What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-15 · 50 added, 30 removed, 132 unchanged (38% of the section changed)

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market acceptance of our technology;

uncertainties associated with COVID-19 or coronavirus, including its possible effects on our operations;

uncertainties associated with any future pandemic, including possible effects on our operations;

results of our human studies, which may be negative or inconclusive;

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Information that is contained in and can be accessed through our website, Twitter posts and LinkedIn are not incorporated into, and do not form a part of, this Quarterly Report or any other report or document we file with the SEC.

We are developing a next-generation enhanced ultrasound devices to develop technology for increasing the capabilities of clinical diagnostic ultrasound, to broaden patient access to the safe diagnosis and treatment of a number of significant medical conditions in circumstances where expensive X-ray CT and MRI technology, or other diagnostic technologies such as surgical biopsy, are unavailable or impractical.

We are developing a next-generation enhanced ultrasound devices to develop technology for increasing the capabilities of clinical diagnostic ultrasound, to broaden patient access to the safe diagnosis and treatment of a number of significant medical conditions in circumstances where expensive X-ray computed tomography (“CT”), magnetic resonance imaging (“MRI”) technology, or other diagnostic technologies such as surgical biopsy, are unavailable or impractical.

Building on our expertise in thermoacoustics, we have developed a next-generation technology platform—Thermo Acoustic Enhanced Ultrasound, or TAEUS—which is intended to enhance the capability of clinical ultrasound technology and support the diagnosis and treatment of a number of significant medical conditions that currently require the use of expensive CT or MRI imaging or where imaging is not practical using existing technology.

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Each of our TAEUS platform applications will require regulatory approvals before we are able to sell or license the application.

Based on certain factors, such as the installed base of ultrasound systems, availability of other imaging technologies, such as CT and MRI, economic strength and applicable regulatory requirements, we intend to seek initial approval of our applications for sale in the European Union and the United States, followed by China.

In March 2020, we received CE mark approval for our TAEUS FLIP (“Fatty Liver Imaging Probe”) System, enabling its marketing and sales in the European Union and other CE mark geographies, including the 27 EU member states.

In March 2020, we received CE mark approval for our TAEUS FLIP (“Fatty Liver Imaging Probe”) System, enabling its marketing and sales in the EU and other CE mark geographies, including the 27 EU member states.

In June 2020, we submitted a 510(k) Application to the FDA for our TAEUS FLIP System.

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Financial Operations Overview

No revenue has been generated by our TAEUS technology, which we have not commercially sold as of March 31, 2023.

No revenue has been generated by our TAEUS technology, which we have not commercially sold as of June 30, 2023.

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.

As of March 31, 2023, we had a full-time sales representative in each of the United Kingdom, France and Germany.

As of June 30, 2023, we had a full-time sales representative in each of the United Kingdom, France and Germany.

We expect to continue actively adding to our sales representation and support headcount for operations in the EU in the coming quarters, and plan to begin staffing our sales efforts in the United States once we have obtained FDA approval for the sale of the NAFLD TAEUS device in that region, in each case as our financial resources permit.

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On January 1, 2023, the pool of shares issuable under the Omnibus Plan automatically increased by 867,966 shares from 454,203 shares to 1,322,169 shares.

As of March 31, 2023, there were 675,521 shares of common stock remaining available for issuance under the Omnibus Plan.

As of June 30, 2023, there were 675,520 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 March 31, 2023 and 2022

We had no revenue during the three months ended March 31, 2023 and 2022.

Three months ended June 30, 2023 and 2022

We had no revenue during the three months ended June 30, 2023 and 2022.

Cost of Goods Sold

We had no cost of goods sold during the three months ended March 31, 2023 and 2022.

We had no cost of goods sold during the three months ended June 30, 2023 and 2022.

Research and Development

Research and development expenses were $1,391,314 for the three months ended March 31, 2023, as compared to $1,213,022 for the three months ended March 31, 2022, an increase of $178,292, or 15%.

Research and development expenses were $1,400,182 for the three months ended June 30, 2023, as compared to $1,847,560 for the three months ended June 30, 2022, a decrease of $447,378, or 24%.

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 due to increased wage and related expenses.

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 $181,616 for the three months ended March 31, 2023, as compared to $339,903 for the three months ended March 31, 2022, a decrease of $158,287, or 47%.

Sales and marketing expenses were $247,773 for the three months ended June 30, 2023, as compared to $342,039 for the three months ended June 30, 2022, a decrease of $94,266, or 28%.

The costs include primarily headcount and pre-selling activities for our TAEUS product line.

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General and Administrative

Our general and administrative expenses for the three months ended March 31, 2023 were $1,366,398, compared to $1,302,344 for the three months ended March 31, 2022, an increase of $64,054, or 5%.

Our wage and related expenses for the three months ended March 31, 2023 were $611,819, compared to $551,312 for the three months ended March 31, 2022.

Wage and related expenses in the three months ended March 31, 2023 included $67,932 for accrued bonuses and $77,865 of stock compensation expense related to the issuance and vesting of options, compared to $45,543 for bonuses and $88,956 of stock compensation expense related to the issuance and vesting of options, for the three months ended March 31, 2022.

Our professional fees, which include legal, audit, and investor relations, for the three months ended March 31, 2023 were $520,637, compared to $503,494 for the three months ended March 31, 2022.

As a result of the foregoing, for the three months ended March 31, 2023, we recorded a net loss of $2,942,746, compared to a net loss of $2,858,202 for the three months ended March 31, 2022.

Our general and administrative expenses for the three months ended June 30, 2023 were $1,346,610, compared to $1,382,094 for the three months ended June 30, 2022, a decrease of $62,868, or 3%.

Our wage and related expenses for the three months ended June 30, 2023 were $558,068, compared to $569,712 for the three months ended June 30, 2022.

Wage and related expenses in the three months ended June 30, 2023 included $67,932 for accrued bonuses and $88,200 of stock compensation expense related to the issuance and vesting of options, compared to $67,932 for bonuses and $111,819 of stock compensation expense related to the issuance and vesting of options, for the three months ended June 30, 2022.

Our professional fees, which include legal, audit, and investor relations, for the three months ended June 30, 2023 were $503,697, compared to $545,614 for the three months ended June 30, 2022.

Other income for the three months ended June 30, 2023 was $437,433, and resulted mostly from the completion of the Employer Retention Tax Credit for employee retention in 2021 and 2022 of $ 413,844.

As a result of the foregoing, for the three months ended June 30, 2023, we recorded a net loss of $2,557,132, compared to a net loss of $3,591,067 for the three months ended June 30, 2022.

Six months ended June 30, 2023 and 2022

We had no revenue during the six months ended June 30, 2023 and 2022.

Cost of Goods Sold

We had no cost of goods sold during the six months ended June 30, 2023 and 2022.

Research and Development

Research and development expenses were $2,791,496 for the six months ended June 30, 2023, as compared to $3,060,582 for the six months ended June 30, 2022, a decrease of $269,086, or 9%.

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

Sales and Marketing

Sales and marketing expenses were $429,389 for the six months ended June 30, 2023, as compared to $681,942 for the six months ended June 30, 2022, a decrease of $252,553, or 37%.

The costs include primarily headcount and pre-selling activities for our TAEUS product line.

Sales and marketing expenses decreased due to the departure of our Chief Commercial Officer.

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

General and Administrative

Our general and administrative expenses for the six months ended June 30, 2023 were $2,713,008, compared to $2,684,438 for the six months ended June 30, 2022, an increase of $28,570, or 1%.

Our wage and related expenses for the six months ended June 30, 2023 were $1,169,887, compared to $1,121,025 for the six months ended June 30, 2022.

Wage and related expenses in the six months ended June 30, 2023 included $135,864 for accrued bonuses and $166,065 of stock compensation expense related to the issuance and vesting of options, compared to $113,475 for bonuses and $200,775 of stock compensation expense related to the issuance and vesting of options, for the six months ended June 30, 2022.

Our professional fees, which include legal, audit, and investor relations, for the six months ended June 30, 2023 were $1,024,335, compared to $1,049,109 for the six months ended June 30, 2022.

Other income for the six months ended June 30, 2023, was $434,015, and resulted mostly from the completion of the Employer Retention Tax Credit for employee retention in 2021 and 2022 of $413,844.

As a result of the foregoing, for the six months ended June 30, 2023, we recorded a net loss of $5,499,878, compared to a net loss of $6,449,269 for the six months ended June 30, 2022.

Near-Term Liquidity and Capital Resources

Since inception, we have incurred losses and expect to continue to incur losses for the foreseeable future.

As of March 31, 2023, we had an accumulated deficit of $84,812,648 and had $2,355,251 in cash.

As of June 30, 2023, we had an accumulated deficit of $87,369,780 and had $4,819,459 in cash.

To date we have funded our operations through private and public sales of our securities and will need to raise additional funds in order to execute on our business plan, fully commercialize our TAEUS technology, and generate revenues.

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In April 2023, we completed a public underwritten offering of 4,312,500 shares of our common stock and warrants to purchase an aggregate 2,156,250 shares of our common stock for aggregate net proceeds of $4.7 million.

However, we except that we will need additional capital to allow us to continue to execute our commercialization plans beyond the fourth quarter of 2023.

However, we expect that we will need additional capital to allow us to continue to execute our commercialization plans beyond the fourth quarter of 2023.

We are considering potential financing options that may be available to us such as additional sales of our common stock, including through our At-The-Market Issuance Sales Agreement with Ascendiant Capital Markets, LLC, dated June 21, 2021 (the “June 2021 ATM Agreement”).

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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 three months ended March 31, 2023, we incurred net losses of $2,942,746 and used cash in operations of $2,506,847.

In light of our cash balance as of March 31, 2023, and taking into account net proceeds from our underwritten offering of common stock and warrants in April 2023, we will need to raise additional capital in order to fund operations through the next twelve months, and prior to any ability to fund operations from revenue generated from the sale of our products.

As reflected in the accompanying consolidated financial statements, during the six months ended June 30, 2023, we incurred net losses of $5,499,878 and used cash in operations of $4,775,442.

In light of our cash balance as of June 30, 2023, we will need to raise additional capital in order to fund operations through the next twelve months, and prior to any ability to fund operations from revenue generated from the sale of our products.

The financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

Operating Activities

During the three months ended March 31, 2023, we used $2,506,847 of cash in operating activities primarily as a result of our net loss of $2,942,746, offset by share-based compensation of $237,279, depreciation expense of $34,516, amortization of right of use assets of $36,526, and net changes in operating assets and liabilities of $127,578.

During the three months ended March 31, 2022, we used $3,098,870 of cash in operating activities primarily as a result of our net loss of $2,858,202, offset by share-based compensation of $288,537, depreciation expense of $19,038, amortization of right of use assets of $33,179, and net changes in operating assets and liabilities of $(581,422).

During the six months ended June 30, 2023, we used $4,775,442 of cash in operating activities primarily as a result of our net loss of $5,499,878, offset by share-based compensation of $493,134, depreciation expense of $69,781, amortization of right of use assets of $73,974, and net changes in operating assets and liabilities of $87,547.

During the six months ended June 30, 2022, we used $6,433,852 of cash in operating activities primarily as a result of our net loss of $6,449,269, offset by share-based compensation of $599,886, depreciation expense of $40,739, amortization of right of use assets of $67,158, and net changes in operating assets and liabilities of $(692,366).

Investing Activities

During the three months ended March 31, 2023, we used $27,000 in investing activities related to purchases of fixed assets.

During the three months ended March 31, 2022, we used $89,353 in investing activities related to purchases of fixed assets

During the six months ended June 30, 2023, we used $27,000 in investing activities related to purchases of fixed assets.

During the six months ended June 30, 2022, we used $149,153 in investing activities related to purchases of equipment.

Financing Activities

During the three months ended March 31, 2023, there were no financing activities.

During the three months ended March 31, 2022, our financing activities provided $854,052 in proceeds from issuances of common stock.

During the six months ended June 30, 2023, our financing activities provided $4,732,803 in proceeds from issuances of common stock and warrants.

During the six months ended June 30, 2022, our financing activities provided $8,399,512 in proceeds from issuances of common stock.

Long-Term Liquidity

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

As described below, the COVID-19 pandemic has impacted our business operations to some extent and is expected to continue to do so and, in light of the effect of such pandemic on financial markets, these impacts may include reduced access to capital.

Additionally, a recession or other unfavorable market conditions, including economic slowdowns, recessions, inflation, instability in the banking system, rising interest rates and tightening of credit markets, the conflict in Ukraine or otherwise, may limit our access to capital.

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Off-Balance Sheet Transactions

At March 31, 2023, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

At June 30, 2023, 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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis