What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-14 · 56 added, 32 removed, 130 unchanged (40% of the section changed)

27 unchanged sentences

our ability to obtain and maintain CE mark certification and secure required FDA and other governmental approvals for our TAEUS applications;

our ability to regain compliance with the listing standards of the Nasdaq Capital Market and maintain the listing of our common stock on such exchange;

our ability to comply with regulation by various federal, state, local and foreign governmental agencies and to maintain necessary regulatory clearances or approvals;

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We subsequently voluntarily withdrew our 510(k) Application submitted a de novo request for the TAEUS system to the FDA in the third quarter of 2023.

In the fourth quarter of 2023, the FDA sent us an AI request related to our de novo application.

Since we received the AI request, we have had several interactions with the FDA and have provided additional information.

In the fourth quarter of 2023, the FDA sent us an Additional Information (“AI”) request related to our de novo application.

After we received the AI request, we have had several interactions with the FDA and have provided additional information.

In order to fully respond to the FDA’s questions, we will need to compile additional clinical data, provide additional device test data, and respond to cybersecurity related questions in a new de novo submission.

We have a scheduled in-person pre-submission meeting with the FDA in the second quarter of 2024.

We currently anticipate completing the necessary clinical studies by the fourth quarter of 2024 and submitting the new de novo request to the FDA in the first half of 2025.

We had an in-person pre-submission meeting with the FDA on May 16, 2024.

We currently anticipate completing the necessary clinical studies by the fourth quarter of 2024 or first quarter of 2025 and submitting the new de novo request to the FDA in the first half of 2025.

Financial Operations Overview

No revenue has been generated by our TAEUS technology, which we have not commercially sold as of March 31, 2024.

No revenue has been generated by our TAEUS technology, which we have not commercially sold as of June 30, 2024.

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, 2024, we had a full-time sales representative in each of the United Kingdom, France and Germany.

During the quarter, we restructured our European sales operations to better align with the Company’s near-term sales prospects.

We expect to add to our sales representation and support headcount for operations in the EU as resources permit in the future, 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.

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On January 1, 2024, the pool of shares issuable under the Omnibus Plan automatically increased by 1,717,783 shares from 1,322,169 shares to 3,039,952 shares.

As of March 31, 2024, there were 2,360,665 shares of common stock remaining available for issuance under the Omnibus Plan.

As of June 30, 2024, there were 2,360,765 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, 2024 and 2023

We had no revenue during the three months ended March 31, 2024 and 2023.

Three months ended June 30, 2024 and 2023

We had no revenue during the three months ended June 30, 2024 and 2023.

Cost of Goods Sold

We had no cost of goods sold during the three months ended March 31, 2024 and 2023.

We had no cost of goods sold during the three months ended June 30, 2024 and 2023.

Research and Development

Research and development expenses were $1,041,526 for the three months ended March 31, 2024, as compared to $1,391,314 for the three months ended March 31, 2023, a decrease of $349,788 or 25%.

Research and development expenses were $716,366 for the three months ended June 30, 2024, as compared to $1,400,182 for the three months ended June 30, 2023, a decrease of $683,816 or 49%.

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

Research and development expenses decreased from the prior year as we complete development of our initial TAEUS product and began focusing our spending on clinical trials and commercialization of the product that has been developed.

Sales and Marketing

Sales and marketing expenses were $162,952 for the three months ended June 30, 2024, as compared to $247,773 for the three months ended June 30, 2023, a decrease of $84,821, or 34%.

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

Sales and marketing expenses decreased largely due to the decrease in consulting fees.

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

General and Administrative

Our general and administrative expenses for the three months ended June 30, 2024 were $1,351,535, compared to $1,346,610 for the three months ended June 30, 2023, an increase of $4,925, or 0%.

Our wage and related expenses for the three months ended June 30, 2024 were $581,096, compared to $558,068 for the three months ended June 30, 2023.

Wage and related expenses in the three months ended June 30, 2024 included $72,869 of stock compensation expense related to the issuance and vesting of options, compared to $88,200 of stock compensation expense related to the issuance and vesting of options, for the three months ended June 30, 2023.

Our professional fees, which include legal, audit, and investor relations, for the three months ended June 30, 2024 were $582,327, compared to $503,697 for the three months ended June 30, 2023.

Other income was $1,700 for the three months ended June 30, 2024, as compared to $437,433 for the three months ended June 30, 2023.

Other income for the three months ended June 30, 2023, 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, 2024, we recorded a net loss of $2,229,153, compared to a net loss of $2,557,132 for the three months ended June 30, 2023.

Six months ended June 30, 2024 and 2023

We had no revenue during the six months ended June 30, 2024 and 2023.

Cost of Goods Sold

We had no cost of goods sold during the six months ended June 30, 2024 and 2023.

Research and Development

Research and development expenses were $1,757,892 for the six months ended June 30, 2024, as compared to $2,791,496 for the six months ended June 30, 2023, a decrease of $1,033,604 or 37%.

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

Research and development expenses decreased from 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 $238,660 for the three months ended March 31, 2024, as compared to $181,616 for the three months ended March 31, 2023, an increase of $57,044, or 31%.

Sales and marketing expenses were $401,612 for the six months ended June 30, 2024, as compared to $429,389 for the six months ended June 30, 2023, a decrease of $27,777, or 6%.

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

Sales and marketing expenses increased largely due to the increase in consulting fees.

Sales and marketing expenses decreased largely due to the decrease in consulting fees.

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

General and Administrative

Our general and administrative expenses for the three months ended March 31, 2024 were $1,500,355, compared to $1,366,398 for the three months ended March 31, 2023, an increase of $133,957, or 10%.

Our wage and related expenses for the three months ended March 31, 2024 were $641,381, compared to $611,819 for the three months ended March 31, 2023.

Wage and related expenses in the three months ended March 31, 2024 included $165,121 of stock compensation expense related to the issuance and vesting of options, compared to $77,865 of stock compensation expense related to the issuance and vesting of options, for the three months ended March 31, 2023.

Our professional fees, which include legal, audit, and investor relations, for the three months ended March 31, 2024 were $639,872, compared to $520,637 for the three months ended March 31, 2023.

As a result of the foregoing, for the three months ended March 31, 2024, we recorded a net loss of $2,775,700, compared to a net loss of $2,942,746 for the three months ended March 31, 2023.

Our general and administrative expenses for the six months ended June 30, 2024 were $2,851,890, compared to $2,713,008 for the six months ended June 30, 2023, an increase of $138,882, or 5%.

Our wage and related expenses for the six months ended June 30, 2024 were $1,222,478, compared to $1,169,887 for the six months ended June 30, 2023.

Wage and related expenses in the six months ended June 30, 2024 included $237,990 of stock compensation expense related to the issuance and vesting of options, compared to $166,065 of stock compensation expense related to the issuance and vesting of options, for the six months ended June 30, 2023.

Our professional fees, which include legal, audit, and investor relations, for the six months ended June 30, 2024 were $1,222,199, compared to $1,024,335 for the six months ended June 30, 2023.

Other income was $6,541 for the six months ended June 30, 2024, as compared to $434,015 for the six months ended June 30, 2023.

Other income for the six months ended June 30, 2023, 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, 2024, we recorded a net loss of $5,004,853, compared to a net loss of $5,499,878 for the six months ended June 30, 2023.

Near-Term Liquidity and Capital Resources

We are experiencing financial and operating challenges.

In the absence of immediate additional liquidity, we will be forced to delay or reduce our product development programs and commercialization efforts, materially curtail or cease our operations, sell or dispose of our rights or assets, pursue sale or other strategic transactions, or undergo restructuring or insolvency proceedings.

As of March 31, 2024, we had an accumulated deficit of $94,705,852 and had $1,134,701 in cash.

As of June 30, 2024, we had an accumulated deficit of $96,935,005 and had $6,400,732 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.

We need additional capital to allow us to continue to execute our commercialization plans through the second quarter of 2024.

We are considering potential financing options that may be available to us, such as sales of our common stock, including through our at-the-market sales program (the “ATM Program”) with Ascendiant Capital Markets, LLC.

Except for the ATM Program, we have no commitments to obtain any additional funds, and there can be no assurance funds will be available in sufficient amounts or on acceptable terms.

We need additional capital to allow us to continue to execute our commercialization plans.

We are considering potential financing options that may be available to us, such as sales of our common stock, including through our at-the-market sales program with Ascendiant Capital Markets, LLC.

Except for the at-the-market sales program, we have no commitments to obtain any additional funds, and there can be no assurance funds will be available in sufficient amounts or on acceptable terms.

In addition, the Company 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 and which includes sales of common stock under the at-the-market sales program, for a period commencing on the date of the Placement Agreement until 180 days following the closing of our June 2024 public offering.

If we are unable to obtain sufficient additional financing in a timely fashion and on terms acceptable to us, our financial condition and results of operations may be materially adversely affected and we may not be able to continue operations or execute our stated commercialization plan.

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, 2024, we incurred net losses of $2,775,700 and used cash in operations of $2,144,312.

In light of our cash balance as of March 31, 2024, 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, 2024, we incurred net losses of $5,004,853 and used cash in operations of $4,227,613.

In light of our cash balance as of June 30, 2024, 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, 2024, we used $2,144,312 of cash in operating activities primarily as a result of our net loss of $2,775,700, offset by share-based compensation of $317,497, amortization of right of use assets of $40,376, inventory reserve of $142,733, depreciation expense of $15,300, fixed assets write-off of $8,808, and net changes in operating assets and liabilities of $106,674.

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 six months ended June 30, 2024, we used $4,227,613 of cash in operating activities primarily as a result of our net loss of $5,004,853, offset by share-based compensation of $504,087, amortization of right of use assets of $81,807, inventory reserve of $4,687, depreciation expense of $23,993, fixed assets write-off of $8,808, and net changes in operating assets and liabilities of $153,858.

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.

Investing Activities

During the three months ended March 31, 2024, we used $27,000 in investing activities related to purchases of fixed assets, and received $3,204 in proceeds from sale of fixed assets.

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

During the six months ended June 30, 2024, we used $16,000 in investing activities related to purchases of fixed assets, and received $3,204 in proceeds from sale of fixed assets.

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

Financing Activities

During the three months ended March 31, 2024, our financing activities provided $419,967 in proceeds from issuances of common stock, $77,419 in proceeds from warrant exercises.

During the six months ended June 30, 2024, our financing activities provided $1,148,470 in proceeds from issuances of common stock, $6,687,248 in proceeds from warrant exercises.

We also used $28,484 to repay a loan from TD Bank under the Canadian Emergency Business Account.

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

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

Long-Term Liquidity

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Off-Balance Sheet Transactions

At March 31, 2024, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

At June 30, 2024, 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