What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-20 compared with 2024-04-16 · 119 added, 111 removed, 62 unchanged (79% of the section changed)

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intended to be used in patients 8-21 years of age with functional abdominal pain associated with IBS.

Our device already has market

clearance from FDA for functional abdominal pain associated with IBS in children.

Other indications in our pipeline are comprised of

functional nausea in children, post-concussion syndrome in children, and cyclic vomiting syndrome in children.

For more information,

see “ Business—Our Pipeline ” and “—Products .”

Our device already has market clearance

from FDA for functional abdominal pain associated with IBS in children.

Other indications in our pipeline are comprised of functional

nausea in children, post-concussion syndrome in children, and cyclic vomiting syndrome in children.

our inception, we have incurred significant operating losses.

Our net loss was $14,626,683 and $4,780,061 million for the years

ended December 31, 2023 and 2022, respectively.

Our auditors have expressed substantial doubt about our ability to continue as a

going concern in their audit opinion.

We expect to incur significant expenses and operating losses for the foreseeable

future as we continue to pursue widespread insurance coverage of our IB-Stim device and seek FDA clearance of our device for other

There are a number of milestones and conditions that we must satisfy before we will be able to generate sufficient

revenue to fund our operations, including FDA clearance of our IB-Stim device to treat future indications.

Our net loss was $8,241,501 and $14,626,683 for the years ended December

31, 2024 and 2023, respectively.

Our auditors have expressed substantial doubt about our ability to continue as a going concern in their

audit opinion.

We expect to incur significant expenses and operating losses for the foreseeable future as we continue to pursue widespread

insurance coverage of our IB-Stim and RED devices and seek FDA clearance of our device for other indications.

There are a number of milestones

and conditions that we must satisfy before we will be able to generate sufficient revenue to fund our operations, including FDA clearance

of our IB-Stim device to treat future indications.

Affecting our Business and Results of Operations

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not seasonal and only mildly correlated with economic cycles.

Our IB-Stim device sells for $1,195 per device, and each child being

treated for functional abdominal pain associated with IBS will use three to four devices.

Potential patients with future indications

are expected to use six or more devices per patient.

Our IB-Stim device sells for $1,195 per device, and each child being treated

for functional abdominal pain associated with IBS will use four.

sales typically are made on a purchase order basis rather than through long-term purchase commitments.

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Standard payment terms generally are that payment is due within 30 days.

Our largest sales were to three

hospitals representing approximately 45% and 52% of total sales for the years ended December 31, 2023 and 2022, respectively.

Our largest sales were to three customers

representing approximately 40% and 45% of total sales for the years ended December 31, 2024 and 2023, respectively.

did not have a material impact on our operations for any applicable period, and we do not expect inflation to have a material impact

on our operations for the foreseeable future.

have four categories of expenses:

cost of goods sold, selling expenses, research and development (“R&D”), and general

and administrative (“G&A”).

of goods sold consist of costs paid for the IB-Stim device to our contract manufacturer along with periodic inventory adjustments and

expired inventory write-offs.

We ramped up production in 2018 and 2019 to meet expected demand and avoid any inventory shortages.

resulted in some excess inventory that did expire.

The costs of expired inventory were $25,008 and $10,026 for the years ended December

31, 2023 and 2022, respectively, representing 8.2% and 3.4% of our costs of goods sold, respectively.

Expired inventory expense is related

to our FDA clearance for our device in the treatment of functional abdominal pain associated with IBS in children.

Specifically, a certain

component of our IB-Stim device is cleared for a two-year period after the date the device is manufactured, and if the device is not

sold in such period, we must take the device out of inventory and write it off.

Expired inventory has not been material to our results,

averaging 1% or less of revenue over the past five years.

We have a fixed-price contract with the manufacturer of our IB-Stim device

to produce the device.

We expect production costs to remain relatively constant and only nominal inventory expirations in the foreseeable

core selling expenses primarily consist of commissions and shipping costs.

These expense items are generally correlated with sales.

and development expense is attributable to our clinical trials and related efforts to have our IB-Stim device cleared by the FDA for

other indications.

and administrative expense primarily consists of wages and benefits, professional fees including legal and audit, insurance,

investor relations, advertising, facility costs, utilities and travel.

profit and Gross Margin

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and allocation of resources.

We calculate gross profit as revenue less cost of goods sold, and gross margin as gross profit divided by

Our gross margin has been and will continue to be affected by a variety of factors, primarily the average selling price of our

IB-Stim device, production volume, order flows, change in mix of customers, third-party manufacturing costs related to components of

our IB-Stim device, and cost-reduction strategies.

We expect our gross profit to increase for the foreseeable future as our revenue grows,

both through broader insurer acceptance of our IB-Stim device in the near term and approval of our technology for the treatment of other

indications over the longer term.

Our gross margin may fluctuate from quarter to quarter due to changes in average selling prices, particularly

as we introduce enhancements to our IB-Stim device and new products to address other indications, and as we adopt new manufacturing processes

and technologies.

We calculate gross profit as net sales less cost of goods sold, and gross margin as gross profit divided

by net sales.

Our gross margin has been and will continue to be affected by a variety of factors, primarily the average selling price

of our IB-Stim device, production volume, order flows, change in mix of customers, third-party manufacturing costs related to components

of our IB-Stim device, and cost-reduction strategies.

We expect our gross profit to increase for the foreseeable future as our net sales

grows, both through broader insurer acceptance of our IB-Stim device in the near term and approval of our technology for the treatment

of other indications over the longer term.

Our gross margin may fluctuate from quarter to quarter due to changes in average selling prices,

particularly as we introduce enhancements to our IB-Stim device and new products to address other indications, and as we adopt new manufacturing

processes and technologies.

have four categories of expenses:

cost of goods sold, selling, research and development (“R&D”), and general and administrative

of goods sold consist of costs paid for the IB-Stim device to our contract manufacturer along with shipping and handling costs and expired

inventory charges.

Expired inventory expense is related to our FDA clearance for our device in the treatment of functional abdominal

pain associated with IBS in children.

Specifically, a certain component of our IB-Stim device is cleared for a two-year period after

the date the device is manufactured, and if the device is not sold in such period, we must take the device out of inventory and write

The cost of expired inventory was $25,008 for the year ended December 31, 2023, representing 8.2% of our costs of goods sold.

The Company did not have any expired inventory in the year ended December 31, 2024.

We have a fixed-price contract with the manufacturer

of our IB-Stim device to produce the device.

We expect production costs to remain relatively constant and only nominal inventory expirations

in the foreseeable future.

core selling expenses primarily consist of commissions.

and development expense is attributable to our clinical trials and related efforts to have our IB-Stim device cleared by the FDA for

other indications.

We expect future R&D expenses for other indications, such as functional nausea, post-concussion syndrome and cyclic

vomiting syndrome in children.

and administrative expense primarily consists of wages and benefits, professional fees including legal and audit, insurance, investor

relations, advertising, facility costs, utilities and travel.

of Operations

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Financing charges

Interest expense

Interest expense, net

Change in fair value of warrant liability

Change in fair value of derivative financial instruments

Amortization of debt discount and issuance cost

Amortization of debt discount and issuance costs

Extinguishment of debt liabilities

Other (expense) income, net

Total other (expense) income, net

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$ (14,626,683 )

sales declined $224,686, or 8.4%, to $2,460,049 in the year ended December 31, 2023 due to (i) management’s focus on gaining further

insurance coverage for our products, funding and the initial public offering and (ii) fewer shipments to certain customers as they manage

through the insurance reimbursement process.

sales increased $225,876, or 9.2%, from $2,460,049 for the year ended December 31, 2023, to $2,685,925 for the year ended December 31,

2024, primarily due to volume growth from our financial assistance programs that provide discounts to patients without insurance coverage.

Profit and Gross Margin

profit declined $230,971, or 9.7%, to $2,156,704 in the year ended December 31, 2023 due to (i) lower sales volume and (ii) gross margin

declining 120 bps from 88.9% to 87.7% in the years ended December 31, 2023 and 2022, respectively, due to growth in our patient assistance

program that provides discounts to patients without insurance coverage.

expenses declined $87,314, or 21.3%, to $323,569 in the year ended December 31, 2023 due to (i) lower sales volume and (ii) a reduction

in the commission rate paid to the sales team in the middle of the year ended December 31, 2022.

profit increased $167,219, or 7.8%, from $2,156,704 for the year ended December 31, 2023, to $2,323,923 for the year ended December 31,

2024, due to higher sales volume.

Despite the increase in sales volume, the decrease in gross margin from 87.7% for the year ended December

31, 2023, to 86.5% for the year ended December 31, 2024, was due to higher growth in the Company’s financial assistance programs

that are discounted to patients without insurance coverage compared to the Company’s undiscounted full reimbursement customers.

expenses increased $1,139, or 0.4%, from $323,569 for the year ended December 31, 2023, to $324,708 for the year ended December 31, 2024,

due to higher sales volume.

and Development

and development expense declined $56,295, or 25.0%, to $169,315 in the year ended December 31, 2023 due to more patient trials conducted

in the year ended December 31, 2023 as the Company prepared for more FDA submissions.

and development expenses increased $36,792, or 21.7%, from $169,315 for the year ended December 31, 2023, to $206,107 for the year ended

December 31, 2024, due to costs to bring the RED product to market and higher costs on a medical research project.

and Administrative

and administrative expense increased $3,204,895, or 62.6%, to $8,328,315 in the year ended December 31, 2023 due to (i) incremental headcount

to build out market access and patient assistance teams including recruiting costs, (ii) higher insurance, investor relations and board

of director costs post-IPO, (iii) one-time IPO advisory costs and (iv) higher advertising costs in order to expand market awareness.

operating loss increased $3,292,257, or 97.6%, to $6,664,495 in the year ended December 31, 2023 primarily due to lower sales volume

and higher general and administrative expenses.

and administrative expenses increased $621,610, or 7.5%, from $8,328,315 for the year ended December 31, 2023, to $8,949,925 for the year

ended December 31, 2024, due to (i) higher legal, insurance, investor relations, board of directors

and stock exchange listing costs as a publicly held entity that the Company did not incur prior to its 2023 IPO, (ii) incremental headcount

to build out the market access, sales and finance teams, (iii) severance charges related to the Company’s prior Chief Operating

Officer, (iv) one-time advisory costs, (v) expenses related to the introduction of an annual short-term incentive program

and (vi) higher advertising costs in order to expand market awareness, partially offset by the non-recurrence of 2023 post-IPO consulting

and recruiting services and the payment of incentive bonuses contingent upon the 2023 IPO.

operating loss increased $492,322, or 7.4%, from $6,664,495 for the year ended December 31, 2023, to $7,156,817 for the year ended December

31, 2024, primarily due to higher general and administrative expenses partially offset by higher sales volume.

(Expense) Income

expense increased $6,554,365, or 465.6%, to $7,962,188 in the year ended December 31, 2023 due to the full amortization of the

unamortized debt discount upon the IPO, a loss on the extinguishment of debt

upon the IPO, higher interest expense and a lower year-over-year change in the fair value of the derivative financial

instrument liability partially offset by the absence of convertible note financing fees in the year ended December 31, 2023 and a

larger year-over-year change in the fair value of the warrant liability.

net loss increased $9,846,622, or 206.0%, to $14,626,683 in the year ended December 31, 2023 primarily due to lower sales volume, higher

general and administrative expenses, the full amortization of the debt discount upon the

IPO and the loss on the extinguishment of debt upon the IPO.

expense decreased $6,877,504 or 86.4%, from $7,962,188 for the year ended December 31, 2023, to $1,084,684 for the year ended

December 31, 2024, due to the full conversion of the convertible notes upon the IPO on August

9, 2023, that eliminated any further debt discount, issuance cost, debt extinguishment and fair value derivative valuation net

charges and lower interest expense and issuance cost amortization from a lower debt burden in 2024, partially offset by financing

charges incurred to settle a 2023 convertible note dispute and other expense to settle certain claims of pre-IPO Series A Preferred

Stock shareholders.

net loss decreased $6,385,182, or 43.7%, from $14,626,683 for the year ended December 31, 2023, to $8,241,501 for the year ended December

31, 2024, primarily due to (i) higher sales volume, (ii) the elimination of debt discount, issuance

cost and fair value derivative valuation net charges as a result of the conversion of notes upon the 2023 IPO and (iii) lower interest

expense and issuance cost amortization from a lower debt burden in 2024, partially offset by (iv) financing charges incurred to settle

a 2023 convertible note dispute and other expense to settle certain claims of pre-IPO Series A Preferred Stock shareholders and (v) higher

general and administrative expenses due to the absence of 2023 post-IPO consulting and recruiting services and the payment of incentive

bonuses relating to the 2023 IPO.

and Capital Resources

had cash on hand of $3,696,870 and $78,560 as of December 31, 2024 and 2023, respectively.

We maintained negative working capital of $1,643,058

and $6,501,101 as of December 31, 2023 and 2022, respectively.

The increase in working capital was primarily due to the conversion of

notes payable upon the IPO along with the corresponding elimination or reduction of the fair value liability of warrants and derivatives

and payments of employee bonuses and to vendors with proceeds from the IPO.

have incurred losses since inception and have funded our operations primarily with a combination of sales, debt, and the sale of

capital stock.

As of December 31, 2023, we had an stockholders’ deficit of $1,403,241 with no outstanding long-term

future capital requirements will depend upon many factors, including progress with developing, manufacturing, and marketing our

technologies, the time and costs involved in preparing, filing, prosecuting, maintaining, and enforcing patent claims and other

proprietary rights, our ability to establish collaborative arrangements, marketing activities and competing technological and market

developments, including regulatory changes and overall economic conditions in our target markets.

Our ability to generate revenue

and achieve profitability requires us to successfully market and secure purchase orders for our products from customers currently

identified in our sales pipeline and to new customers as well.

The primary activity that will drive all customers and revenues is

the adoption of insurance coverage by commercial insurance carriers nationally, so this is a top priority of the Company.

activities, including our planned research and development efforts, will require significant uses of working capital through the

rest of 2024 and beyond.

Based on our current operating plans, we believe that our existing cash at the time of this filing will only

be sufficient to meet our anticipated operating needs through the end of 2024.

We maintained a working capital surplus of

$1,832,858 and negative working capital of $1,643,058 as of December 31, 2024 and 2023, respectively.

The increase in working capital

was primarily due to the issuance of $5,000,000 of Convertible Series B Preferred Stock in November 2024 that significantly improved

the Company’s liquidity position.

have incurred losses since inception and have funded our operations primarily with a combination of sales, debt, and the sale of capital

As of December 31, 2024, we had stockholders’ equity of $2,067,748, short-term outstanding borrowings of $154,152 and no

long-term debt.

future capital requirements will depend upon many factors, including progress with developing, manufacturing, and marketing our technologies,

the time and costs involved in preparing, filing, prosecuting, maintaining, and enforcing patent claims and other proprietary rights,

our ability to establish collaborative arrangements, marketing activities and competing technological and market developments, including

regulatory changes and overall economic conditions in our target markets.

Our ability to generate revenue and achieve profitability requires

us to successfully market and secure purchase orders for our products from customers currently identified in our sales pipeline and to

new customers as well.

The primary activity that will drive all customers and revenues is the adoption of insurance coverage by commercial

insurance carriers nationally, so this is a top priority of the Company.

These activities, including our planned research and development

efforts, will require significant uses of working capital through the rest of 2025 and beyond.

Based on our current operating plans,

we believe that our existing cash at the time of this filing will only be sufficient to meet our anticipated operating needs before the

Additionally,

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Years Ended December 31,

Net cash used in operating activites

Net cash used in operating activities

$ (6,098,264 )

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Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Activities – Net cash used in operating activities increased $4,395,974, or 191.3%, in the year ended December 31, 2023 primarily

due to higher general and administrative expenses and the payment of vendors and employee bonuses, partially offset by the issuance of

common stock for non-cash consideration of IPO services.

Activities – Net cash used in investing activities increased $10,576, or 17.3%, in the year ended December 31, 2023 due to

purchases of equipment, trademarks and licenses.

Activities – Net cash provided by financing activities increased $4,298,570, or 187.5%, in the year ended December 31, 2023

due to proceeds from the issuance of common stock via an IPO and convertible notes partially offset by repayments of notes payable and

the payment of IPO costs.

Activities – Net cash used in operating activities declined 595,714, or 8.9% from $6,693,978 for the year ended December

31, 2023, to $6,098,264 for the year ended December 31, 2024, primarily due to more issuances of common stock instead of cash for

certain services in 2024 than in 2023 and lower interest payments in 2024 due to the conversion of debt in the 2023 IPO, partially

offset by payments to past due vendors in 2024 for 2023 services.

Activities – Net cash used in investing activities decreased $44,005, or 61.3%, from $71,781 for the year ended December 31,

2023, to $27,776 for the year ended December 31, 2024, primarily due to the purchase of the Company’s trademark in 2023 that did

not recur in 2024.

Activities – Net cash provided by financing activities increased $3,153,730, or 47.9%, from $6,590,620 for the year ended

December 31, 2023, to $9,744,350 for the year ended December 31, 2024, primarily due to principal repayments on notes payable in

2023 that did not recur in 2024 and the Company subsequently raised capital from the IPO in 2023 to retire the notes payable and

issued Convertible Series B Preferred Stock in 2024.

QUANTITATIVE AND QUALITATIVE DISCLOSURES 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-K

Item 7. Management’s Discussion and Analysis