What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-05-15 · 116 added, 87 removed, 258 unchanged (44% of the section changed)

8 unchanged sentences

Right of use assets

Vendor advance

Prepaid expenses, long term

Liabilities and Stockholders’ Equity

11 unchanged sentences

141 .397 shares issued and outstanding

Series B Convertible Preferred Stock, $ 0.0001 par value;

1,000 shares authorized;

no shares issued and outstanding

Series C Convertible Preferred Stock, $ 0.0001 par value;

100,000 shares authorized;

no shares issued and outstanding

Common stock, $ 0.0001 par value;

80,000,000 shares authorized;

3,169,103 shares issued and outstanding

7,481,603 and 3,169,103 shares issued and outstanding, respectively

Additional paid in capital

10 unchanged sentences

Three Months Ended

Six Months Ended

Operating Expenses

6 unchanged sentences

( 3,571,693 )

( 5,933,893 )

( 6,426,962 )

Other Expenses

4 unchanged sentences

( 3,591,067 )

( 5,499,878 )

( 6,449,269 )

Provision for income taxes

1 unchanged sentence

$ ( 3,591,067 )

$ ( 5,499,878 )

$ ( 6,449,269 )

Net loss per share – basic and diluted

3 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Series A Convertible

Preferred Stock

Series B Convertible

Preferred Stock

Stockholders’

Balance as of December 31, 2021

Balance as of March 31, 2022

$ ( 71,549,012 )

4 unchanged sentences

( 3,591,067 )

Balance as of June 30, 2022

$ ( 75,140,079 )

Three Months Ended June 30, 2023

Series A Convertible

Preferred Stock

Series B Convertible

Preferred Stock

Stockholders’

Balance as of March 31, 2023

( 84,812,648 )

Three Months Ended March 31, 2023

Common stock issued for cash, net of funding costs

Warrants issued for cash, net of funding costs

Fair value of vested stock options

Stock payable towards preference dividend

( 2,557,132 )

Balance as of June 30, 2023

$ ( 87,369,780 )

Six Months Ended June 30, 2022

Series A Convertible

Preferred Stock

Series B Convertible

Preferred Stock

Stockholders’

1 unchanged sentence

( 68,690,810 )

Common stock issued for cash, net of funding costs

Fair value of vested stock options

2 unchanged sentences

( 6,449,269 )

Balance as of March 31, 2023

Balance as of June 30, 2022

$ ( 75,140,079 )

Six Months Ended June 30, 2023

Series A Convertible

Preferred Stock

Series B Convertible

Preferred Stock

Stockholders’

Balance as of December 31, 2022

( 81,869,902 )

Common stock issued for cash, net of funding costs

Warrants issued for cash, net of funding costs

Fair value of vested stock options

Stock payable towards preference dividend

( 5,499,878 )

Balance as of June 30, 2023

$ ( 87,369,780 )

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

Cash Flows from Operating Activities

3 unchanged sentences

Depreciation and amortization

Fixed assets write off

Stock compensation expense including common stock issued for RSUs

1 unchanged sentence

Changes in operating assets and liabilities:

Decrease in prepaid expenses

Increase in prepaid expenses

Increase in inventory

( 1,090,150 )

Increase in accounts payable and accrued liabilities

8 unchanged sentences

Proceeds from issuance of common stock

Proceeds from issuance of warrants

Net cash provided by financing activities

Net increase (decrease) in cash

( 2,533,847 )

( 2,334,171 )

Cash, beginning of period

10 unchanged sentences

Notes to Condensed Consolidated Financial Statements

For the three months ended March 31, 2023 and 2022

For the three and six months ended June 30, 2023 and 2022

Note 1 - Nature of the Business

3 unchanged sentences

Certain reclassifications have been made to the 2022 consolidated financial statements in order to conform to the current period presentations.

These classifications did not impact the net loss for period ended March 31, 2023.

These classifications did not impact the net loss for period ended June 30, 2023.

Note 2 - Summary of Significant Accounting Policies

13 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 three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The balance sheet at December 31, 2022 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 March 31, 2023 and December 31, 2022, the Company had no cash equivalents.

As of June 30, 2023 and December 31, 2022, the Company had no cash equivalents.

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

12 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.

As of March 31, 2023 and December 31, 2022, the Company recorded a right of use asset of $ 469,290 and $ 505,816 , respectively.

As of March 31, 2023 and December 31, 2022, the Company recorded a lease liability of $ 481,618 and $ 518,147 , respectively.

As of June 30, 2023 and December 31, 2022, the Company recorded a right of use asset of $ 431,842 and $ 505,816 , respectively.

As of June 30, 2023 and December 31, 2022, the Company recorded a lease liability of $ 444,167 and $ 518,147 , respectively.

Revenue Recognition

6 unchanged sentences

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

During the three months ended March 31, 2023 and 2022, the Company incurred $ 1,391,314 and $ 1,213,022 of expenses related to research and development costs, respectively.

During the three months ended June 30, 2023 and 2022, the Company incurred $ 1,400,182 and $ 1,847,560 of expenses related to research and development costs, respectively.

During the six months ended June 30, 2023 and 2022, the Company incurred $ 2,791,496 and $ 3,060,582 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 665,104 and 410,358 potentially dilutive shares, which include outstanding common stock options, and warrants, as of March 31, 2023 and December 31, 2022, respectively.

There were 3,123,030 and 410,358 potentially dilutive shares, which include outstanding common stock options, and warrants, as of June 30, 2023 and December 31, 2022, respectively.

Options to purchase common stock

15 unchanged sentences

The carrying amounts of the Company’s financial assets and liabilities, including cash, accounts receivable, prepaid expenses, accounts payable, accrued expenses, and other current liabilities, approximate their fair values because of the short maturity of these instruments.

The fair value of notes payable and convertible notes approximates their fair values since the current interest rates and terms on these obligations are the same as prevailing market rates.

The fair value of notes payable approximates their fair values since the current interest rates and terms on these obligations are the same as prevailing market rates.

Share-based Compensation

11 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 March 31, 2023 of $ 84,812,648 .

The Company had working capital of $ 3,687,342 as of March 31, 2023.

The Company has limited commercial experience and had a cumulative net loss from inception to June 30, 2023 of $ 87,369,780 .

The Company had working capital of $ 6,050,947 as of June 30, 2023.

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 three months ended March 31, 2023 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 three and six months ended June 30, 2023 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.

4 unchanged sentences

Recent Accounting Pronouncements

The Company considered recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC, did not or in management’s opinion will not have a material impact on the Company’s present or future consolidated financial statements.

The Company considered recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC, and concluded that they did not or in management’s opinion will not have a material impact on the Company’s present or future consolidated financial statements.

Note 3 - Inventory

As of March 31, 2023 and December 31, 2022, inventory consisted of raw materials, subassemblies to be used in the assembly of TAEUS systems, and finished goods.

As of March 31, 2023, the Company had no orders pending for the sale of a TAEUS system.

As of March 31, 2023 and December 31, 2022, the Company had inventory valued at $ 2,735,349 and $ 2,644,717 , respectively.

As of June 30, 2023 and December 31, 2022, inventory consisted of raw materials, subassemblies to be used in the assembly of TAEUS systems, and finished goods.

As of June 30, 2023, the Company had no orders pending for the sale of a TAEUS system.

As of June 30, 2023 and December 31, 2022, the Company had inventory valued at $ 2,757,633 and $ 2,644,717 , respectively.

Note 4 - Fixed Assets

As of March 31, 2023 and December 31, 2022, fixed assets consisted of the following:

As of June 30, 2023 and December 31, 2022, fixed assets consisted of the following:

Property, leasehold and capitalized software

2 unchanged sentences

Fixed assets, net

Depreciation expense for the three months ended March 31, 2023 and 2022 was $ 34,516 and $ 19,038 , respectively.

Depreciation expense for the three months ended June 30, 2023 and 2022 was $ 35,265 and $ 21,701 , respectively.

Depreciation expense for the six months ended June 30, 2023 and 2022 was $ 69,781 and $ 40,739 , respectively.

Note 5 - Accounts Payable and Accrued Liabilities

As of March 31, 2023 and December 31, 2022, current liabilities consisted of the following:

As of June 30, 2023 and December 31, 2022, current liabilities consisted of the following:

Accounts payable

12 unchanged sentences

On December 7, 2022, the Company filed with the Secretary of State of the State of Delaware a certificate of amendment (the “Certificate of Amendment”) to its certificate of incorporation, which Certificate of Amendment effectuated as of December 19, 2022 at 12:01 a.m.

Eastern Time (the “Effective Time”) a reverse split of the Company’s common stock by a ratio of one-for-20 (the “Reverse Split”).

Eastern Time a reverse split of the Company’s common stock by a ratio of one-for-20 (the “Reverse Split”).

All per share amounts and number of shares in the consolidated financial statements and related notes have been retroactively restated to reflect the Reverse Split.

4 unchanged sentences

Capital Stock

As of March 31, 2023, 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.

As of June 30, 2023, 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”), 1,000 shares of its preferred stock as Series B Convertible Preferred Stock (“Series B Preferred Stock”), 100,000 shares of its preferred stock as Series C Preferred Stock, and the remainder of the 9,889,000 preferred shares remain authorized but undesignated.

As of March 31, 2023, there were 3,169,103 shares of common stock, 141,397 shares of Series A Preferred Stock, and no shares of Series B Preferred Stock or Series C Preferred Stock issued and outstanding, and a stock payable balance of $ 3,692 .

During the three months ended March 31, 2022, the Company issued a total of 100,245 shares of its common stock in return for aggregate net proceeds of $ 854,052 .

As of June 30, 2023, there were 7,481,603 shares of common stock, 141 .397 shares of Series A Preferred Stock, and no shares of Series B Preferred Stock or Series C Preferred Stock issued and outstanding, and a stock payable balance of $ 2,427 .

On April 27, 2023, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with Newbridge Securities Corporation (the “Underwriter”), relating to the issuance and sale (the “Offering”) of 3,750,000 shares of our common stock and warrants to purchase up to 1,875,000 shares of our common stock.

The warrants were offered and sold at the rate of one warrant to purchase one share for every two shares of common stock purchased in the Offering.

The public offering price for each set of two shares of common stock and accompanying warrant to purchase one share of common stock was $ 2.41 per set of securities, yielding an effective price of $ 1.20 per share and $ 0.01 per warrant.

Under the terms of the Underwriting Agreement, the Company also granted to the Underwriter an option (the “Over-allotment Option”) to purchase up to an additional 562,500 shares of common stock and additional warrants to purchase 281,250 shares of common stock.

The Offering closed on May 2, 2023.

The Company conducted the Offering pursuant to a Registration Statement on Form S-1 (File Nos.

333-271003 and 333-271483) (the “Registration Statement”), which was declared effective by the SEC on April 27, 2023.

At the closing of the Offering, the Underwriter fully exercised the Over-allotment Option.

The net proceeds to the Company from the Offering were approximately $ 4.7 million, after deducting underwriting discounts and commissions and other offering expenses.

During the six months ended June 30, 2023, the Company issued a total of 4,312,500 shares of its common stock in return for aggregate net proceeds of $ 4,712,750 .

During the six months ended June 30, 2022, the Company issued a total of 1,030,997 shares of its common stock in return for aggregate net proceeds of $ 8,399,512 under the June 2021 ATM Agreement.

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 March 31, 2023, under the June 2021 ATM Agreement the Company has issued an aggregate of 1,064,634 shares of common stock in return for net proceeds of $ 9,216,618 , resulting in approximately $ 286,289 of compensation paid to Ascendiant.

As of June 30, 2023, under the June 2021 ATM Agreement the Company has issued an aggregate of 1,064,634 shares of common stock in return for net proceeds of $ 9,216,618 , resulting in approximately $ 286,289 of compensation paid to Ascendiant.

Note 8 - Common Stock Options

1 unchanged sentence

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 three months ended March 31, 2023 was determined to be $ 1,017,235 using the Black-Scholes-Merton option-pricing model based on the following assumptions:

The aggregate fair value of these stock options granted by the Company during the six months ended June 30, 2023 was determined to be $ 1,017,235 using the Black-Scholes-Merton option-pricing model based on the following assumptions:

(i) volatility rate of 106 % to 107 %, (ii) discount rate of 0 %, (iii) zero expected dividend yield, (iv) risk free rate of 3.68 % to 3.72 %, and (v) expected life of 10 years.

A summary of option activity under the Company’s Omnibus Plan as of March 31, 2023, and changes during the year then ended, is presented below:

A summary of option activity under the Company’s Omnibus Plan as of June 30, 2023, and changes during the year then ended, is presented below:

Balance outstanding at December 31, 2022

Cancelled or expired

Balance outstanding at March 31, 2023

Exercisable at March 31, 2023

Balance outstanding at June 30, 2023

Exercisable at June 30, 2023

Note 9 - Common Stock Warrants

Warrant Conversions and Consent Solicitation

The following table summarizes all stock warrant activity of the Company for the three months ended March 31, 2023:

On May 2, 2023, the Company conducted the Offering in which the Company issued 2,156,250 warrants to purchase shares of common stock for an exercise price per share equal to $ 1.40 .

The warrants expire May 2, 2028 .

The Company also issued to the placement agent and its designees warrants exercisable for an aggregate of 301,875 shares of common stock for an exercise price per share equal to $ 1.50 .

The warrants expire November 2, 2026 .

The following table summarizes all stock warrant activity of the Company for the six months ended June 30, 2023:

Balance outstanding at December 31, 2022

Balance outstanding at March 31, 2023

Exercisable at March 31, 2023

Balance outstanding at June 30, 2023

Exercisable at June 30, 2023

Note 10 - Related Party Transactions

On May 2, 2023, the Company conducted the Offering in which the Company issued 83,333 shares of its common stock and 41,667 warrants to the Company’s director, Anthony DiGiandomenico, for cash, which was less than 5 % of beneficial ownership in the Company.

Note 11 - Commitments and Contingencies

5 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 March 31, 2023 was 10 %.

The Company’s discount rate for operating leases at June 30, 2023 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 2.5 years.

As of March 31, 2023, the maturities of operating lease liabilities are as follows:

As of June 30, 2023, the maturities of operating lease liabilities are as follows:

2025 and beyond

3 unchanged sentences

Long-term lease obligations

For the three months ended March 31, 2023 and 2022, the Company incurred rent expenses of $ 53,809 and $ 52,763 , respectively.

Employment Agreements

Francois Michelon - The Company has an employment agreement with Francois Michelon, the Company’s Chief Executive Officer and Chairman of the board of directors, dated May 12, 2017 and amended on December 27, 2019.

Effective January 1, 2022, it increased Mr.

Michelon’s annual salary to $423,000.

Under the employment agreement, Mr.

Michelon is eligible for an annual cash bonus based upon achievement of performance-based objectives established by the board of directors.

Upon termination without cause, any portion of Mr.

Michelon’s option award granted pursuant to his employment agreement that is scheduled to vest within 12 months will automatically vest, and upon termination without cause within 12 months following a change of control, the entire unvested portion of the option award will automatically vest.

Upon termination for any other reason, the entire unvested portion of the option award will terminate.

Michelon’s employment is terminated by the Company without cause or Mr.

Michelon terminates his employment for good reason, Mr.

Michelon will be entitled to receive 12 months’ continuation of his current base salary and a lump sum payment equal to 12 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).

Under his employment agreement, Mr.

Michelon is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.

Michael Thornton - The Company has an employment agreement with Michael Thornton, the Company’s Chief Technology Officer, dated May 12, 2017 and amended on December 27, 2019.

The employment agreement provides for an annual base salary that is subject to adjustment at the board of directors’ discretion.

Effective January 1, 2022, it increased Mr.

Thornton’s annual salary to $ 324,000 .

Under the employment agreement, Mr.

Thornton is eligible for an annual cash bonus based upon achievement of performance-based objectives established by the board of directors.

Upon termination without cause, any portion of Mr.

Thornton’s option award granted pursuant to his employment agreement that is scheduled to vest within 12 months will automatically vest, and upon termination without cause within 12 months following a change of control, the entire unvested portion of the option award will automatically vest.

Upon termination for any other reason, the entire unvested portion of the option award will terminate.

Thornton’s employment is terminated by the Company without cause or Mr.

Thornton terminates his employment for good reason, Mr.

Thornton will be entitled to receive 12 months’ continuation of his current base salary and a lump sum payment equal to 12 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).

Under his employment agreement, Mr.

Thornton is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.

Renaud Maloberti - The Company had an employment agreement with Renaud Maloberti, dated April 15, 2019, that provided for an annual base salary of $ 250,000 and eligibility for an annual cash bonus to be paid based on attainment of Company and individual performance objectives to be established by the Board of Directors.

On December 21, 2022, Mr.

Maloberti notified the Company of his resignation as the Company’s Chief Commercial Officer, effective January 13, 2023.

For the six months ended June 30, 2023 and 2022, the Company incurred rent expenses of $ 108,187 and $ 106,604 , respectively.

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

As of March 31, 2023, 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

The warrants were offered and sold at the rate of one warrant to purchase one share for every two shares of common stock purchased in the Offering.

The Offering closed on May 2, 2023.

The Company conducted the Offering pursuant to a Registration Statement on Form S-1 (File Nos.

333-271003 and 333-271483) (the “Registration Statement”), which was declared effective by the Securities and Exchange Commission (the “Commission”) on April 27, 2023.

At the closing of the Offering, the Underwriter fully exercised the Over-allotment Option.

The net proceeds to us from the Offering were approximately $4.5 million, after deducting underwriting discounts and commissions and other estimated offering expenses.

As of June 30, 2023, there were no legal matters that management believes would have a material effect on the Company’s financial position or results of operations.

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