What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-08-12 · 42 added, 45 removed, 164 unchanged (35% of the section changed)

56 unchanged sentences

FDA review of a 510(k) submission requires careful review of indication for intended use, effectiveness and safety, of both the predicate device and the submitted device.

We continue to work with the FDA on the submission and are optimistic that we will secure 510(k) clearance in 2021.

We continue to work with the FDA on the submission.

However, TAEUS represents an advancement in medical ultrasound technology and this process has been taking longer than expected and may continue to do so.

There can be no assurance regarding the timing for the FDA to complete its review of this 510(k) application or with regard to the ultimate outcome of that review.

There can be no assurance regarding the timing for the FDA to complete its regulatory review or with regard to the ultimate outcome of that review.

In March 2021, we announced an agreement with a clinical-stage biopharmaceutical company to incorporate TAEUS as an add-on technology to support the company’s patient screening and biomarker measurement during an upcoming clinical trial.

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Financial Operations Overview

No revenue has been generated by our TAEUS technology, which we have not commercially sold as of June 30, 2021.

No revenue has been generated by our TAEUS technology, which we have not commercially sold as of September 30, 2021.

Cost of Goods Sold

No cost of goods sold has been generated by our TAEUS technology, which we have not commercially sold as of June 30, 2021.

No cost of goods sold has been generated by our TAEUS technology, which we have not commercially sold as of September 30, 2021.

Research and Development Expenses

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In connection with the commercialization of our TAEUS applications, we are building a small sales and marketing team to train and support global ultrasound distributors, and expect to execute traditional marketing activities such as promotional materials, electronic media and participation in industry events and conferences.

In September 2020, we hired our first full-time sales representative in the United Kingdom, and during the second quarter we added two additional representatives in France.

In September 2020, we hired our first full-time sales representative in the United Kingdom, and during 2021 we added two additional representatives in France and one in Germany.

We expect to continue actively adding to our sales representation and support headcount for operations in the EU in the coming quarters, as well begin staffing our sales efforts in the United States once we have obtained FDA approval for the sale of the TAEUS product in that region.

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On January 1, 2021, the pool of shares issuable under the Omnibus Plan automatically increased by 1,599,570 shares from 5,861,658 shares to 7,461,228.

As of June 30, 2021, there were 2,392,018 shares of common stock remaining available for issuance under the Omnibus Plan.

As of September 30, 2021, there were 2,365,018 shares of common stock remaining available for issuance under the Omnibus Plan.

We record share-based compensation in accordance with the provisions of the Share-based Compensation Topic of the FASB Codification.

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Results of Operations

Three months ended June 30, 2021 and 2020

We had no revenue during the three months ended June 30, 2021 and 2020.

Three months ended September 30, 2021 and 2020

We had no revenue during the three months ended September 30, 2021 and 2020.

Cost of Goods Sold

We had no cost of goods sold during the three months ended June 30, 2021 and 2020.

We had no cost of goods sold during the three months ended September 30, 2021 and 2020.

Research and Development

Research and development expenses were $1,744,925 for the three months ended June 30, 2021, as compared to $1,487,049 for the three months ended December 31, 2020, an increase of $257,876, or 17%.

Research and development expenses were $1,173,319 for the three months ended September 30, 2021, as compared to $1,769,339 for the three months ended December 31, 2020, a decrease of $596,020, or 34%.

The costs include primarily wages, fees and equipment for the development of our TAEUS product line.

Research and development expenses increased from the same period for the prior year due to on increased spending for regulatory activities and product development.

Research and development expenses decreased from the same period for the prior year as we completed development of our initial TAEUS product and began focusing our spending on commercialization of the product that has been developed.

Sales and Marketing

Sales and marketing expenses were $256,763 for the three months ended June 30, 2021, as compared to $134,763 for the three months ended June 30, 2020, an increase of $122,000, or 91%.

Sales and marketing expenses were $275,565 for the three months ended September 30, 2021, as compared to $139,751 for the three months ended September 30, 2020, an increase of $135,814, or 97%.

The increase was primarily due to additional headcount and pre-selling activities for our TAEUS product line.

Currently, our marketing efforts are through our website and attendance of key industry meetings.

During the period ending June 30, 2021 we continued hiring and training additional staff to support our sales efforts.

During the period ending September 30, 2021 we continued hiring and training additional staff to support our sales efforts.

General and Administrative

Our general and administrative expenses for the three months ended June 30, 2021 were $1,198,502, compared to $1,269,467 for the three months ended June 30, 2020, a decrease of $70,965, or 6%.

Our wage and related expenses for the three months ended June 30, 2021 were $488,102, compared to $556,424 for the three months ended June 30, 2020.

Wage and related expenses in the three months ended June 30, 2021 included $52,230 for bonuses and $112,867 of stock compensation expense related to the issuance and vesting of options, compared to $53,751 for bonuses, $225,833 of stock compensation expense related to the issuance and vesting of options, for the three months ended June 30, 2020.

Our professional fees, which include legal, audit, and investor relations, for the three months ended June 30, 2021 were $500,046, compared to $592,529 for the three months ended June 30, 2020.

Amortization of Debt Discount

During the three months ended June 30, 2020, we incurred non-cash expenses of $3,858 related to the amortization of debt discount incurred as result of our issuance of our convertible notes and warrants issued in July 2019.

During the three months ended June 30, 2021, we had no such expense.

As a result of the foregoing, for the three months ended June 30, 2021, we recorded a net loss of $3,199,104, compared to a net loss of $2,893,872 for the three months ended June 30, 2020.

Six months ended June 30, 2021 and 2020

We had no revenue during the six months ended June 30, 2021 and 2020.

Our general and administrative expenses for the three months ended September 30, 2021 were $1,201,851, compared to $1,346,360 for the three months ended September 30, 2020, a decrease of $144,509, or 11%.

Our wage and related expenses for the three months ended September 30, 2021 were $517,829, compared to $443,913 for the three months ended September 30, 2020.

Wage and related expenses in the three months ended September 30, 2021 included $44,652 for bonuses and $136,008 of stock compensation expense related to the issuance and vesting of options, compared to $53,751 for bonuses, $151,947 of stock compensation expense related to the issuance and vesting of options, for the three months ended September 30, 2020.

Our professional fees, which include legal, audit, and investor relations, for the three months ended September 30, 2021 were $448,728, compared to $718,397 for the three months ended September 30, 2020.

As a result of the foregoing, for the three months ended September 30, 2021, we recorded a net loss of $2,658,242, compared to a net loss of $3,258,071 for the three months ended September 30, 2020.

Nine months ended September 30, 2021 and 2020

We had no revenue during the nine months ended September 30, 2021 and 2020.

Cost of Goods Sold

We had no cost of goods sold during the six months ended June 30, 2021 and 2020.

We had no cost of goods sold during the nine months ended September 30, 2021 and 2020.

Research and Development

Research and development expenses were $2,886,411 for the six months ended June 30, 2021, as compared to $3,005,195 for the six months ended December 31, 2020, a decrease of $118,784, or 4%.

Research and development expenses were $4,059,730 for the nine months ended September 30, 2021, as compared to $4,774,534 for the nine months ended December 31, 2020, a decrease of $714,804, or 15%.

The costs include primarily wages, fees and equipment for the development of our TAEUS product line.

1 unchanged sentence

Sales and Marketing

Sales and marketing expenses were $417,698 for the six months ended June 30, 2021, as compared to $249,718 for the six months ended June 30, 2020, an increase of $167,980, or 67%.

Sales and marketing expenses were $693,263 for the nine months ended September 30, 2021, as compared to $389,469 for the nine months ended September 30, 2020, an increase of $303,794, or 78%.

The increase was primarily due to additional headcount and pre-selling activities for our TAEUS product line.

Currently, our marketing efforts are through our website and attendance of key industry meetings.

During the period ending June 30, 2021 we began hiring and training additional staff to support our sales efforts.

During the period ending September 30, 2021 we began hiring and training additional staff to support our sales efforts.

General and Administrative

Our general and administrative expenses for the six months ended June 30, 2021 were $2,471,920, compared to $2,737,212 for the six months ended June 30, 2020, a decrease of $265,292, or 10%.

Our wage and related expenses for the six months ended June 30, 2021 were $1,000,889, compared to $1,203,867 for the six months ended June 30, 2020.

Wage and related expenses in the six months ended June 30, 2021 included $104,460 for bonuses and $230,791 of stock compensation expense related to the issuance and vesting of options, compared to $119,944 for bonuses, $475,418 of stock compensation expense related to the issuance and vesting of options, for the six months ended June 30, 2020.

Our professional fees, which include legal, audit, and investor relations, for the six months ended June 30, 2021 were $1,078,147, compared to $1,261,804 for the six months ended June 30, 2020.

Our general and administrative expenses for the nine months ended September 30, 2021 were $3,673,771, compared to $4,083,572 for the nine months ended September 30, 2020, a decrease of $409,801, or 10%.

Our wage and related expenses for the nine months ended September 30, 2021 were $1,518,718, compared to $1,647,780 for the nine months ended September 30, 2020.

Wage and related expenses in the nine months ended September 30, 2021 included $149,112 for bonuses and $366,799 of stock compensation expense related to the issuance and vesting of options, compared to $173,695 for bonuses, $627,365 of stock compensation expense related to the issuance and vesting of options, for the nine months ended September 30, 2020.

Our professional fees, which include legal, audit, and investor relations, for the nine months ended September 30, 2021 were $1,526,874, compared to $1,980,201 for the nine months ended September 30, 2020.

Gain on Extinguishment of Debt

During the six months ending June 30, 2021, we received notice that the SBA Loan had been forgiven in full in accordance with the terms and provisions of the PPP, and recorded a gain on extinguishment of debt of $308,600.

During the nine months ending September 30, 2021, we received notice that the SBA Loan had been forgiven in full in accordance with the terms and provisions of the PPP, and recorded a gain on extinguishment of debt of $308,600.

Amortization of Debt Discount

During the six months ended June 30, 2020, we incurred non-cash expenses of $232,426 related to the amortization of debt discount incurred as result of our issuance of our convertible notes and warrants issued in July 2019.

During the six months ended June 30, 2021, we had no such expense.

As a result of the foregoing, for the six months ended June 30, 2021, we recorded a net loss of $5,468,380, compared to a net loss of $6,216,669 for the six months ended June 30, 2020.

During the nine months ended September 30, 2020, we incurred non-cash expenses of $232,426 related to the amortization of debt discount incurred as result of our issuance of our convertible notes and warrants issued in July 2019.

During the nine months ended September 30, 2021, we had no such expense.

As a result of the foregoing, for the nine months ended September 30, 2021, we recorded a net loss of $8,126,622, compared to a net loss of $9,474,740 for the nine months ended September 30, 2020.

Liquidity and Capital Resources

To date we have funded our operations primarily through private and public sales of our securities.

As of June 30, 2021, we had $14,043,341 in cash.

As of the date of this Report, we believe that our cash on hand at June 30, 2021 will be sufficient to fund our current operations through the second quarter of 2022.

As of September 30, 2021, we had $11,793,189 in cash.

As of the date of this Report, we believe that our cash on hand at September 30, 2021 will be sufficient to fund our current operations into the second half of 2022.

We will need additional capital by such time to allow us to continue to execute our commercialization plans.

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The consolidated financial statements included in this Form 10-Q have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

As reflected in the accompanying consolidated financial statements, during the six months ended June 30, 2021, we incurred net losses of $5,468,380 and used cash in operations of $5,722,895.

As reflected in the accompanying consolidated financial statements, during the nine months ended September 30, 2021, we incurred net losses of $8,126,622 and used cash in operations of $8,469,653.

While we maintain cash balances in excess of our anticipated needs for cash for the next twelve months, it is likely that we will need to raise additional capital prior to any ability to fund operations from revenue generated from the sale of our products.

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Operating Activities

During the six months ended June 30, 2021, we used $5,722,895 of cash in operating activities primarily as a result of our net loss of $5,468,380, offset by share-based compensation of $705,036, gain on extinguishment of debt of $308,600, depreciation expense of $65,154, amortization of right of use assets of $44,086, and net changes in operating assets and liabilities of $(760,191).

During the six months ended June 30, 2020, we used $6,540,032 of cash in operating activities primarily as a result of our net loss of $6,216,669, offset by share-based compensation of $1,057,120, amortization of debt discount of $232,426, depreciation expense of $44,014, amortization of Right of Use assets of $32,199, and net changes in operating assets and liabilities of $(1,689,122).

During the nine months ended September 30, 2021, we used $8,469,653 of cash in operating activities primarily as a result of our net loss of $8,126,622, offset by share-based compensation of $1,032,840, gain on extinguishment of debt of $308,600, depreciation expense of $94,977, amortization of right of use assets of $75,768, and net changes in operating assets and liabilities of $(1,238,016).

During the nine months ended September 30, 2020, we used $8,673,489 of cash in operating activities primarily as a result of our net loss of $9,474,740, offset by share-based compensation of $1,559,232, amortization of debt discount of $232,426, depreciation expense of $45,114, amortization of right of use assets of $48,859, and net changes in operating assets and liabilities of $(1,114,380).

Investing Activities

During the six months ended June 30, 2021, we used $45,000 in investing activities related to purchases of equipment.

During the six months ended June 30, 2020, we used $22,350 in investing activities related to purchases of equipment.

During the nine months ended September 30, 2021, we used $45,000 in investing activities related to purchases of equipment.

During the nine months ended September 30, 2020, we used $10,483 in investing activities related to purchases of equipment.

Financing Activities

During the six months ended June 30, 2021, our financing activities provided $12,583,920, including $9,798,293 in proceeds from issuance of common stock, and $2,785,627 in proceeds from warrant exercises.

During the six months ended June 30, 2020, financing activities provided $1,136,736, including $50,438 in proceeds from warrant exercises, $337,084 in proceeds from loans, $791,474 in proceeds from issuance of common stock, and $42,260 paid on account of repayment of notes.

During the nine months ended September 30, 2021, our financing activities provided $13,080,526, including $10,294,899 in proceeds from issuance of common stock, and $2,785,627 in proceeds from warrant exercises.

During the nine months ended September 30, 2020, financing activities provided $6,303,058, including $4,644,084 in proceeds from warrant exercises, $337,084 in proceeds from loans, and $1,321,890 in proceeds from issuance of common stock.

Funding Requirements

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Off-Balance Sheet Transactions

At June 30, 2021, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

At September 30, 2021, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

Quantitative and Qualitative Disclosure About Market Risk

1 unchanged sentence

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 2. Management’s Discussion and Analysis