What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 81 added, 60 removed, 369 unchanged (28% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

Current Assets

16 unchanged sentences

10,000 shares authorized;

141 .397 shares issued and outstanding

141,397 and 141,397 shares issued and outstanding, respectively

Series B Convertible Preferred Stock, $ 0.0001 par value;

16 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating Expenses

33 unchanged sentences

Condensed Consolidated Statements Changes in Stockholders’ Equity

Three Months Ended June 30, 2021

Three Months Ended

September 30, 2021

Series A Convertible

3 unchanged sentences

Stockholders'

Balance as of March 31, 2021

Balance as of June 30, 2021

$ ( 62,927,940 )

3 unchanged sentences

Stock payable towards preference dividend

Stock payable for services

Stock payable for RSU

( 2,658,242 )

Balance as of June 30, 2021

Balance as of September 30, 2021

$ ( 65,586,182 )

Three Months Ended June 30, 2022

Three Months Ended

September 30, 2022

Series A Convertible

3 unchanged sentences

Stockholders'

Balance as of March 31, 2022

Balance as of June 30, 2022

( 75,140,079 )

Common stock issued for cash, net of funding costs

Fair value of vested stock options

2 unchanged sentences

( 3,440,227 )

Balance as of June 30, 2022

Balance as of September 30, 2022

$ ( 78,580,306 )

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Series A Convertible

16 unchanged sentences

( 8,126,622 )

Balance as of June 30, 2021

Balance as of September 30, 2021

$ ( 65,586,182 )

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Series A Convertible

10 unchanged sentences

( 9,889,496 )

Balance as of June 30, 2022

Balance as of September 30, 2022

$ ( 78,580,306 )

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

Cash Flows from Operating Activities

11 unchanged sentences

( 1,349,499 )

Decrease in accounts payable and accrued liabilities

Increase in accounts payable and accrued liabilities

Decrease in lease liability

9 unchanged sentences

Net cash provided by financing activities

Net increase in cash

Net increase (decrease) in cash

( 1,445,184 )

Cash, beginning of period

12 unchanged sentences

Notes to Condensed Consolidated Financial Statements

For the Three and Six Months ended June 30, 2022 and 2021

For the Three and Nine months ended September 30, 2022 and 2021

Note 1 - Nature of the Business

11 unchanged sentences

the magnitude and duration of COVID-19, the extent to which it continues impact worldwide macroeconomic conditions, the emergence of variants of the virus and effectiveness of vaccines, access to capital markets, and governmental and business reactions to the pandemic.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of June 30, 2022 and through the date of the filing of this Quarterly Report on Form 10-Q.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 30, 2022 and through the date of the filing of this Quarterly Report on Form 10-Q.

The accounting matters assessed included, but were not limited to, estimates related to the accounting for potential liabilities and accrued expenses, the assumptions utilized in valuing stock-based compensation issued for services, the realization of deferred tax assets, and assessments of impairment related to long-lived assets.

9 unchanged sentences

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

Operating results for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The balance sheet at December 31, 2021 has been derived from the audited financial statements at that date.

3 unchanged sentences

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of one year or less, when purchased, to be cash.

As of June 30, 2022 and December 31, 2021, the Company had no cash equivalents.

As of September 30, 2022 and December 31, 2021, the Company had no cash equivalents.

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.

11 unchanged sentences

A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements.

At June 30, 2022 and December 31, 2021 the Company recorded a right of use asset of $ 576,255 and $ 643,413 , respectively.

At June 30, 2022 and December 31, 2021 the Company recorded a lease liability of $ 586,193 and $ 650,477 , respectively.

At September 30, 2022 and December 31, 2021 the Company recorded a right of use asset of $ 541,456 and $ 643,413 , respectively.

At September 30, 2022 and December 31, 2021 the Company recorded a lease liability of $ 552,830 and $ 650,477 , respectively.

Revenue Recognition

6 unchanged sentences

Research and development costs are charged to the statement of operations as incurred.

During the three months ended June 30, 2022 and 2021, the Company incurred $ 1,847,560 and $ 1,744,925 of expenses related to research and development costs, respectively.

During the six months ended June 30, 2022 and 2021, the Company incurred $ 3,060,582 and $ 2,886,411 of expenses related to research and development costs, respectively.

During the three months ended September 30, 2022 and 2021, the Company incurred $ 1,830,297 and $ 1,173,319 of expenses related to research and development costs, respectively.

During the nine months ended September 30, 2022 and 2021, the Company incurred $ 4,890,879 and $ 4,059,730 of expenses related to research and development costs, respectively.

Net Earnings (Loss) Per Common Share

2 unchanged sentences

Diluted loss per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive.

There were 8,508,852 and 7,848,899 potentially dilutive shares, which include outstanding common stock options, and warrants, as of June 30, 2022 and December 31, 2021, respectively.

There were 8,375,004 and 7,848,899 potentially dilutive shares, which include outstanding common stock options, and warrants, as of September 30, 2022 and December 31, 2021, respectively.

The potential shares, which are excluded from the determination of basic and diluted net loss per share as their effect is anti-dilutive, are as follows:

September 30,

Options to purchase common stock

19 unchanged sentences

Each January 1 the pool of shares available for issuance under the Omnibus Plan automatically increases by an amount equal to the lesser of (i) the number of shares necessary such that the aggregate number of shares available under the Omnibus Plan equals 25% of the number of fully-diluted outstanding shares on the increase date (assuming the conversion of all outstanding shares of preferred stock and other outstanding convertible securities and exercise of all outstanding options and warrants to purchase shares) and (ii) if the board of directors takes action to set a lower amount, the amount determined by the board.

On January 1, 2022, the pool of shares authorized for issuance under the Omnibus Plan automatically increased by 1,622,848 shares from 7,461,228 shares to 9,084,076 .

On January 1, 2022, the pool of shares authorized for issuance under the Omnibus Plan automatically increased by 1,622,848 shares from 7,461,228 shares to 9,084,076 shares.

The Company records share-based compensation in accordance with the provisions of the Share-based Compensation Topic of the FASB Codification.

7 unchanged sentences

GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

The Company has limited commercial experience and had a cumulative net loss from inception to June 30, 2022 of $ 75,140,079 .

The Company had working capital of $ 12,985,242 as of June 30, 2022.

The Company has limited commercial experience and had a cumulative net loss from inception to September 30, 2022 of $ 78,580,306 .

The Company had working capital of $ 9,859,534 as of September 30, 2022.

The Company has not established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern and will require additional financing to fund its future planned operations, including research and development and commercialization of its products.

The accompanying financial statements for the period ended June 30, 2022 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable.

The accompanying financial statements for the period ended September 30, 2022 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable.

Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing.

6 unchanged sentences

Note 3 - Inventory

As of June 30, 2022 and December 31, 2021, inventory consisted of raw materials, subassemblies to be used in the assembly of TAEUS systems, and finished goods.

As of June 30, 2022, the Company had no orders pending for the sale of a TAEUS system.

As of June 30, 2022 and December 31, 2021, the Company had inventory valued at $ 2,374,728 and $ 1,284,578 , respectively.

As of September 30, 2022 and December 31, 2021, inventory consisted of raw materials, subassemblies to be used in the assembly of TAEUS systems, and finished goods.

As of September 30, 2022, the Company had no orders pending for the sale of a TAEUS system.

As of September 30, 2022 and December 31, 2021, the Company had inventory valued at $ 2,634,077 and $ 1,284,578 , respectively.

Note 4 - Fixed Assets

As of June 30, 2022 and December 31, 2021, fixed assets consisted of the following:

As of September 30, 2022 and December 31, 2021, fixed assets consisted of the following:

September 30,

Property, leasehold and capitalized software

2 unchanged sentences

Fixed assets, net

Depreciation expense for the three months ended June 30, 2022 and 2021 was $ 21,701 and $ 33,729 , respectively.

Depreciation expense for the six months ended June 30, 2022 and 2021 was $ 40,739 and $ 65,154 , respectively.

Depreciation expense for the three months ended September 30, 2022 and 2021 was $ 23,793 and $ 29,823 , respectively.

Depreciation expense for the nine months ended September 30, 2022 and 2021 was $ 64,532 and $ 94,977 , respectively.

Note 5 - Accounts Payable and Accrued Liabilities

As of June 30, 2022 and December 31, 2021, current liabilities consisted of the following:

As of September 30, 2022 and December 31, 2021, current liabilities consisted of the following:

September 30,

Accounts payable

15 unchanged sentences

Note 7 - Capital Stock

At June 30, 2022, the authorized capital of the Company consisted of 90,000,000 shares of capital stock, comprised of 80,000,000 shares of common stock with a par value of $ 0.0001 per share, and 10,000,000 shares of preferred stock with a par value of $ 0.0001 per share.

At September 30, 2022, the authorized capital of the Company consisted of 90,000,000 shares of capital stock, comprised of 80,000,000 shares of common stock with a par value of $ 0.0001 per share, and 10,000,000 shares of preferred stock with a par value of $ 0.0001 per share.

The Company has designated 10,000 shares of its preferred stock as Series A Convertible Preferred Stock (“Series A Preferred Stock”) and 1,000 shares of its preferred stock as Series B Convertible Preferred Stock (“Series B Preferred Stock”), and the remainder of 9,989,000 shares remain authorized but undesignated.

As of June 30, 2022, there were 63,174,455 shares of common stock, 141 .397 shares of Series A Preferred Stock, and no shares of Series B Preferred Stock issued and outstanding, and a stock payable balance of $ 5,814 .

During the six months ended June 30, 2022, the Company issued a total of 20,619,941 shares of its common stock in return for aggregate net proceeds of $8,399,512 under the June 2021 ATM Agreement (as described below).

During the six months ended June 30, 2021, the Company issued a total of 7,807,648 shares of its common stock, as follows:

As of September 30, 2022, there were 63,174,455 shares of common stock, 141,397 shares of Series A Preferred Stock, and no shares of Series B Preferred Stock issued and outstanding, and a stock payable balance of $ 8,490 .

During the nine months ended September 30, 2022, the Company issued a total of 20,619,941 shares of its common stock in return for aggregate net proceeds of $ 8,399,512 under the June 2021 ATM Agreement (as described below).

During the nine months ended September 30, 2021, the Company issued a total of 8,116,023 shares of its common stock, as follows:

67,889 shares upon the conversion of 55,397 shares of its Series A Preferred Stock;

4 unchanged sentences

32,527 shares for services valued at $ 74,000 ;

22,815 shares upon vesting of restricted stock units (“RSUs”) valued at $ 36,460 .

At-the-Market Equity Offering Program

On June 21, 2021, the Company entered into the At-The-Market Issuance Sales Agreement with Ascendiant (the “June 2021 ATM Agreement”) to sell shares of common stock for aggregate gross proceeds of up to $ 20 .0 million, from time to time, through an “at-the-market” equity offering program under which Ascendiant acts as sales agent.

As of June 30, 2022, under the June 2021 ATM Agreement the Company has issued an aggregate of 21,292,682 shares of common stock in return for net proceeds of $ 9,216,618 , resulting in approximately $ 286,289 of compensation paid to Ascendiant.

During the six months ended June 30, 2022, under the June 2021 ATM Agreement the Company has issued an aggregate of 20,619,941 shares of common stock in return for net proceeds of $ 8,398,936 , resulting in $ 260,776 of compensation paid to Ascendiant.

As of September 30, 2022, under the June 2021 ATM Agreement the Company has issued an aggregate of 21,292,682 shares of common stock in return for net proceeds of $ 9,216,618 , resulting in approximately $ 286,289 of compensation paid to Ascendiant.

During the nine months ended September 30, 2022, under the June 2021 ATM Agreement the Company has issued an aggregate of 20,619,941 shares of common stock in return for net proceeds of $ 8,398,936 , resulting in $ 260,776 of compensation paid to Ascendiant.

Note 8 - Common Stock Options

Common Stock Options

Stock options are awarded to the Company’s employees, consultants and non-employee members of the board of directors under the 2016 Omnibus Incentive Plan (the “Omnibus Plan”) and are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant.

The aggregate fair value of these stock options granted by the Company during the six months ended June 30, 2022 was determined to be $ 907,482 using the Black-Scholes-Merton option-pricing model based on the following assumptions:

Stock options are awarded to the Company’s employees, consultants and non-employee members of the board of directors under the Omnibus Plan and are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant.

The aggregate fair value of these stock options granted by the Company during the nine months ended September 30, 2022 was determined to be $ 909,072 using the Black-Scholes-Merton option-pricing model based on the following assumptions:

(i) volatility rate of 74 % to 99 %, (ii) discount rate of 0 %, (iii) zero expected dividend yield, (iv) risk free rate of 1.37 % to 3.37 %, and (v) expected life of 8 - 10 years.

A summary of option activity under the Company’s Omnibus Plan as of June 30, 2022, and changes during the year then ended, is presented below:

A summary of option activity under the Company’s Omnibus Plan as of September 30, 2022, and changes during the year then ended, is presented below:

Weighted Average

2 unchanged sentences

Cancelled or expired

Balance outstanding at June 30, 2022

Exercisable at June 30, 2022

Balance outstanding at September 30, 2022

Exercisable at September 30, 2022

Note 9 - Common Stock Warrants

Warrant Conversions and Consent Solicitation

The following table summarizes all stock warrant activity of the Company for the six months ended June 30, 2022:

The following table summarizes all stock warrant activity of the Company for the nine months ended September 30, 2022:

Number of Warrants

5 unchanged sentences

( 2,230,411 )

Balance outstanding at June 30, 2022

Exercisable at June 30, 2022

Balance outstanding at September 30, 2022

Exercisable at September 30, 2022

Note 10 - Commitments and Contingencies

6 unchanged sentences

therefore, the Company uses its estimated incremental borrowing rate at the time of lease commencement to discount the present value of lease payments.

The Company’s discount rate for operating leases at June 30, 2022 was 10 %.

The Company’s discount rate for operating leases at September 30, 2022 was 10 %.

Lease expense is recognized on a straight-line basis over the lease term to the extent that collection is considered probable.

1 unchanged sentence

The weighted-average remaining lease term is 3.25 years.

As of June 30, 2022, the maturities of operating lease liabilities are as follows:

As of September 30, 2022, the maturities of operating lease liabilities are as follows:

2025 and beyond

3 unchanged sentences

Long-term lease obligations

For the three months ended June 30, 2022 and 2021, the Company incurred rent expenses of $ 53,840 and $ 34,348 , respectively.

For the six months ended June 30, 2022 and 2021, the Company incurred rent expenses of $ 106,604 and $ 66,539 , respectively.

For the three months ended September 30, 2022 and 2021, the Company incurred rent expenses of $ 53,698 and $ 53,263 , respectively.

For the nine months ended September 30, 2022 and 2021, the Company incurred rent expenses of $ 160,302 and $ 119,802 , respectively.

Employment and Consulting Agreements

33 unchanged sentences

Maloberti’s employment agreement renews on a year-to-year basis.

Maloberti’s employment is terminated by the Company without cause (as defined in the 2016 Plan), Mr.

Maloberti’s employment is terminated by the Company without cause (as defined in the Omnibus Plan), Mr.

Maloberti will be entitled to receive, subject to his execution of a standard release agreement, 8 months’ continuation of his current base salary and a lump sum payment equal to 8 months of continued healthcare coverage (or 24 months’ continuation of his current base salary and a lump sum payment equal to 24 months of continued healthcare coverage if such termination occurs within one year following a change in control).

2 unchanged sentences

From time to time the Company may become a party to litigation in the normal course of business.

As of June 30, 2022, there were no legal matters that management believes would have a material effect on the Company’s financial position or results of operations.

As of September 30, 2022, there were no legal matters that management believes would have a material effect on the Company’s financial position or results of operations.

Note 12 - Subsequent Events

Not applicable.

On September 26, 2022, the Company’s board of directors declared a dividend of one one-thousandth of a share of Series C Preferred Stock, par value $ 0.0001 per share (“Series C Preferred Stock”), for each outstanding share of the Company’s common stock, and 1.359 shares of Series C Preferred Stock for each outstanding share of Series A Convertible Preferred Stock, to stockholders of record at 5:00 p.m.

Eastern Time on October 7, 2022.

Each whole share of Series C Preferred Stock entitles the holder thereof to 1,000,000 votes (and each fraction of a share of Series C Preferred Stock will have a ratable number of votes) on any proposal to adopt an amendment to the Company’s certificate of incorporation to reclassify the outstanding shares of the Company’s common stock into a smaller number of shares at a ratio specified in or determined in accordance with the terms of such amendment (the “Reverse Stock Split”).

All shares of Series C Preferred stock that are not present in person or by proxy at any meeting of stockholders held to vote on the Reverse Stock Split as of immediately prior to the opening of the polls at such meeting will automatically be redeemed in whole by the Company without further action on the part of the Company or the holder of shares of Series C Preferred Stock.

Any outstanding shares of Series C Preferred Stock that are not redeemed at such time will be redeemed (i) if such redemption is ordered by the Company’s board of directors in its sole discretion, automatically and effective on such time and date specified by the board of directors or (ii) automatically upon the approval by the Company’s stockholders of the Reverse Stock Split at any meeting of stockholders held for the purpose of voting on such proposal.

Each share of Series C Preferred Stock redeemed in any redemption described above will be redeemed for no consideration.

The Series C Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company.

No shares of Series C Preferred Stock may be transferred by the holder thereof except in connection with a transfer by such holder of shares of Common Stock or Series A Preferred Stock, as applicable, of such holder, in which case a number of (i) one one-thousandths (1/1,000ths) of a share of Series C Preferred Stock equal to the number of shares of Common Stock to be transferred by such holder or (ii) a number of shares of Series C Preferred Stock issued in respect of each share of Series A Preferred Stock to be transferred will be automatically transferred to the transferee of such shares of Common Stock or Series A Preferred Stock, as applicable.

The foregoing description of the Series C Preferred Stock does not purport to be complete and is qualified in its entirety by reference to the Certificate of Designations of Series C Preferred Stock, which is filed as Exhibit 4.5 hereto.

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

What changed 10-Q

Item 1. Financial Statements