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Item 1. Financial Statements

2024-08-14 compared with 2024-05-14 · 176 added, 72 removed, 309 unchanged (45% of the section changed)

15 unchanged sentences

Long Term Debt

Loans, long term

Lease liabilities

4 unchanged sentences

10,000 shares authorized;

34 .976 and 141 .397 shares issued and outstanding

17 .488 and 141 .397 shares issued and outstanding, respectively

Series B Convertible Preferred Stock, $ 0.0001 par value;

19 unchanged sentences

Three Months Ended

Six Months Ended

Operating Expenses

6 unchanged sentences

( 2,994,565 )

Other Expenses

Other income (expense)

Total other expenses

( 5,011,394 )

( 5,933,893 )

Total other income

Loss from operations before income taxes

1 unchanged sentence

( 2,557,132 )

( 5,004,853 )

( 5,499,878 )

Provision for income taxes

1 unchanged sentence

$ ( 2,557,132 )

$ ( 5,004,853 )

$ ( 5,499,878 )

Net loss per share – basic and diluted

3 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

Series A Convertible

Series B Convertible

Preferred Stock

Stockholders'

Stock Payable

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

2 unchanged sentences

( 5,499,878 )

Balance as of March 31, 2023

Balance as of June 30, 2023

$ ( 87,369,780 )

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

Series A Convertible

Preferred Stock

Series B Convertible

Preferred Stock

Stockholders'

Stock Payable

Balance as of December 31, 2023

3 unchanged sentences

Common stock issued for warrant exercise

Fair value of vested common stock for services

Common stock issued for cashless warrant exercise

Fair value of vested common stock

Fair value of vested stock options

2 unchanged sentences

( 5,004,853 )

Balance as of June 30, 2024

$ 105,921,675

$ ( 96,935,005 )

Three Months Ended June 30, 2023

Series A Convertible

Series B Convertible

Preferred Stock

Stockholders'

Balance as of March 31, 2023

$ ( 84,812,648 )

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 )

Three Months Ended June 30, 2024

Series A Convertible

Series B Convertible

Preferred Stock

Stockholders'

Balance as of March 31, 2024

$ ( 94,705,852 )

Preferred stock conversion to common stock

Common stock issued for cash

Common stock issued for warrant exercise

Common stock issued for cashless warrant exercise

Fair value of vested common stock

Fair value of vested stock options

Stock payable towards preference dividend

( 2,229,153 )

Balance as of June 30, 2024

$ 105,921,675

$ ( 96,935,005 )

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

7 unchanged sentences

Amortization of right of use assets

Gain on extinguishment of debt

Changes in operating assets and liabilities:

Decrease in prepaid expenses

Increase in prepaid expenses

Increase in inventory

Increase in accounts payable and accrued liabilities

Decrease in accounts payable and accrued liabilities

Decrease in lease liability

9 unchanged sentences

Proceeds from warrant exercise

Proceeds from issuance of warrants

Repayment of loan

Net cash provided by financing activities

Net decrease in cash

( 1,699,206 )

( 2,533,847 )

Net increase (decrease) in cash

Cash, beginning of period

10 unchanged sentences

Notes to Condensed Consolidated Financial Statements

For the three months ended March 31, 2024 and 2023

For the six months ended June 30, 2024 and 2023

Note 1 - Nature of the Business

15 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, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The balance sheet at March 31, 2024 has been derived from the audited financial statements at that date.

Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The balance sheet at June 30, 2024 has been derived from the audited financial statements at that date.

For further information, refer to the financial statements and footnotes thereto included in the Company’s annual financial statements for the twelve months ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2024.

9 unchanged sentences

The Company periodically determines whether a reserve should be taken for devaluation or obsolescence of inventory.

The Company assessed its inventory at March 31, 2024 and determined that certain challenges, including potential damage and a longer timeframe for initial sales, warranted the establishment of an inventory shrinkage reserve.

The Company assessed its inventory at June 30, 2024 and determined that certain challenges, including potential damage and a longer timeframe for initial sales, warranted the establishment of an inventory shrinkage reserve.

As a result, the Company recognized an inventory reserve of 5 % amounting to $ 142,733 , which resulted in the net carrying value of inventory of $ 2,711,923 .

8 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 March 31, 2024 and December 31, 2023 the Company recorded a right of use asset of $ 313,715 and $ 354,091 , respectively.

At March 31, 2024 and December 31, 2023 the Company recorded a lease liability of $ 324,064 and $ 365,919 , respectively.

At June 30, 2024 and December 31, 2023 the Company recorded a right of use asset of $ 272,284 and $ 354,091 , respectively.

At June 30, 2024 and December 31, 2023 the Company recorded a lease liability of $ 281,154 and $ 365,919 , 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, 2024 and 2023, the Company incurred $ 1,041,526 and $ 1,391,314 of expenses related to research and development costs, respectively.

During the three months ended June 30, 2024 and 2023, the Company incurred $ 716,366 and $ 1,400,182 of expenses related to research and development costs, respectively.

During the six months ended June 30, 2024 and 2023, the Company incurred $ 1,757,892 and $ 2,791,496 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 1,444,742 and 1,514,715 potentially dilutive shares, which include outstanding common stock options, and warrants, as of March 31, 2024 and December 31, 2023, respectively.

There were 4,520,560 and 1,514,715 potentially dilutive shares, which include outstanding common stock options, and warrants, as of June 30, 2024 and December 31, 2023, respectively.

Options to purchase common stock

29 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, 2024 of $94,705,852.

The Company had working capital of $53,818 as of March 31, 2024.

The Company has limited commercial experience and had a cumulative net loss from inception to June 30, 2024 of $ 96,935,005 .

The Company had working capital of $ 5,363,307 as of June 30, 2024.

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.

These matters raise substantial doubt about the Company's ability to continue as going concern.

The accompanying financial statements for the three months ended March 31, 2024 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 six months ended June 30, 2024 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 March 31, 2024 and December 31, 2023, inventory consisted of raw materials, subassemblies to be used in the assembly of TAEUS systems, and finished goods.

As of March 31, 2024, the Company had no orders pending for the sale of a TAEUS system.

As of March 31, 2024, the Company recorded inventory reserve of 5 % or $ 142,733 .

As of March 31, 2024 and December 31, 2023, the Company had inventory valued at $ 2,711,923 and $ 2,622,865 , respectively.

As of June 30, 2024 and December 31, 2023, inventory consisted of raw materials, subassemblies to be used in the assembly of TAEUS systems, and finished goods.

As of June 30, 2024, the Company had no orders pending for the sale of a TAEUS system.

As of June 30, 2024, the Company recorded inventory reserve of 5 % or $ 142,733 .

As of June 30, 2024 and December 31, 2023, the Company had inventory valued at $ 2,711,923 and $ 2,622,865 , respectively.

Note 4 - Fixed Assets

As of March 31, 2024 and December 31, 2023, fixed assets consisted of the following:

As of June 30, 2024 and December 31, 2023, 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, 2024 and 2023 was $ 15,300 and $ 34,516 .

Depreciation expense for the six months ended June 30, 2024 and 2023 was $ 23,993 and $ 69,781 .

Note 5 - Accounts Payable and Accrued Liabilities

As of March 31, 2024 and December 31, 2023, current liabilities consisted of the following:

As of June 30, 2024 and December 31, 2023, current liabilities consisted of the following:

Accounts payable

9 unchanged sentences

Under the conditions of the loan, twenty-five percent (25%) of the loan will be forgiven if seventy-five percent (75%) is repaid prior to the initial term date .

During the three months ended March 31, 2024, the loan was repaid in full.

As of March 31, 2024 and December 31, 2022, the loan had a balance of CAD 0 and CAD 40,000 .

During the six months ended June 30, 2024, the loan was repaid in full.

As of June 30, 2024 and December 31, 2023, the loan had a balance of CAD 0 and CAD 40,000 , respectively.

Note 7 - Capital Stock

Capital Stock

At March 31, 2024, 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 June 30, 2024, 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, 2024, there were 10,914,447 shares of common stock (which exclude 121,212 unvested shares of restricted stock described in Note 8 below), 34 .976 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 $ 301 .

During the three months ended March 31, 2024, the Company issued a total of 443,489 shares of its common stock, as follows:

- 118,904 shares of its common stock upon warrant exercises for an aggregate net proceeds of $ 77,419 ;

As of June 30, 2024, there were 72,439,526 shares of common stock outstanding (which excludes both the 121,212 unvested shares of restricted stock described in Note 8 below and the conversion of Series A Preferred Stock into 1,005 shares of common stock ), 17 .488 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 $ 27 .

During the six months ended June 30, 2024, the Company issued a total of 62,049,376 shares of its common stock, as follows:

- 6,107,691 shares of its common stock in return for aggregate net proceeds of $ 728,503 under the Placement Agreement;

- 55,416,117 shares of its common stock upon exercise of pre-funded warrants for aggregate net proceeds of $ 6,609,831 under the Placement Agreement (includes net proceeds from sale and exercise of pre-funded warrants);

- 118,904 shares of its common stock upon warrant exercises for aggregate net proceeds of $ 77,419 ;

- 316,963 shares of its common stock in return for aggregate net proceeds of $ 419,967 under the June 2021 ATM Agreement;

- 8,893 shares of its common stock upon conversion of 123 .909 shares of its Series A Preferred Stock.

During the three months ended March 31, 2024, a total of 80,808 shares of the previously issued restricted common stock vested.

During the six months ended June 30, 2024, a total of 80,808 shares of the previously issued restricted common stock vested.

The shares were issued for services and valued at $ 80,000 .

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 .

Registered Offering

On June 4, 2024, the Company entered into a placement agency agreement (the “Placement Agreement”) with Craig-Hallum Capital Group LLC (the “Placement Agent”) pursuant to which the Placement Agent served, on a best efforts basis, in connection with the issuance and sale (the “Offering”) of 6,107,691 shares of common stock and pre-funded warrants to purchase up to an aggregate of 55,430,770 shares of common stock (the “pre-funded warrants”), together with Series A warrants to purchase up to an aggregate of 61,538,461 shares of common stock (the “Series A Warrants”) and Series B warrants to purchase up to an aggregate of 61,538,461 shares of common stock (the “Series B Warrants” and, together with the Series A Warrants, the “Series Warrants”).

The common stock, pre-funded warrants and Series Warrants were sold in a fixed combination, with each share of common stock or pre-funded warrant accompanied by a Series A Warrant to purchase one share of common stock and a Series B Warrant to purchase one share of common stock.

In connection with the Offering, the Company also issued to the Placement Agent warrants (“Placement Agent Warrants”) to purchase up to 3,076,923 shares of common stock.

The Offering closed on June 5, 2024.

The purchase price of each share of common stock and accompanying Series Warrants was $ 0.13 and the purchase price of each pre-funded warrant and accompanying common warrants was $ 0.1299 .

The Company received net proceeds from the Offering, after deducting offering expenses payable by the Company, of $ 7,338,333 .

The Offering was made pursuant to the Company’s registration statement on Form S-1 (File No.

333-278842), declared effective by the SEC on June 4, 2024.

The Series Warrants became exercisable on August 9, 2024, the first trading day following effectiveness of an amendment to the Company’s certificate of incorporation (the “Charter Amendment”) to increase the number of authorized shares of common stock (the “Initial Exercise Date”).

Each Series A Warrant has an exercise price of $ 0.22 per share of common stock and will expire five years from the Initial Exercise Date.

Each Series B Warrant has an exercise price of $ 0.22 per share of common stock and will expire two and one-half years from the Initial Exercise Date.

Under the alternate cashless exercise option of the Series B Warrants, the holder of a Series B Warrant has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon a cashless exercise of the Series B Warrant using $ 0.001 as the exercise price for that purpose and (y) 3.0.

In addition, the Series Warrants include a provision that resets their respective exercise prices in the event of a reverse split of the Company’s common stock to a price equal to the lesser of (i) the then current exercise price and (ii) lowest volume weighted average price (VWAP) during the period commencing five trading days immediately preceding and the five trading days commencing on the date the Company effects a reverse stock split, (such lower price, the “Floor Price”), provided that such Floor Price shall not be lower than $0.0434 (subject to adjustment for reverse and forward splits, recapitalizations and similar transactions), with a proportionate adjustment to the number of shares underlying the Series A Warrants and Series B Warrants.

Subject to certain exceptions, the Series A Warrants provide for an adjustment to the exercise price and number of shares underlying the Series A Warrants upon the Company’s issuance of Common Stock or Common Stock equivalents at a price per share that is less than the exercise price of the Series A Warrants, provided that such adjusted price shall be no less than $0.0434 (subject to adjustment for reverse and forward splits, recapitalizations and similar transactions).

A holder does not have the right to exercise any portion of the Series A Warrants or Series B Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Series A Warrants and Series B Warrants.

However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% , provided that any increase in such percentage shall not be effective until 61 days following notice from the holder to us.

Pursuant to the Placement Agreement, in addition to the Placement Agent Warrants described above, the Company paid the Placement Agent a cash placement fee equal to 7.0% of the aggregate gross proceeds raised in the Offering .

The Company reimbursed expenses of the Placement Agent in connection with the Offering, including but not limited to legal fees, of $ 100,000 .

The Placement Agent Warrants have an expiration date of three and one-half years from the Initial Exercise Date and were immediately exercisable upon issuance.

The Company has agreed, subject to certain exceptions, not to effect any issuance of Common Stock or securities convertible into Common Stock involving a Variable Rate Transaction, as defined in the Placement Agreement, for a period commencing on the date of the Placement Agreement until 180 days following the closing of the Offering.

At-the-Market Equity Offering Programs

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, 2024, under the June 2021 ATM Agreement the Company had issued an aggregate of 2,706,644 shares of common stock in return for net proceeds of $ 11,407,240 , resulting in $ 354,527 of compensation paid to Ascendiant.

As of June 30, 2024, under the June 2021 ATM Agreement the Company had issued an aggregate of 2,706,644 shares of common stock in return for net proceeds of $ 11,407,240 , resulting in $ 354,527 of compensation paid to Ascendiant.

On February 14, 2024, the Company entered into a new At-The-Market Issuance Sales Agreement with Ascendiant (the “February 2024 ATM Agreement”) to sell shares of common stock for aggregate gross proceeds of up to $ 6.2 million, which replaced the June 2021 ATM Agreement.

As of March 31, 2024, the Company had not sold any shares under the February 2024 ATM Agreement.

As of June 30, 2024, the Company had not sold any shares under the February 2024 ATM Agreement.

Note 8 - Common Stock Options and Restricted Stock

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, 2024 was determined to be $ 77,418 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, 2024 was determined to be $ 77,418 using the Black-Scholes-Merton option-pricing model based on the following assumptions:

(i) volatility rate of 107 % to 111 %, (ii) discount rate of 0 %, (iii) zero expected dividend yield, (iv) risk free rate of 3.93 % to 4.21 %, (v) price of $ 1.13 to $ 1.59 , and (vi) expected life of 8 - 10 years.

A summary of option activity under the Company’s Omnibus Plan as of March 31, 2024, 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, 2024, and changes during the year then ended, is presented below:

Balance outstanding at December 31, 2023

Cancelled or expired

Balance outstanding at March 31, 2024

Exercisable at March 31, 2024

Balance outstanding at June 30, 2024

Exercisable at June 30, 2024

Restricted Common Stock

3 unchanged sentences

The Restricted Stock is subject to a vesting schedule pursuant to the Restricted Stock Agreement and the shares may not be sold, assigned, transferred, pledged, hypothecated, disposed of or otherwise encumbered prior to becoming vested.

During the three months ended March 31, 2024, the Company recorded as vested 80,808 shares valued at $ 80,000 .

During the six months ended June 30, 2024, the Company recorded as vested 80,808 shares valued at $ 80,000 .

Note 9 - Common Stock Warrants

On June 4, 2024, the Company entered into the Placement Agreement in which the company issued pre-funded warrants to purchase up to an aggregate of 55,430,770 shares of common stock (the “pre-funded warrants”), together with Series A warrants to purchase up to an aggregate of 61,538,461 shares of common stock (the “Series A Warrants”) and Series B warrants to purchase up to an aggregate of 61,538,461 shares of common stock (the “Series B Warrants” and, together with the Series A Warrants, the “common warrants”).

Additionally, the Series B Warrants contain an alternative cashless exercise option whereby the holder of a Series B Warrant has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon a cashless exercise of the Series B Warrant using $0.001 as the exercise price for that purpose and (y) 3.0.

The common stock, pre-funded warrants and common warrants were sold in a fixed combination, with each share of common stock or pre-funded warrant accompanied by a Series A Warrant to purchase one share of common stock and a Series B Warrant to purchase one share of common stock.

In connection with the Offering, the Company also issued placement agent warrants (“Placement Agent Warrants” and, together with the pre-funded warrants and the common warrants, the “Warrants”) to purchase up to 3,076,923 shares of common stock.

The purchase price of each share of common stock and accompanying common warrants was $ 0.13 and the purchase price of each pre-funded warrant and accompanying common warrants was $ 0.1299 .

Warrant Exercises

4 unchanged sentences

The warrants expire November 2, 2026 .

During the three months ended March 31, 2024, the Company issued a total of 118,904 shares of its common stock upon warrant exercises for an aggregate net proceeds of $ 83,233 .

The following table summarizes all stock warrant activity of the Company for the three months ended March 31, 2024:

During the six months ended June 30, 2024, the Company issued a total of 118,904 shares of its common stock upon warrant exercises for an aggregate net proceeds of $ 83,233 .

Between June 4, 2024 and June 7, 2024, 55,430,770 pre-funded warrants were exercised.

The company issued a total of 55,416,117 shares of its common stock upon the cash exercises of 44,344,616 warrants and cashless exercises of 11,071,501 warrants for aggregate net proceeds of $ 6,609,831 (includes net proceeds from sale and exercise of pre-funded warrants).

The remaining 14,653 warrants were used to satisfy the exercise price under the warrants’ cashless exercise provision.

The following table summarizes all stock warrant activity of the Company for the six months ended June 30, 2024:

Balance outstanding at December 31, 2023

Balance outstanding at March 31, 2024

Exercisable at March 31, 2024

( 58,493,040 )

( 55,535,021 )

Balance outstanding at June 30, 2024

Exercisable at June 30, 2024

Note 10 - Related Party Transactions

2 unchanged sentences

Under the terms of the agreement, Mr.

Tokman is compensated at a rate of $ 150 per hour for his services

Tokman was compensated at a rate of $ 150 per hour for his services.

On November 30, 2023, the Company entered into a Restricted Stock Agreement and Consulting Services Agreement, each with PatentVest, in exchange for certain services related to the Company’s patent portfolio.

9 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, 2024 was 10 %.

The Company’s discount rate for operating leases at June 30, 2024 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 1.75 years.

As of March 31, 2024, the maturities of operating lease liabilities are as follows:

As of June 30, 2024, 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, 2024 and 2023, the Company incurred rent expenses of $ 54,839 and $ 53,809 , respectively.

For the six months ended June 30, 2024 and 2023, the Company incurred rent expenses of $ 109,608 and $ 108,187 , respectively.

Employment and Consulting 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, as amended on December 27, 2019.

Francois Michelon - As of June 30, 2024, the Company had an employment agreement with Francois Michelon, the Company’s Chief Executive Officer and Chairman of the board of directors, dated May 12, 2017, as amended on December 27, 2019.

Effective January 1, 2022, the Compensation Committee increased Mr.

2 unchanged sentences

Michelon agreed to a 30% reduction of his base salary received for the remainder of 2023 in order to preserve cash for the Company’s operations.

Michelon is also eligible for an annual cash bonus based upon achievement of performance-based objectives established by the Board of Directors.

Michelon was also 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 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).

Michelon’s option award scheduled to vest within 12 months would automatically vest, and upon termination without cause within 12 months following a change of control, the entire unvested portion of the option award would automatically vest.

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

Pursuant to his employment agreement, if Mr.

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

Michelon terminated his employment for good reason, Mr.

Michelon would be entitled to receive 12 months’ continuation of his then-current base salary and a lump sum payment equal to 12 months of continued healthcare coverage (or 24 months’ continuation of his then-current base salary and a lump sum payment equal to 24 months of continued healthcare coverage if such termination occurred 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.

Michelon was 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, as amended December 27, 2019.

14 unchanged sentences

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

As described in Note 7, our Registered Offering included Series A Warrants and Series B Warrants which were subject to shareholder approval and consequently have not been included in the financial statements as of June 30, 2024.

The Series A Warrants and Series B Warrants were approved by shareholders on August 6, 2024.

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

As of March 31, 2024, 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 June 30, 2024, 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

On May 3, 2024, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $ 1.00 for 30 consecutive trading days , the Company no longer meets the minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).

The notification has no immediate effect on the listing of the Company’s common stock.

In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has a period of 180 calendar days from May 3, 2024, or until October 30, 2024, to regain compliance with the Minimum Bid Price Requirement.

If at any time before October 30, 2024, the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days , Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement.

Leadership Changes

On August 5, 2024, Irina Pestrikova notified the Company of her resignation as the Company’s Senior Director, Finance, effective August 7, 2024.

Pestrikova’s resignation was not in connection with any disagreement relating to the Company’s operations, policies, or practices.

Pestrikova may provide consulting services to the Company after her resignation, as desired and agreed to between Ms.

Pestrikova and Company management, in order to assist with the transitional matters.

On August 7, 2024, the Company’s Board of Directors appointed Richard Jacroux as Chief Financial Officer, effective upon Ms.

Pestrikova’s resignation.

On August 12, 2024, the Company and Francois Michelon mutually agreed on Mr.

Michelon’s resignation as the Company’s Chief Executive Officer and as a member of the Company’s Board of Directors.

Michelon’s resignation as a member of the Board did not involve any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.

The terms of Mr.

Michelon’s separation from the Company have been memorialized pursuant to a Separation Agreement and Release, dated August 12, 2024 (the “Separation Agreement”).

Pursuant to the Separation Agreement, Mr.

Michelon will be entitled to a single cash payment of $ 100,000 , which is equal to 4 months’ continuation of his current base salary, a cash payment for accrued vacation time and $ 1,705 monthly for up to 12 months for continued healthcare coverage in consideration for a release of any and all claims he may have against the Company, its affiliates, and their respective representatives and other related parties.

The Separation Agreement also terminated certain restrictive covenants applicable to Mr.

Michelon under his employment agreement with the Company.

Effective August 13, 2024, the Board appointed Alexander Tokman as the Company’s acting Chief Executive Officer and Chairman of the Board.

As described in Part II, Item 5, in connection with such appointment the Company and Mr.

Tokman entered into employment agreement.

Increase in Authorized Shares of Common Stock

At the 2024 Annual Meeting of the Company’s Stockholders held on August 6, 2024 (the “Annual Meeting”), the Company’s stockholders approved and adopted a Certificate of Amendment to the Company’s Fourth Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to increase the number of authorized shares of Company’s Common stock, from 80,000,000 shares to 1,000,000,000 shares (the “Charter Amendment”).

The Charter Amendment was filed with the Secretary of State of the State of Delaware on August 8, 2024 and was effective upon filing.

Reverse Stock Split

At the Annual Meeting, the Company’s stockholders approved a Certificate of Amendment to the Certificate of Incorporation to effect a reverse stock split of the shares of the Common Stock at a stock split ratio between 1-for-20 and 1-for-50 , inclusive (the “Reverse Stock Split”), with the ultimate ratio and precise timing of the Reverse Stock Split to be determined by the Company’s Board of Directors in its sole discretion.

On August 8, 2024, the Board of Directors approved a ratio of 1-for-50 for the Reverse Stock Split.

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