in our product, the materials and labor that are used to produce our products, and the manufacturing overhead that directly supports production.

expect cost of sales to increase in absolute terms as our revenue grows.

Our gross margin has been and will continue to be affected by a variety of factors, primarily production volumes, the cost of direct materials, product mix, geographic mix, discounting practices, manufacturing

costs, product yields, headcount and cost-reduction strategies.

While we expect gross margin percentage to increase over the long term, it will likely fluctuate from quarter to quarter as we continue to introduce new products and adopt new

manufacturing processes and technologies.

Research and development

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cost of outside consultants, who assist with technology development, regulatory affairs, clinical affairs and quality assurance, and testing fees.

We track outsourced development costs and other external research and development costs to specific product candidates on a program-by-program basis, fees paid to CROs, manufacturing and

clinical development activities.

However, we do not track our internal research and development expenses on a program-by-program basis as they primarily relate to compensation, overhead and early research and other costs which are deployed across

multiple projects under development.

We track outsourced development costs and other external research and development costs to specific product candidates on a program-by-program basis, fees paid to CROs, manufacturing and clinical development

under development.

R&D costs are expensed as incurred.

In the future, we expect R&D expenses to increase in absolute dollars as we continue to develop our product candidates, expand our product candidate

pipeline, enhance our existing products and technologies and perform activities related to obtaining additional regulatory approval.

In the future, we expect R&D expenses to increase in absolute dollars as we continue to develop our product candidates, expand our product candidate pipeline, enhance our

existing products and technologies and perform activities related to obtaining additional regulatory approval.

Sales and marketing

Sales and marketing expense consist of personnel-related expenses, including salaries, benefits, and stock-based compensation.

Other sales and marketing expenses include marketing and

promotional activities, including travel, trade shows and market research, and cost of outside consultants.

Other sales and marketing expenses include marketing and promotional activities,

including travel, trade shows and market research, and cost of outside consultants.

We expect to grow a sales force and increase marketing efforts as we commercialize our products based on our platform technologies.

result, we expect sales and marketing expenses to increase in absolute dollars in future periods.

As a result, we expect sales

and marketing expenses to increase in absolute dollars in future periods.

General and administrative

General and administrative expense consist of personnel-related expenses, including salaries, benefits, travel and stock-based compensation.

Other general and administrative expenses include

professional services fees, including legal, audit and tax fees, insurance costs, cost of outside consultants and employee recruiting and training costs.

Moreover, we expect to incur additional expenses associated with operating as a public

company, including legal, accounting, insurance, exchange listing and SEC compliance and investor relations.

Other general and administrative expenses include professional services

fees, including legal, audit and tax fees, insurance costs, cost of outside consultants and employee recruiting and training costs.

Moreover, we expect to incur additional expenses associated with operating as a public company, including legal,

accounting, insurance, exchange listing and SEC compliance and investor relations.

As a result, we expect general and administrative expenses to increase in absolute dollars in future periods.

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Depreciation and amortization expense consist of depreciation expense associated with our fixed assets and lease right of-use assets and amortization expense associated with our patents.

expect to invest in capital equipment to support our ongoing and planned commercialization efforts and continue to invest in our intellectual property.

As a result, we expect our depreciation and amortization expenses to increase in absolute

dollars in the future.

We expect to invest in

capital equipment to support our ongoing and planned commercialization efforts and continue to invest in our intellectual property.

As a result, we expect our depreciation and amortization expenses to increase in absolute dollars in the future.

Other income (expense)

Other income (expense) consists largely of interest earned on our cash equivalents and short-term investments, other income earned from grants, and offset by interest expense and other

Other income (expense) consists largely of interest earned on our cash equivalents and short-term investments, other income earned from grants, and offset by interest expense and other expenses.

Income tax expense

Income tax expense consists of the minimum state income taxes we are required to pay.

We have a full valuation allowance for deferred tax assets, including net operating loss carryforwards and

tax credits related primarily to R&D.

We have a full valuation allowance for deferred tax assets, including net operating loss carryforwards and tax credits related

primarily to R&D.

Results of Operations

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The increase was attributable to a $84,747 increase in U.S.

sales and a $36,910 increase in international

sales increased by 11.6% in 2021 as compared to 2020 and were $1,005,612 in 2021 as compared to $900,751 in 2020, representing a 9.8% increase in units sold coupled with a slight increase in the average selling price.

International

sales increased by 26.9% in 2021 compared to 2020 and were $174,077 in 2021 as compared to $137,167 in 2020, representing an 8.5% increase in units sold with an increase in the average selling price due to the sales mix to our international

distributors.

sales and a $58,218 decrease in international sales.

increased by 8.4% in 2022 as compared to 2021 and were $1,090,359 in 2022 as compared to $1,005,612 in 2021, representing a 45.1% increase in units sold but were offset by a reduction in the average selling price.

International sales decreased by

33.4% in 2022 compared to 2021 and were $115,859 in 2022 as compared to $174,077 in 2021, representing a 33.4% decrease in units sold with the average selling price remaining the same.

Cost of sales and gross margin percentage

Cost of sales increased by $71,554, or 19.3%, to $441,938 in 2022 from $370,384 in 2021.

The increase was primarily due to the increase in sales along with the sales mix between U.S.

and international sales in

2021 compared to 2020 as our international sales have a lower gross margin.

In addition, we are experiencing pricing increases from our suppliers along with our production personnel taking longer to build our FemVue product than originally

The increase in cost of sales was mainly due an increase in material costs, production personnel labor and overhead costs

applied to our cost of sales compared to the same period last year.

As a result, gross margin percentage was 63.4% in 2022 as compared to 68.6% in 2021.

We expect to see improvement in our gross margin in the future as our new production personnel become more efficient with the manufacturing process

and as we invest in equipment which will allow us to automate certain manufacturing processes.

We expect to see improvement in our gross margin in the future as we are investing in

equipment and tooling which will enable us to reduce labor in certain manufacturing processes and reduce material costs as well.

Research and development

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Total research and development expenses

R&D expenses decreased by $46,309 or 1.1%, to $4,084,304 in 2021 from $4,130,613 in 2020.

The net decrease of $46,309 was due to the decrease of $226,480 in compensation and related personnel costs primarily

in salaries, fringe benefits and share-based compensation expense, a decrease of $83,888 in clinical-related costs and offset by increased costs largely supporting our clinical trials of $160,791 in material and development costs, $73,341 in

professional and outside consultant cost, and $29,927 in other costs.

R&D expenses increased by $1,729,451 or 42.3%, to $5,813,755 in 2022 from $4,084,304 in 2021.

The net increase of $1,729,451 was primarily due to the increase of $551,445 in compensation and related personnel

costs primarily in salaries, fringe benefits and share-based compensation expense due to an increase in headcount, an increase of $957,505 in clinical-related costs, an increase of $184,581 in professional and outside consultant costs, and an

increase of $75,074 in other costs all to mainly support our clinical trials.

Sales and marketing

Sales and marketing expenses decreased by $101,484 or 32.7%, to $208,735 in 2021 from $310,219 in 2020.

The net decrease was primarily due to a decrease of $174,468 in compensation and related personnel costs due

to the reduction in staff in March 2020 and partially offset by $75,933 in sales in marketing costs primarily to promote our FemVue product.

Sales and marketing expenses increased by $350,117 or 167.7%, to $558,852 in 2022 from $208,735 in 2021.

The net increase was primarily due to an increase in compensation and related personnel costs due to the

increase in headcount in 2022 and an increase in sales in marketing costs primarily to promote our FemVue product.

General and administrative

General and administrative expenses increased by $1,168,702, or 27.4%, to $5,430,704 in 2022 from $4,262,002 in 2021.

The increase was largely due to an increase of $1,188,473 in professional costs largely

associated with our financing transactions and additional costs associated with being a public company, and $426,743 in facility and other allocated overhead costs mainly for additional directors & officers insurance.

The increase was largely due various additional costs associated with being a public company

including an increase in compensation and related personnel costs, an increase in facility and other overhead costs mainly for additional directors & officers insurance, and an increase in professional costs.

Depreciation and amortization

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Other income (expense)

Total other income (expense) increased by $783,008, or 3924.7%, to $802,959 in 2021 from $19,951 in 2020 largely from the $821,515 in other income recognized due to the SBA approval of our PPP loan forgiveness in

Total other income (expense) decreased by $590,565, or 73.5%, to $212,394 in 2022 from $802,959 in 2021, the decrease is largely from the $821,515 in other income recognized due to the SBA approval of our PPP loan

forgiveness in 2021, offset by an increase of $224,396, or 5955.3% in interest income, net.

Income tax expense

Income tax expense increased by $2,200 or 122.2%, to $4,000 in 2021 from $1,800 in 2020 due to increase in our minimum net worth tax we are required to pay.

Income tax expense increased by $2,300 or 57.5%, to $6,300 in 2022 from $4,000 in 2021 due to an increase in our minimum net worth taxes we are required to pay.

Liquidity and Capital Resources

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On June 14, 2021, we were notified by Georgia Primary Bank that the Paycheck Protection Program (PPP) loan in the amount of $812,500 and accrued interest of $9,015 was fully forgiven;

and, as a result, we recognized $821,515 in other income in

and, as a result, we

recognized $821,515 in other income in June 2021.

On June 22, 2021, we closed our initial public offering (the IPO) in which we issued and sold 2,650,000 shares of our authorized common stock.

The price per share in the IPO was $13.00.

Net proceeds received, after deducting underwriting discounts, commissions, and legal expenses, were $31,613,500.

Offering costs incurred by the Company were $2,016,143, which includes legal expenses incurred and paid by our

underwriters of $425,000.

Immediately prior to the closing of the IPO, all our shares of our convertible Series A preferred stock and our redeemable convertible Series B and Series C preferred stock automatically converted into 8,116,343 shares

of common stock.

Net proceeds received, after

deducting underwriting discounts, commissions, and legal expenses, were $31,613,500.

Offering costs incurred by the Company were $2,016,143, which includes legal expenses incurred and paid by our underwriters of $425,000.

Immediately prior to the

closing of the IPO, all our shares of our convertible Series A preferred stock and our redeemable convertible Series B and Series C preferred stock automatically converted into 8,116,343 shares of common stock.

On July 1, 2022, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co.

(“Piper Sandler” or the “Sales Agent”) and filed a related Prospectus establishing an “at-the-market”

facility, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $8,800,000 from time to time through the Sales Agent pursuant to the Prospectus.

As of December 31, 2022, 51,251 shares of

our common stock had been sold under the Equity Distribution Agreement.

On March 10, 2023, Silicon Valley Bank (SVB), at which we maintained cash and cash equivalents in multiple accounts, was closed by the California Department of Financial Protection and Innovation, which appointed

the Federal Deposit Insurance Corporation (FDIC) as receiver.

The failure of SVB exposed us to liquidity and credit risk prior to the completion of the FDIC resolution of SVB in a manner that fully protects all depositors.

We did not experience

any losses with respect to our funds that had been deposited with SVB.

Funding requirements

Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations at least 12 months from the date of filing these

financial statements.

Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations into the first

quarter of 2024.

Our estimate as to how long we expect our existing cash and cash equivalents to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources

sooner than we currently expect.

Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

Our cash and cash equivalents as of December 31, 2021 will not be sufficient to fund all of our product candidates through regulatory approval, and we anticipate needing to raise additional

capital to complete the development and commercialization of our product candidates.

However, we can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds will be available to

us, that such additional financing will be sufficient to meet our needs or be on terms acceptable to us.

Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate.

We do not expect liquidity to be sufficient for twelve months from the date of these financial statements.

As a result of our current limited financial liquidity, we have concluded that substantial doubt exists about our

ability to continue as a going concern.

Our cash and cash equivalents as of December 31, 2022 will not be sufficient to fund all of our product candidates through regulatory approval, and we anticipate needing to raise additional capital to complete the

development and commercialization of our product candidates.

However, we can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds will be available to us, that such additional

financing will be sufficient to meet our needs or be on terms acceptable to us.

This risk may increase if economic and market conditions deteriorate.

If we are unable to obtain additional financing when needed, we may

need to terminate, significantly modify, or delay the development of our product candidates, or we may need to obtain funds through collaborations or otherwise on terms that may require us to relinquish rights to our technologies or product

candidates that we might otherwise seek to develop or commercialize independently.

If we are unable to raise adequate additional capital as and when required in the future, we could be forced to cease development activities and terminate our

operations, and you could experience a complete loss of your investment.

Based on our planned operations, we expect that our current cash and cash equivalents will be sufficient to fund our operations for at least 12 months after the date our

most recent financial statements were issued without raising additional capital through equity and/or debt financing.

We expect to continue to make substantial investments in these trials and in additional clinical trials that are designed to provide clinical evidence of the safety and effectiveness of our

We also expect to continue to make investments in research and development, regulatory affairs and clinical trials to develop future products.

If we are unable to obtain additional financing when needed, we may need to terminate,

significantly modify, or delay the development of our product candidates, or we may need to obtain funds through collaborations or otherwise on terms that may require us to relinquish rights to our technologies or product candidates that we might

otherwise seek to develop or commercialize independently.

If we are unable to raise adequate additional capital as and when required in the future, we could be forced to cease development activities and terminate our operations, and you could

experience a complete loss of your investment.

We expect to continue to make substantial investments in our ongoing trials and in additional clinical trials that are designed to provide clinical evidence of the safety and effectiveness of our products.

expect to continue to make investments in research and development, manufacturing, regulatory affairs and clinical trials to develop future products.

If our product candidates are approved, we will need to make investments in our sales and

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Net cash used in operating activities

Net cash (used in) provided by investing activities

Net cash provided by financing activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net change in cash and cash equivalents

Operating activities

In 2021, cash used in operating activities was $7,930,785, attributable to a net loss of $7,537,845 and a net change in our net operating assets and liabilities of $732,716 and offset by net

non-cash charges of $339,776.

Non-cash charges primarily consisted of $193,366 in stock-based compensation and $964,287 in depreciation and amortization offset by the PPP loan forgiveness of $821,515.

The change in our net operating assets and

liabilities was primarily due to a decrease in accounts payable, accrued expenses, and lease liabilities totaling $1,146,822, offset by an increase in other assets of $475,993.

In 2020, cash used in operating activities was $4,933,015, attributable to a net loss of $6,914,992, and offset by a net change in our net operating assets and liabilities of $557,962 and

non-cash charges of $1,424,015.

In 2022, cash used in operating activities was $10,731,973, attributable to a net loss of $11,394,170 and a net change in our net operating assets and liabilities of $458,267 and offset by net non-cash charges of

Non-cash charges primarily consisted of $224,939 in stock-based compensation and $889,140 in depreciation and amortization.

The change in our net operating assets and liabilities was primarily due to an increase

in accounts payable, accrued expenses, and other liabilities totaling $931,170, offset by a decrease in lease liabilities of $445,733.

The change in our net operating assets and liabilities was primarily due to an increase of $232,553 in

inventory and a decrease of $383,616 in lease liabilities, offset by a change in other assets of $295,862.

In 2021, cash used in operating activities was $7,930,785, attributable to a net loss of $7,537,845 and a net change in our net operating assets and liabilities of $732,716 and offset by net non-cash charges of

Non-cash charges primarily consisted of $193,366 in stock-based compensation and $964,287 in depreciation and amortization offset by the PPP loan forgiveness of $821,515.

The change in our net operating assets and liabilities was

primarily due to a decrease in accounts payable, accrued expenses, and lease liabilities totaling $1,146,822, offset by an increase in other assets of $475,993.

Investing activities

In 2022, cash used in investing activities for the purchase of equipment was $407,475.

In 2020, cash provided by investing activities was $968,319, attributable to maturities of short-term investments of $1,000,000 offset by the purchase of property and equipment of $8,352 and

payments of patents and other intangible assets of $23,329.

In 2021, cash used in investing activities for the purchase of equipment was $306,868.

Financing activities

In 2022, cash used in financing activities was $681,645, attributable to payments of deferred offering costs of $232,845, repayments on notes payable of $505,205, payments under lease obligations of $23,058, and

offset by proceeds from issuance of common stock of $79,463.

In 2021, cash provided by financing activities was $29,698,456, attributable to net proceeds from our IPO of $30,034,857, exercise of stock options totaling $126,546, offset by repayments on notes payable of

$442,086 and payments under lease obligations of $20,861.

In 2020, cash provided by financing activities was $871,648, consisting of the proceeds of the PPP note proceeds of $812,500, proceeds from the exercise of stock options of $153,200, offset by

deferred offering cost payments of $75,000 and payments under lease obligations of $19,052.

Off-Balance Sheet Arrangements

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Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S.

accepted accounting principles, or GAAP.

generally accepted accounting

principles, or GAAP.

The preparation of these financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures.

Our estimates are

based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not

readily apparent from other sources.

Our estimates are based on our historical

experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other

Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

While our significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following

discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and require our most difficult, subjective and complex judgments.

While our significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following discussion addresses our

most critical accounting policies, which are those that are most important to our financial condition and results of operations and require our most difficult, subjective and complex judgments.

Revenue recognition

Our policy is to recognize revenue when a customer obtains control of the promised goods under Accounting Standards Codification 606— Revenue from Contracts

with Customers (Topic 606) , which we adopted effective January 1, 2018.

The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods, and we have elected to exclude

amounts collected from customers for all sales (and other similar) taxes from the transaction price.

We do not have multiple performance obligations in our customer orders, so revenue is recognized upon shipment of our goods based upon

contractually stated pricing at standard payment terms ranging from 30 to 60 days.

Our policy is to recognize revenue when a customer obtains control of the promised goods under Accounting Standards Codification 606— Revenue from Contracts with Customers (Topic

606) , which we adopted effective January 1, 2018.

The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods, and we have elected to exclude amounts collected from

customers for all sales (and other similar) taxes from the transaction price.

We do not have multiple performance obligations in our customer orders, so revenue is recognized upon shipment of our goods based upon contractually stated pricing at

standard payment terms ranging from 30 to 60 days.

All revenue is recognized point in time and no revenue is recognized over time.

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customers are shipped via common carrier, and the customer pays for shipping and handling and assumes control Free on Board (FOB) shipping point.

Products shipped to our international distributors are in accordance with their respective agreements;

Products shipped to

our international distributors are in accordance with their respective agreements;

however, the shipping terms are generally EX-Works, reflecting that control is assumed by the distributor at the shipping point.

only accepted with prior authorization from the Company.

Returns are only accepted with

prior authorization from the Company.

Items to be returned must be in original unopened cartons and are subject to a 30% restocking fee.

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We accrue expenses for estimated costs of R&D activities conducted by our third-party service providers, which include the conduct of preclinical studies and clinical trials.

We record the

estimated costs of R&D activities based upon the estimated amount of services provided but not yet invoiced.

These costs, at times, may be a significant component of the research and development expenses and the Company makes estimates in

determining the accrued expense each period.

We record the estimated costs of

R&D activities based upon the estimated amount of services provided but not yet invoiced.

These costs, at times, may be a significant component of the research and development expenses and the Company makes estimates in determining the

accrued expense each period.

As actual costs become known, the Company adjusts its accrual.

These accrued R&D costs are included in accrued expenses on the balance sheet and within R&D expense on the statement of

comprehensive loss.

These accrued R&D costs are included in accrued expenses on the balance sheet and within R&D expense on the statement of comprehensive loss.

Recent Accounting Pronouncements

See Notes 2(z) and 2(aa) to our financial statements in Part II, Item 8 for information related to recently issued accounting pronouncements.

Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk

Our cash and cash equivalents as of December 31, 2021 consisted of $24,783,029 in bank deposits and money market funds that presently earn very little interest.

We believe such

interest-earning instruments carry a low degree of interest rate risk.

The goals of our investment policy are liquidity and capital preservation;

we do not enter into investments for trading or speculative purposes and have not used any

derivative financial instruments to manage our interest rate exposure.

We believe that we do not have any material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our

cash and cash equivalents.

Foreign currency exchange risk

As we expand internationally, our results of operations and cash flows may become increasingly subject to fluctuations due to changes in foreign currency exchange rates.

Our functional

currency is the U.S.

dollar, and our revenue is denominated primarily in U.S.

For the years ended December 31, 2021 and 2020, all our sales were in U.S.

Our expenses are generally denominated in the currencies in which our

operations are located, which is primarily in the United States.

A 10% change in exchange rates would not result in a material change in fair value of our cash and accounts receivable in 2021.

As our operations in countries outside of the United

States grow, our results of operations and cash flows may be subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future.

To date, we have not entered into any material foreign currency

hedging contracts, although we may do so in the future.

Emerging Growth Company Status

We are an emerging growth company, as defined in the JOBS Act.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the

enactment of the JOBS Act until such time as those standards apply to private companies.

We have elected not to take advantage of such extended transition period, which means that we will adopt a new standard when a standard is issued or revised.

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