Valion Bio, Inc 10-Q for FY2023 Q3
Valion Bio, Inc. (VBIO)
About this 10-Q
Valion Bio, Inc filed this 10-Q on November 14, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $282K
- down 40.9% from $477K a year earlier
- Net loss
- $1.76M
- compared with a net loss of $2.58M a year earlier
- Diluted EPS
- -$1.48
- compared with -$27.00 a year earlier
Table of Contents
ppju5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
OR
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices including zip code) |
( (Registrant’s telephone number, including area code) |
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Title of Each Class |
Trading Symbol(s) |
Name of Each Exchange on Which Registered The |
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act (Check one):
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☐ Large accelerated Filer |
☐ Accelerated Filer |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No
As of November 10, 2023,
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PART I - FINANCIAL INFORMATION |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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PART II - OTHER INFORMATION |
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Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our condensed financial statements included in this Quarterly Report on Form 10‑Q are as follows:
Condensed Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 |
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Condensed Statements of Cash Flow for the nine months ended September 30, 2023 and 2022 (unaudited) |
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This Quarterly Report on Form 10‑Q for the quarter ended September 30, 2023, should be read in conjunction with the Company’s Annual Report on Form 10‑K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 31, 2023.
The accompanying condensed financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10‑Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended September 30, 2023 are not necessarily indicative of the results that can be expected for the full year.
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Table of Contents
Tivic Health Systems, Inc.
Condensed Balance Sheets (Unaudited)
September 30, 2023 and December 31, 2022
(in thousands, except share and per share data)
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September 30, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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Accounts receivable, net |
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Inventory, net |
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Deferred offering costs |
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— |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets, operating lease |
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Other assets |
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Total assets |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
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Other accrued expenses |
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Operating lease liability, current |
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Total current liabilities |
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Operating lease liability |
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Total liabilities |
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and (See Note 5) |
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Stockholders’ equity |
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Preferred stock, $ |
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— |
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Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
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Table of Contents
Tivic Health Systems, Inc.
Condensed Statements of Operations (Unaudited)
Three and Nine Months Ended September 30, 2023 and 2022
(in thousands, except share and per share data)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Net loss |
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Net loss per share - basic and diluted |
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Weighted-average number of shares - basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
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Table of Contents
Tivic Health Systems, Inc.
Condensed Statements of Stockholders’ Equity (Unaudited)
Three and Nine Months Ended September 30, 2023 and 2022
(in thousands except share and per share data)
For the Three and Nine Months Ended September 30, 2022
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Additional |
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Total |
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Preferred Stock |
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Common Stock |
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Paid-in |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balances at January 1, 2022 |
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$ |
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$ |
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Stock-based compensation |
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— |
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Net loss |
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— |
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Balances at March 31, 2022 |
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— |
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$ |
— |
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$ |
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$ |
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Repurchase of restricted common stock |
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Stock-based compensation expense |
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Net loss |
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— |
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Balances at June 30, 2022 |
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— |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
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Exercise of stock options |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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Balances at September 30, 2022 |
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— |
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$ |
— |
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$ |
— |
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$ |
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$ |
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$ |
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For the Three and Nine Months Ended September 30, 2023
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Additional |
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Total |
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Preferred Stock |
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Common Stock |
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Paid-in |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balances at January 1, 2023 |
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— |
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$ |
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$ |
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Issuance of common stock, net of issuance costs |
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Issuance of warrants |
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Stock-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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Balances at March 31, 2023 |
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— |
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$ |
— |
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$ |
— |
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$ |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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Balances at June 30, 2023 |
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— |
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$ |
— |
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$ |
— |
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$ |
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$ |
( |
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$ |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock, net of issuance costs |
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— |
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— |
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Issuance of warrants |
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Stock-based compensation |
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— |
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— |
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Issuance of fractional shares |
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Net loss |
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— |
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— |
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( |
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Balances at September 30, 2023 |
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— |
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$ |
— |
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$ |
— |
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$ |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
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Table of Contents
Tivic Health Systems, Inc.
Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2023 and 2022
(in thousands)
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Nine Months Ended |
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September 30, |
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2023 |
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2022 |
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Cash flows from operating activities |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock based compensation |
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Depreciation |
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Amortization of right-of-use asset |
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Changes is operating assets and liabilities: |
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Accounts receivable |
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Inventory |
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Prepaid expenses and other current assets |
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Deferred offering costs |
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Accounts payable |
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Accrued expenses |
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Lease liabilities |
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Other assets |
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Net cash used in operating activities |
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Cash flows from investing activities |
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Acquisition of property and equipment |
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Net cash used in investing activities |
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Cash flows from financing activities |
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Proceeds from issuance of common stock, net of issuance costs |
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Proceeds from exercise of stock options |
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Net cash provided by financing activities |
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Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents |
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Beginning of period |
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End of period |
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Supplemental disclosure on noncash financing activities |
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Issuance of common stock warrant |
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$ |
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$ |
— |
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Deferred offering costs charged to additional paid-in-capital |
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$ |
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$ |
— |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
5
Table of Contents
Tivic Health Systems, Inc.
Notes to Unaudited Condensed Financial Statements
(amounts are as indicated)
Tivic Health Systems, Inc. (the “Company”) was incorporated in the state of California on September 22, 2016 for the purpose of developing and commercializing non-invasive bioelectronic medicine. In June 2021, the Company was reincorporated as a Delaware corporation. Tivic is a commercial-stage health tech company advancing the field of bioelectronic medicine. Tivic’s patented technology platform leverages stimulation on the trigeminal, sympathetic, and vagus nerve structures. Tivic’s non-invasive and targeted approach to the treatment of inflammatory chronic health conditions is intended to give consumers and providers drug-free therapeutic solutions with high safety profiles, low risk, and broad applications. Tivic’s first commercial product, ClearUP, is an FDA approved, award-winning, handheld bioelectronic sinus device. ClearUP is clinically proven, doctor-recommended, and is available through online retailers and commercial distributors. The Company is headquartered in Hayward, California.
2. Summary of Significant Accounting Policies
Basis of Presentation
Reverse Stock Split
In August 2023, the Company’s Board of Directors and stockholders approved an amendment to the Company’s amended and restated certificate of incorporation to effect a
Going Concern Uncertainty
During the nine months ended September 30, 2023 and 2022, the Company incurred a net loss of $
The accompanying unaudited interim condensed financial statements have been prepared as if the Company will continue as a going concern. As noted above, the Company has experienced losses and negative cash flows from operations. The Company's working capital
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Table of Contents
as of September 30, 2023 was approximately $
Future capital requirements will depend upon many factors, including, without limitation, 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; completion of any acquisitions or other strategic transactions; 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 and services from existing as well as new customers. We also will be required to efficiently manufacture and deliver equipment on those purchase orders. These activities, including our planned research and development efforts, may require significant uses of working capital. There can be no assurance that we will generate revenue and cash as expected in our current business plan.
The Company recognizes it will need to raise additional capital to continue research and development and to fund its planned operations, clinical trials and, if regulatory approval is obtained, commercialization of future products. We may seek additional funds through equity or debt offerings and/or borrowings under notes payable, lines of credit or other sources. We do not know whether additional financing will be available on commercially acceptable terms, or at all, when needed. If adequate funds are not available or are not available on commercially acceptable terms, our ability to fund our operations, support the growth of our business or otherwise respond to competitive pressures could be significantly delayed or limited, which could materially adversely affect our business, financial conditions, or results of operations.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual results could differ materially from those estimates. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at date of purchase to be cash equivalents. As of September 30, 2023 and December 31, 2022, cash and cash equivalents totaled $
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount, net of allowances for credit losses and returns reserves. The allowance for credit losses is based on our assessment of the collectability of accounts. Management regularly reviews the adequacy of the allowance for credit losses by considering the age of each outstanding invoice, each customer’s expected ability to pay, and the collection history with each customer, when applicable, to determine whether a specific allowance is appropriate. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. As of both September 30, 2023 and December 31, 2022, the allowance for credit losses balance was $
Inventory
Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. Inventories are reviewed periodically to identify slow-moving inventory based on anticipated sales activity. As of both September 30, 2023 and December 31, 2022, the reserve for obsolescence was $
Deferred Financing Costs
7
Table of Contents
The Company complies with the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 340-10-S99-1. The Company capitalizes incremental legal, professional, accounting, and other third-party fees that are directly associated with an equity or debt offering as other current assets. If the Company consummates an equity offering, the deferred financing costs will be allocated to additional paid-in capital. If the Company consummates a debt offering, the deferred financing costs will be recorded as a discount to the debt.
Revenue Recognition
The Company recognizes revenue from product sales in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”). The standard applies to all contracts with customers, except contracts that are within scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are in within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inceptions, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company sells its products through direct sales and resellers. Revenue is recognized when control of the promised goods is transferred to the customers or the resellers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. Revenue associated with products holding rights of return are recognized when the Company concludes there is not a risk of significant revenue reversal in the future periods for the expected consideration in the transaction.
The Company may receive payments at the onset of the contract and before goods have been delivered. In such instances, the Company records a deferred revenue liability. The Company recognizes these contract liabilities as revenue after the revenue criteria are met. As of September 30, 2023 and December 31, 2022, the contract liability related to the Company’s deferred revenues approximated $
The Company relies on third parties to have procedures in place to detect and prevent credit card fraud, as the Company has exposure to losses from fraudulent charges. The Company records the losses related to chargebacks as incurred.
The Company has also elected to exclude from the measurement of the transaction price sales taxes remitted to governmental authorities.
The table below presents revenue by channel for the three and nine months ended September 30, 2023 and 2022 (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Product Revenue by Sales Channel |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Product Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct-to-consumer |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Reseller |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Return Reserves |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Shipping and Handling
Shipping and handling fees paid by customers are recorded in revenue, with the related expenses recorded in cost of sales. Shipping and handling fees paid by customers for the three and nine months ended September 30, 2023 were $
8
Table of Contents
Shipping costs for delivery of product to customers in the three and nine months ended September 30, 2023 were $
Product Warranty
The Company generally offers a
Sales and Marketing Expenses
Sales and marketing expenses are expensed as incurred and consist primarily of merchandising, customer service and targeted online marketing costs, such as display advertising, keyword search campaigns, search engine optimization and social media and offline marketing costs such as television, radio and print advertising. Sales and marketing expenses also include payroll costs and stock-based compensation expense for employees involved in marketing activities. Sales and marketing expenses are primarily related to growing the customer base.
Research and Development Expenses
Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee benefits, materials, supplies, depreciation on and maintenance of research equipment, the cost of services provided by outside contractors, and the allocable portions of facility costs, such as rent, utilities, insurance, repairs and maintenance, depreciation, and general support services. All costs associated with research and development are expensed as incurred. Additionally, the Company incurs costs related to periodic design changes to existing products. Such costs are not considered research and development expenses and are capitalized and amortized over the newly designed product's estimated life.
Stock-Based Compensation
The Company accounts for stock-based compensation arrangements with employees and non-employee consultants using a fair value method, which requires the recognition of compensation expense for costs related to all stock-based payments, including stock options. The fair value method requires the Company to estimate the fair value of stock-based payment awards to employees and non-employees on the date of grant using an option pricing model.
Stock-based compensation costs are based on the fair value of the underlying option calculated using the Black-Scholes option-pricing model and recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. The Company measures equity-based compensation awards granted to non-employees at fair value as the awards vest and recognizes the resulting value as compensation expense at each financial reporting period.
Determining the appropriate fair value model and related assumptions requires judgment, including estimating stock price volatility, expected dividend yield, expected term, risk-free rate of return, and the estimated fair value of the underlying common stock. Due to the lack of company-specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The group of representative companies have characteristics similar to the Company, including stage of product development and focus on the life science industry. The Company uses the simplified method, which is the average of the final vesting tranche date and the contractual term, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company uses an assumed dividend yield of
Net Loss per Common Share
The Company computes net loss per share of common stock in conformity with the two-class method required for participating securities. Diluted net loss per share is computed similar to basic net loss per share, except that the denominator is increased to include the number of additional shares for the potential dilutive effects of warrants, convertible preferred stock and stock options outstanding during the period calculated in accordance with the treasury stock method, or the two-class method, whichever is more dilutive. For all periods presented, basic and diluted net loss per share is the same, as inclusion of any additional share equivalents would be anti-dilutive.
9
Table of Contents
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents and accounts receivable. Cash and cash equivalents include a checking account and money market account, both held at one national financial institution in the United States. At times, such deposits may be in excess of insured limits. Despite recent concerns regarding the stability of certain banking institutions in the United States, management believes that the financial institution at which the Company holds its deposits is financially sound, and accordingly, minimal credit risk exists with respect to the financial institution. The Company has not experienced any losses on its deposits of cash and cash equivalents. As of September 30, 2023 and December 31, 2022, the Company had cash and cash equivalents balances exceeding FDIC insured limits by $
During 2023, the majority, or
For the three months ended September 30, 2023, the Company had
For the nine months ended September 30, 2023, the Company had
During 2023, we outsourced
The world continues to be affected by the lingering effects of the COVID-19 pandemic, the ongoing conflict between Russia and Ukraine and more recent conflict in Israel, economic uncertainty in human capital management and certain other macroeconomic factors including climate change, recent uncertainty with respect to the banking systems in the United States, inflation, and rising interest rates. Additionally, events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, in March 2023, Silicon Valley Bank and Signature Bank, and most recently on May 1, 2023, First Republic Bank, were closed and taken over by the FDIC, which created significant market disruption and uncertainty for those who bank with those institutions, and which raised significant concern regarding the stability of the banking system in the United States, and in particular with respect to regional banks. These factors, amongst other things, could result in further economic uncertainty and volatility in the capital markets in the near term, and could negatively affect our operations. We will continue to monitor material impacts on our business strategies and operating results.
Recently Issued Accounting Pronouncements — Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and issued subsequent amendments to the initial guidance within ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, and ASU 2020-02 (collectively, “Topic 326”). Topic 326 introduces an approach, based on expected losses, to estimate credit losses for certain types of financial instruments, including accounts receivable, among other changes. This guidance became effective for us on January 1, 2023. We determined the applicable assets impacted by the guidance to be our accounts receivable. We reviewed the acceptable methods for determining the expected credit losses and utilized the roll-rate method whereby expected credit losses are determined using historical trends in credit quality indicators such as delinquency risk ratings. The majority of our sales are to individual customers where payment is made at the time of purchase, thus no credit loss has been estimated. Our accounts receivable balances represent amounts due primarily from our resellers, which are large, well established companies. We have not experienced any credit losses from our current accounts receivable base in the past and estimate that we will have no credit losses based on the current account attributes. As of September 30, 2023, there have been no estimated credit losses recorded.
Recently Issued Accounting Pronouncements — Not Yet Adopted
There have been no recently issued accounting pronouncements that are applicable to the Company.
10
Table of Contents
The Company’s financial instruments consist of money market funds. The following tables show the Company’s cash equivalents carrying value and fair value at September 30, 2023 and December 31, 2022 (in thousands):
|
|
As of September 30, 2023 (unaudited) |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
Quoted |
|
|
Significant |
|
|
|
|
|||||
|
|
|
|
|
|
|
|
Priced in |
|
|
other |
|
|
Significant |
|
|||||
|
|
|
|
|
|
|
|
active |
|
|
observable |
|
|
unobservable |
|
|||||
|
|
Carrying |
|
|
Fair |
|
|
markets |
|
|
inputs |
|
|
inputs |
|
|||||
|
|
Amount |
|
|
Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
|
|
As of December 31, 2022 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
Quoted |
|
|
Significant |
|
|
|
|
|||||
|
|
|
|
|
|
|
|
Priced in |
|
|
other |
|
|
Significant |
|
|||||
|
|
|
|
|
|
|
|
active |
|
|
observable |
|
|
unobservable |
|
|||||
|
|
Carrying |
|
|
Fair |
|
|
markets |
|
|
inputs |
|
|
inputs |
|
|||||
|
|
Amount |
|
|
Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Cash equivalents – Cash equivalents of $
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
There have been no changes to the valuation methodologies utilized by the Company during the nine months ended September 30, 2023 compared to the year ended December 31, 2022. The Company evaluates transfers between levels at the end of each reporting period. There were
11
Table of Contents
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
(unaudited) |
|
|
|
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Inventory at cost |
|
|
|
|
|
|
||
Less reserve for obsolescence |
|
|
— |
|
|
|
— |
|
Inventory, net |
|
$ |
|
|
$ |
|
||
5. Commitments and Contingencies
Lease
In November 2021, the Company executed a noncancelable operating lease for approximately
Lease costs for the three and nine months ended September 30, 2023 were $
The Company’s weighted average remaining lease term and weighted average discount rate as of September 30, 2023 is shown below:
Remaining lease term (in years) |
|
|
|
|
Discount rate |
|
|
% |
Cash paid for amounts included in the measurement of operating lease liabilities were $
Future minimum maturities of lease liabilities recognized on the condensed balance sheets as of September 30, 2023 are as follows (in thousands):
Fiscal Year |
|
|
|
|
Remainder of 2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Total minimum lease payments |
|
|
|
|
Less imputed interest |
|
|
( |
) |
Present value of lease payments |
|
$ |
|
|
ALOM Fulfillment Services Agreement
On November 25, 2022, the Company entered into a Fulfillment Services Agreement (the “ALOM Agreement”) with ALOM Technologies Corporation (“ALOM”). Pursuant to the ALOM Agreement, commencing on November 28, 2022, ALOM began providing, on a non-exclusive basis, certain assembly, procurement, storage, returns, and fulfillment services to our end customers and retailers within the United States. During the term of the ALOM Agreement, ALOM shall provide the services in accordance with purchase orders issued by us from time to time. The consideration payable by us to ALOM for services rendered under the ALOM Agreement will be calculated and invoiced based on fixed hourly rates and fixed unit pricing, as applicable, subject to certain exceptions; provided that, commencing April 1, 2023, we became subject to a $
12
Table of Contents
Contingencies
From time to time, the Company may become involved in litigation. Management is not currently aware of any litigation matters or other contingencies that could have a material adverse effect on the financial position, results of operations, or cash flows of the Company.
6. Preferred Stock
The Company’s board of directors is authorized, without action by its stockholders, to designate and issue up to
7. Common Stock
On April 1, 2022, the Company exercised its right and repurchased
On February 13, 2023, the Company sold
On
On
On
13
Table of Contents
Effective August 23, 2023, the Company's board of directors approved a reverse stock split of the Company's issued and outstanding shares of common stock, par value $
As of September 30, 2023,
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Warrants to purchase common stock |
|
|
|
|
|
|
||
Options issued and outstanding |
|
|
|
|
|
|
||
Shares available for future stock option grants |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
8. Common Stock Warrants
Historically, the Company has entered into warrant agreements in connection with certain consulting agreements and equity offerings. In August 2023, the Company implemented a
In July 2021, the Company entered into a consulting agreement, pursuant to which
In November 2021, the Company issued warrants to purchase
In February 2023, the Company issued warrants to purchase
In July and August 2023, the Company issued a total of
14
Table of Contents
from the from the commencement of sales under the applicable offering. Of the warrants issued in the offerings,
The Company estimated the value of the warrants in 2023 using the
The fair value of the warrants issued in 2023 was estimated on the date of grant using the following assumptions:
|
|
2023 |
||
|
|
Minimum |
|
Maximum |
Expected life (in years) |
|
|
||
Expected volatility |
|
|
||
Risk-free interest rate |
|
|
||
Dividend yield |
|
|
||
A summary of the Company’s outstanding warrants as of September 30, 2023 is as follows:
Class of Shares |
|
Number of Warrants |
|
|
Exercise Price |
|
|
Expiration Date |
||
Common Stock |
|
|
|
|
$ |
|
|
|||
Common Stock |
|
|
|
|
$ |
|
|
|||
Common Stock |
|
|
|
|
$ |
|
|
|||
Common Stock |
|
|
|
|
$ |
|
|
|||
Common Stock |
|
|
|
|
$ |
|
|
|||
Common Stock |
|
|
|
|
$ |
|
|
|||
Common Stock |
|
|
|
|
$ |
|
|
|||
9. Equity Incentive Plans
In 2017, the Company adopted its 2017 Equity Incentive Plan (the “2017 Plan”).
On November 10, 2021, the 2017 Plan terminated and was replaced by the 2021 Plan (defined below), and future issuances of incentive instruments will be made under and governed by the 2021 Plan. Outstanding awards issued under the 2017 Plan will remain subject to the terms and conditions of the 2017 Plan, provided that to the extent that outstanding awards under the 2017 Plan are forfeited or lapse unexercised, the shares of common stock subject to such awards will no longer be available for future issuance.
In 2021, the Company adopted its 2021 Equity Incentive Plan (“2021 Plan”). Options granted under the 2021 Plan may be incentive stock options or non-statutory stock options, as determined at the time of grant by the Compensation Committee of the Company’s board of directors, which is responsible for administering the 2021 Plan. Stock purchase rights and restricted stock units may also be granted under the 2021 Plan. The term shall be no more than
In the case of an incentive stock option (i) granted to an employee who, at the time of grant of such option, owns stock representing more than
15
Table of Contents
price shall be no less than
The options may include provisions permitting exercise of the option prior to full vesting. Any unvested shares upon termination shall be subject to repurchase by the Company at the original exercise price of the option.
In August 2023, the Company implemented a
As of September 30, 2023, there were
Stock options granted under the Company’s equity incentive plans generally vest over
The following table summarizes the stock option award activity for the nine months ended September 30, 2023:
|
|
Outstanding |
|
|
Exercisable |
|
||
January 1, 2023 |
|
|
|
|
|
|
||
Granted |
|
|
|
|
|
— |
|
|
Vested |
|
|
— |
|
|
|
|
|
Forfeited or expired |
|
|
( |
) |
|
|
( |
) |
Exercised |
|
|
— |
|
|
|
— |
|
September 30, 2023 |
|
|
|
|
|
|
||
The weighted-average exercise price as of September 30, 2023 for stock options outstanding and stock options exercisable was $
Stock-Based Compensation
Total stock-based compensation recorded in the condensed statements of operations is allocated as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales and marketing |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following outstanding potentially dilutive common stock equivalents have been excluded from the calculation of diluted net loss per share for the periods presented due to their antidilutive effect:
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Warrants to purchase common stock |
|
|
|
|
|
|
||
Common stock options issued and outstanding |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
16
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the interim condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10‑Q, as well as our audited financial statements and related notes as disclosed in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2022. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part II, Item 1A “Risk Factors” or in other parts of this Quarterly Report on Form 10‑Q, as well as those identified in the “Risk Factors” section of our Annual Report on Form 10‑K for the fiscal year ended December 31, 2022, each of which Risk Factors are incorporated in this Quarterly Report on Form 10-Q by reference. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. See “Forward-Looking Statements.”
Overview
Tivic is a bioelectronic medicine company developing and commercializing drug-free treatments for various diseases and conditions. Bioelectronic medicine, also referred to as electroceuticals or neuromodulation, is the treatment of disease and conditions by preferentially activating electrical functions of the body to modify central or peripheral nerve activity. ClearUP is our first commercial product, and is FDA-approved for the treatment of sinus pain and congestion. It has also been granted a CE-Mark as a medical device for the treatment of sinus pain, pressure and congestion. ClearUP is currently sold in the U.S. directly to consumers on various platforms and through reseller channels. The Company has also recently announced the expansion of its intellectual property (“IP”) portfolio and research programs related to vagus nerve stimulation to expand its applications in non-invasive bioelectronic medicine.
Bioelectronic medicine is an emerging market. Since our formation in September 2016, we have devoted substantially all of our efforts to the development and marketing of our proprietary technology platform to provide noninvasive, drug-free treatments and treatment candidates for various diseases and conditions. In 2019, we launched ClearUP in the U.S. market. ClearUP is approved by the FDA for sale in the U.S. for the two FDA-approved indications noted above and has a CE Mark (which covers a third indication of sinus pressure and gives us commercial access to European Union Member states and certain other countries). We currently sell directly to consumers online through our own website, Amazon, and Walmart in addition to wholesale via major and specialty retailers, such as BestBuy, FSAStore, and others.
Business Updates
On January 26, 2023, we received notice from the Nasdaq Stock Market LLC (“Nasdaq”) that we were not in compliance with Nasdaq Listing Rule 5550(a)(2), as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business days, and on July 24, 2023 we received a new notice from Nasdaq that, as of July 21, 2023, the Company’s common stock had a closing bid price of $0.10 or less for ten consecutive trading days and that, consistent with Nasdaq Listing Rule 5810(c)(3)(A)(iii), the Staff determined to delist the Company’s common stock from the Nasdaq Capital Market. The Company appealed the delisting decision and effected the 1-for-100 reverse stock split in August 2023, prior to the relevant hearing date for the Company’s appeal due to such appeal being moot, in order to regain compliance with the Nasdaq continued listing rules. On September 15, 2023, Nasdaq notified the Company that the Company’s bid price deficiency had been cured and that the Company had regained compliance with all applicable listing standards. As a result, Nasdaq cancelled the Company’s appeal hearing, reversed its delisting determination and confirmed that the Company’s common stock will continue to be listed and traded on the Nasdaq Capital Market. Although the Company regained compliance with the relevant Nasdaq listing rules and is no longer in imminent risk of delisting, no assurances can be provided that the Company will be able to maintain compliance with Nasdaq’s minimum bid price requirement or other continued listing rules.
Effective August 23, 2023, the Company implemented a reverse stock split of the Company's issued and outstanding shares of common stock at a ratio of 1-for-100. As a result of the reverse stock split, the total number of shares of Common Stock held by each stockholder of the Company were converted automatically into the number of shares of Common Stock equal to the number of issued and outstanding shares of Common Stock held by each such stockholder immediately prior to completion of the reverse stock split divided by 100. The Company issued one whole share of the post reverse stock split common stock to any stockholder who otherwise would have been entitled to receive a fractional share as a result of the reverse stock split. As a result, no fractional shares were issued in connection with the reverse stock split and no cash or other consideration was paid in connection with any fractional shares that would otherwise have resulted from the reverse stock split. Also, all options, warrants and other convertible securities of the Company outstanding immediately prior to the reverse stock split were adjusted by dividing the number of shares of common stock into which such options, warrants and other convertible securities were exercisable or convertible by 100 and multiplied the exercise or conversion price thereof by 100, all in accordance with the terms of the plans, agreements or arrangements governing such options, warrants and other convertible securities and subject to rounding pursuant to such terms. There was no change to the par value, or authorized shares, of either the common stock
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or preferred stock, as a result of the reverse stock split. All share and per share amounts for the Company’s common stock, as well as the options and warrants outstanding and exercise prices thereof, included in this Quarterly Report on Form 10-Q, including the financial statements and footnotes thereto included herein, have been retroactively restated to give effect to the reverse stock split.
On July 5, 2023, we amended our amended and restated bylaws (the “Bylaws”) to (i) revise Article II, Section 2.5 of the Bylaws to incorporate those requirements set forth in Rule 14a-19 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as recently implemented by the SEC; and (ii) to revise Article II, Section 2.8 of the Bylaws to decrease the quorum threshold necessary to conduct business at stockholder meetings of the Company to one-third of the capital stock issued and outstanding and entitled to vote at the meeting. Pursuant to Article XI of the Bylaws, stockholder approval was not required to amend the Bylaws.
From July 11, 2023 to August 9, 2023, we sold an aggregate of 1,169,230 shares of common stock to certain investors at prices ranging from $4.00 to $5.50 per share in a series of registered public offerings, resulting in aggregate gross proceeds to the Company of approximately $5.2 million. Aggregate net proceeds to the Company, after deducting placement agent fees and offering expenses paid by the Company, was approximately $4.8 million. Maxim served as the placement agent, on a “reasonable best efforts basis,” in connection with each of the offerings. The shares of common stock sold in the offerings were offered pursuant to final prospectus supplements, filed with the SEC, to the Company’s effective shelf registration statement on Form S-3 (File No. 333-269494), which was initially filed with the SEC on February 1, 2023 and was declared effective on February 8, 2023. See the Recent Developments section, below, for additional information regarding each of the offerings.
In Q3 2023, we began to see the positive impact of initiatives that have spanned several quarters to improve fundamentals on our ClearUP product and advancing our commercial roadmap as follows:
We invested in research and development (“R&D”) programs as follows:
Tivic has proven its ability to innovate by combining science and technology with its expertise in neuroimmunology, medical device product development, and regulatory affairs. We expect to increasingly focus our internal research on breakthrough opportunities, treating medical conditions that generate high costs and could benefit from more effective, patient-centric therapeutic solutions.
Operational Updates
On October 21, 2022, the Company entered into a Manufacturing Agreement (the “Microart Agreement”) with Microart Services Inc. (“Microart”). Pursuant to the Microart Agreement, Microart will manufacture, on a non-exclusive basis, certain components and sub-assemblies (collectively, “Products”) of the Company’s current and future products. On November 25, 2022, we entered into a Fulfillment Services Agreement (the “ALOM Agreement”) with ALOM Technologies Corporation (“ALOM”). Pursuant to the ALOM
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Agreement, commencing on November 28, 2022, ALOM began providing, on a non-exclusive basis, certain assembly, procurement, storage, returns, and fulfillment services to our end customers and retailers within the United States.
As a result of both the Microart and ALOM Agreements signed within the fourth quarter of 2022, we have significantly reduced the cost per unit for the existing ClearUP product in 2023. We expect that the remainder of the ClearUp products previously built under the higher cost structure should sell through in 2023, resulting in continued reduction of cost of goods sold as a percentage of revenue.
Team Updates
We are intent on maintaining a small core team at this stage of the Company, given current market conditions and need for a smaller footprint. We have relied, and continue to rely, heavily on third-party service providers, including marketing agencies, clinical research organizations and academic research partnerships, finance and accounting support, legal support, and contract manufacturing organizations to carry out our operations. We recognize that any amount of turnover in our internal or third-party service providers at our size may impair our ability to execute our business plans.
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2023 and 2022
The following table summarizes our results of operations (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
||||||
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenue |
|
$ |
282 |
|
|
$ |
477 |
|
|
$ |
(195 |
) |
|
$ |
819 |
|
|
$ |
1,432 |
|
|
$ |
(613 |
) |
Cost of sales |
|
|
174 |
|
|
|
414 |
|
|
|
(240 |
) |
|
|
537 |
|
|
|
1,176 |
|
|
|
(639 |
) |
Gross profit |
|
|
108 |
|
|
|
63 |
|
|
|
45 |
|
|
|
282 |
|
|
|
256 |
|
|
|
26 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development |
|
|
337 |
|
|
|
399 |
|
|
|
(62 |
) |
|
|
1,295 |
|
|
|
1,295 |
|
|
|
0 |
|
Sales and marketing |
|
|
480 |
|
|
|
487 |
|
|
|
(7 |
) |
|
|
1,390 |
|
|
|
2,291 |
|
|
|
(901 |
) |
General and administrative |
|
|
1,051 |
|
|
|
1,761 |
|
|
|
(710 |
) |
|
|
3,598 |
|
|
|
4,512 |
|
|
|
(914 |
) |
Total operating expenses |
|
|
1,868 |
|
|
|
2,647 |
|
|
|
(779 |
) |
|
|
6,283 |
|
|
|
8,098 |
|
|
|
(1,815 |
) |
Loss from operations |
|
|
(1,760 |
) |
|
|
(2,584 |
) |
|
|
824 |
|
|
|
(6,001 |
) |
|
|
(7,842 |
) |
|
|
1,841 |
|
Net loss |
|
$ |
(1,760 |
) |
|
$ |
(2,584 |
) |
|
$ |
824 |
|
|
$ |
(6,001 |
) |
|
$ |
(7,842 |
) |
|
$ |
1,841 |
|
Revenue
Revenue is currently generated through the sale of our ClearUP device and ancillary products, including accessories and accelerated shipping charges, and is net of return reserves. Sales are currently made directly to consumers online through our own website, Amazon and Walmart. We also sell to major and specialty retailers, such as BestBuy, and FSAStore. Noninvasive bioelectronic medicine is an emerging market space that provides consumers with non-drug treatments for various diseases and ClearUP is the first FDA-approved bioelectronic treatment for sinus pain and congestion.
For the three months ended September 30, 2023, revenue decreased by $195 thousand, or 40.9%, compared to the same period in 2022, primarily due to the higher price point implemented in Q2 resulting in a 58% decrease in unit sales, offset by a 54% increase in the per unit average sales price.
For the nine months ended September 30, 2023, revenue decreased by $613 thousand, or 42.8%, compared to the same period in 2022, primarily due to the higher price point implemented in Q2 as well as significant reductions in marketing activities resulting in a 57% decrease in unit sales, offset by a 51% increase in the per unit average sales price.
We expect some variability in sales due to reduction in marketing spend and price point positioning for target markets, with the net impact resulting in a higher gross profit and lower loss from operations.
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Cost of Sales
Cost of sales consists primarily of the materials and services to manufacture our products, the internal personnel costs to oversee manufacturing and supply chain functions, and the shipment of goods to customers. A significant portion of our cost of sales is currently in fixed and semi-fixed expenses associated with the management of manufacturing and supply chain.
For the three months ended September 30, 2023, cost of sales decreased by $240 thousand, or 58%, compared to the same period in 2022, primarily driven by the decrease in sales volume. Variable cost was $120 thousand, or $73.57 per unit, for the three months ended September 30, 2023, compared to $373 thousand, or $95.04 per unit, for the same period in 2022. The decrease in variable cost was primarily driven by lower manufacturing and fulfillment costs. Fixed costs were $54 thousand, or $33.05 per unit, for the three months ended September 30, 2023, compared to $41 thousand, or $10.48 per unit, for the same period in 2022. The increase in the fixed cost was primarily due to lower sales volume to absorb the costs.
For the nine months ended September 30, 2023, cost of sales decreased by $639 thousand, or 54%, compared to the same period in 2022, primarily driven by the decrease in sales volume. Variable cost was $364 thousand, or $70.09 per unit, for the nine months ended September 30, 2023, compared to $1.0 million, or $85.49 per unit, for the same period in 2022. The decrease in variable cost was primarily driven by lower manufacturing and fulfillment costs. Fixed costs were $173 thousand, or $33.37 per unit, for the nine months ended September 30, 2023, compared to $134 thousand, or $11.01 per unit, for the same period in 2022. The increase in the fixed cost was primarily due to lower sales volume to absorb the costs.
Gross Margin
Gross margin has been and will continue to be affected by, and is likely to fluctuate on a quarterly basis due to, a variety of factors, including sales volumes, product and channel mix, pricing strategies, costs of finished goods, and product return rates, new product launches and potential new manufacturing partners and suppliers. We expect our gross margin to increase with future price increases, optimization of our supply-chain and product design, and increasing sales volume over which fixed and semi-fixed costs are allocated.
Although we currently do not anticipate a supply shortage in the near term, we continue to maintain relationships with and monitor alternative and secondary source suppliers in order to ensure that we are able to source sufficient components and materials to manufacture our products. Global supply chain shortages (especially when coupled with the increase in inflation and other economic factors) could result in an increase in the cost of the components used in our products, which could result in a decrease of our gross margins or in us having to increase the price at which we sell our products until supply chain constraints are resolved.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred to conduct research, including the discovery, development and validation of product candidates. Research and development expenses include personnel costs, including stock-based compensation expense, third-party contractor services, including development and testing of prototype devices, and maintenance of limited in-house research facilities. We expense research and development costs as they are incurred. We expect research and development expenses to increase with the discovery, development and validation of new product candidates.
For the three months ended September 30, 2023, research and development expenses decreased by $62 thousand compared to the same period in 2022. For the nine months ended September 30, 2023, research and development expenses remained flat compared to the same period in 2022. The emphasis of research and development activities in 2023 has been primarily related to a large segmentation study to identify additional incremental market segments with high willingness to pay, product design in our next generation device, intellectual property protection, and the Feinstein study on vagus nerve stimulation. Activities in 2022 were primarily focused on product research and design in the migraine therapeutic area, initiation of a double-blind randomized controlled trial for post-operative pain relief following sinus surgery, and enhancement of our intellectual property protection.
Sales and Marketing Expenses
Sales and marketing expenses include personnel costs and expenses for advertising and other marketing services. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation expense.
For the three months ended September 30, 2023, sales and marketing expenses decreased by $7 thousand compared to the same period in 2022. For the nine months ended September 30, 2023, sales and marketing expenses decreased by $901 thousand compared to the
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same period in 2022. The decreases were due primarily to reductions in unprofitable marketing spend, offset by more targeted sales and marketing efforts while bringing new distribution partners and new creative online.
General and Administrative Expenses
General and administrative expenses include D&O insurance, personnel costs, expenses for outside professional services and other expenses. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation expense. Outside professional services consist of legal, finance, accounting and audit services, and other consulting fees. We expect to continue to look for ways to reduce our general and administrative expenses incurred as a result of our public company status.
For the three months ended September 30, 2023, general and administrative expenses decreased by $710 thousand compared to the same period in 2022. For the nine months ended September 30, 2023, general and administrative expenses decreased by $914 thousand compared to the same period in 2022. The overall decreases were primarily attributable to lower consulting and professional fee expenses, as well as other general administrative expenses.
Liquidity and Capital Resources
Sources of Liquidity
Since our formation in September 2016, we have devoted substantially all of our efforts to research and development, to regulatory clearance and to early market development and testing for our first product, released in September 2019 in the United States. We are not profitable and have incurred net losses and negative cash flows from our operations in each year since our inception. As of September 30, 2023, we had cash and cash equivalents of $5.2 million, working capital of $5.5 million and an accumulated deficit of $35.6 million. We have financed our operations to date primarily through issuances of SAFE instruments, convertible notes and convertible preferred stock and the proceeds from registered public offerings of our securities. In 2021, we completed our IPO, generating net proceeds to the Company of approximately $14.9 million, and we borrowed $2.6 million by issuing convertible notes payable, the outstanding balance of all of which converted into shares of our common stock in connection with our IPO. On February 13, 2023, we completed the sale of 200,000 shares of our common stock in a firm commitment, fully underwritten registered public offering, resulting in net proceeds to the Company of approximately $3.6 million. From July 11, 2023 to August 9, 2023, we sold an aggregate of 1,169,230 shares of our common stock to certain investors in a series of registered public offerings, resulting in aggregate net proceeds to the Company of approximately $4.3 million.
We expect that our operating expenses will increase significantly as we discover, acquire, validate and develop additional product candidates; seek regulatory approval and, if approved, proceed to commercialization of new products; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. Furthermore, we have incurred and will continue to incur additional costs associated with operating as a public company that we did not experience as a private company. Management expects to incur substantial additional operating losses for at least the next two years to expand our markets, complete development or acquisition of new product lines, obtain regulatory approvals, launch and commercialize our products and continue research and development programs. Based on the Company’s current cash levels and burn rate, amongst other things, the Company believes its cash and financial resources may be insufficient to meet the Company’s anticipated needs for the twelve months following the date of issuance of the financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Recent Developments
February 2023 Offering
On February 8, 2023, we entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity LLC (“ThinkEquity”), as representative of the underwriters, pursuant to which, on February 13, 2023, we issued and sold to ThinkEquity in a firm commitment underwritten public offering, 200,000 shares of our common stock at a public offering price of $25.00 per share, less underwriting discounts and commissions, resulting in gross proceeds to the Company of $5.0 million and net proceeds to the Company of $3.6 million. Additionally, pursuant to the Underwriting Agreement, on February 13, 2023, we issued designees of ThinkEquity warrants to purchase an aggregate of 10,000 shares of common stock (the “Representative’s Warrants”), representing 5.0% of the aggregate shares sold in the offering, as partial consideration for services rendered in connection with the offering. The Representative’s Warrants have an initial exercise price of $31.25 per share, will be exercisable for a four-year period commencing 180 days following the commencement of sales in the offering, and provide the holders thereof with certain piggyback and demand registration rights. The securities sold in the offering were offered pursuant to a registration statement on Form S-1, as amended, which was initially filed with the SEC and was declared effective on February 8, 2023.
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Shelf Offerings
On February 1, 2023, we filed a universal shelf registration statement on Form S-3 (the “Shelf Registration Statement”) with the SEC, which was initially filed with the SEC on February 1, 2023 and was declared effective on February 8, 2023. The Shelf Registration Statement permits us to sell, in one or more public offerings, shares of our common stock, shares of preferred stock, debt securities, warrants, subscription rights, or any combination of such securities, for proceeds in an aggregate amount of up to $100 million, subject to limitations on the amount of securities we may sell in any twelve-month period. The Shelf Registration Statement will expire on February 1, 2026.
From July 11, 2023 to August 9, 2023, we sold an aggregate of 1,169,230 shares of common stock to certain investors at prices ranging from $4.00 to $5.50 per share in a series of registered public offerings, resulting in aggregate gross proceeds to the Company of approximately $5.2 million. Aggregate net proceeds to the Company, after deducting placement agent fees and offering expenses paid by the Company, was approximately $4.8 million. The shares of common stock sold in the offering were offered pursuant to a prospectus supplement, filed with the SEC on July 10, 2023, to the Shelf Registration Statement.
Maxim served as the placement agent, on a “reasonable best efforts basis,” in connection with each of the offerings. As compensation for services rendered by Maxim in connection with the offerings, we paid Maxim a cash fee of 8.0% of the aggregate gross proceeds of each of the offerings (amounting to an aggregate of $416 thousand) at closing, as well as an aggregate of $210 thousand for the reimbursement of certain of Maxim’s expenses. Additionally, as partial consideration for services rendered in connection with the offerings, we issued Maxim unregistered warrants to purchase an aggregate of 46,770 shares of our common stock, representing 4.0% of the aggregate shares sold in the offerings. The warrants are exercisable at any time beginning six months after the close of the applicable equity offering and expire five years from the from the commencement of sales under the applicable offering. Of the warrants issued in the offerings, 13,000 are exercisable beginning on January 11, 2024 at a price of $6.60 per share; 20,500 are exercisable beginning on January 19, 2024 at a price of $4.80 per share; and 13,270 are exercisable beginning on February 9, 2024 at a price of $4.92 per share. The warrants issued to Maxim, and the shares of common stock issuable upon exercise thereof, were not, and have not been, registered under the Securities Act of 1933, as amended (the “Securities Act”), and are instead were pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and/or Regulation D promulgated thereunder.
The Company recognizes it will need to raise additional capital to continue operating its business and fund its planned operations, including research and development, clinical trials and, if regulatory approval is obtained, commercialization of future product candidates. We may seek additional funds through equity or debt offerings and/or borrowings under notes payable, lines of credit or other sources. We do not know whether additional financing will be available on commercially acceptable terms, or at all, when needed. If adequate funds are not available or are not available on commercially acceptable terms, our ability to fund our operations, support the growth of our business or otherwise respond to competitive pressures could be significantly delayed or limited, which could materially adversely affect our business, financial conditions, or results of operations.
Plan of Operation and Future Funding Requirements
We use our capital resources primarily to fund development of our product candidates, marketing and advertising for commercial products, and general operations. We expect that our operating expenses may increase as we discover, acquire, validate and develop additional product candidates; seek regulatory approval and, if approved, proceed to commercialization of new products; obtain, maintain, protect and enforce our intellectual property portfolio; hire additional personnel; and maintain compliance with material government (in addition to environmental) regulations. We expect to continue to incur significant losses for the foreseeable future. At this time, due to the inherently unpredictable nature of research and new product adoption as well as other macroeconomic factors, we cannot reasonably estimate the costs we will incur and the timelines that will be required to complete development, obtain marketing approval and commercialize future product candidates, if at all. For the same reasons, we are also unable to predict how quickly we will generate revenue from ClearUP product sales or whether, or when, if ever, we may achieve profitability from the sales of one or more products. Clinical and preclinical development timelines, the probability of success, and costs can differ materially from expectations. In addition, we cannot forecast which product candidates may be best developed and/or monetized through future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
In addition to the foregoing, we may, from time to time, consider opportunities for strategic acquisitions that we believe will align with our growth plan, complement our product offerings and be in the best interest of the Company and our stockholders. We remain committed to our growth strategy and will continue to evaluate strategic acquisition, licensing, and partnership opportunities. If an acquisition is identified and pursued, a substantial portion of our cash reserves may be required to complete such acquisition. If we identify an attractive acquisition that would require more cash to complete than we are willing or able to use from our cash reserves, we
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will consider financing options to complete the acquisition, including through equity and/or debt financings.
We have generated operating losses in each period since inception. We have incurred an accumulated deficit of $35.6 million through September 30, 2023. We expect to incur additional losses in the future as we expand our sales, marketing, and research and development activities. Based on our current cash levels and burn rate, amongst other things, we believe our cash and financial resources may be insufficient to meet our anticipated needs for the next twelve months. As a result, we expect that we will need to raise additional capital to continue operating our business and fund our planned operations, including research and development, clinical trials and, if regulatory approval is obtained, commercialization of future product candidates.
We currently generate sales revenue direct-to-consumer though our own website, Amazon.com and Walmart.com and have recently started to expand our wholesale distribution channels. Our ability to grow sales revenue will depend on successfully executing targeted marketing campaigns to drive additional sales through existing and new channels. Long-term growth will be commensurate with our ability to successfully identify, develop, and secure regulatory approval of one or more additional product candidates beyond ClearUP. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. We do not know whether additional financing will be available on commercially acceptable terms, or at all, when needed. If adequate funds are not available or are not available on commercially acceptable terms, our ability to fund our operations, support the growth of our business or otherwise respond to competitive pressures could be significantly delayed or limited, which could materially adversely affect our business, financial conditions or results of operations, and we may have to significantly delay, scale back or discontinue the development and commercialization of our products and/or future product candidates.
The timing and amount of our operating expenditures will depend largely on:
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Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financings. We may also consider entering into collaboration arrangements or selectively partnering with third parties for clinical development and commercialization. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of additional debt would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations or our ability to incur additional indebtedness or pay dividends, among other items. If we raise additional funds through governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially and adversely affect our business, financial condition, results of operations and prospects.
Cash Flows
The following table summarizes our cash flows for the period indicated (in thousands):
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(unaudited) |
|
|
(unaudited) |
|
||
Cash used in operating activities |
|
$ |
(6,737 |
) |
|
$ |
(6,692 |
) |
Cash used in investing activities |
|
|
(118 |
) |
|
|
(11 |
) |
Cash provided by financing activities |
|
|
8,507 |
|
|
|
56 |
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
1,652 |
|
|
$ |
(6,647 |
) |
Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2023 was $6.7 million, which consisted primarily of a net loss of $6.0 million, decreased by non-cash charges of $348 thousand and a net decrease of $1.1 million in our net operating assets and liabilities. The non-cash charges primarily consisted of stock-based compensation of $213 thousand and amortization of right-of-use assets of $129 thousand. The change in our net operating assets and liabilities was primarily due to a decrease in accounts payable and accrued expenses of $869 thousand and a decrease of $115 thousand in lease liabilities. Net cash used in operating activities for the nine months ended September 30, 2022 was $6.7 million, which consisted primarily of a net loss of $7.8 million decreased by non-cash charges of $415 thousand and a net change of $735 thousand in our net operating assets. The non-cash charges primarily consisted of stock-based compensation of $286 thousand and amortization of right-of-use assets of $122 thousand.
Investing Activities
Net cash used in investing activities during the nine months ended September 30, 2023 and 2022 was related to the purchases of property and equipment.
Financing Activities
Our financing activities provided $8.5 million of cash during the nine months ended September 30, 2023, which consisted primarily of proceeds from the sale of 1,369,230 shares of our common stock, net of offering discounts and other costs. Financing activities for the nine months ended September 30, 2022, were $56 thousand, which consisted of proceeds from the exercise of stock options.
Known Trends or Uncertainties
As discussed elsewhere in this Report, the world continues to be affected by the lingering effects of the COVID-19 pandemic, the ongoing conflict between Russia and Ukraine and more recent conflict in Israel, economic uncertainty in human capital management (“HCM”) and certain other macroeconomic factors. Inflation has risen, Federal Reserve interest rates have increased recently, and the general consensus among economists continues to suggest that we should expect a higher recession risk to continue for the near term. Additionally, there has recently been significant concern regarding the stability of the banking systems in the United States, in particular with respect to regional banks. Further, climate change continues to be an intense topic of public discussion and is adding additional challenges and financial burden due to impending preparations and changes in the customer mindset. These factors, amongst other things, could result in further economic uncertainty and volatility in the capital markets in the near term, and could negatively affect our
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operations. The pandemic and recent economic volatility have negatively impacted our business in various ways over the last two years. We will continue to monitor material impacts on our HCM strategies, including potential of employee attrition, amongst other things.
We encountered disruptions in our supply of various materials and components in 2022 due to the well-documented shortages and constraints in the global supply chain. We experienced increased pricing, longer lead-times, unavailability of product and limited supplies, protracted delivery dates, and shortages of certain parts and supplies that were necessary components for our products. As a result, we are carrying increased inventory balances to ensure availability of necessary products and to secure pricing. Although we currently do not anticipate a supply shortage will continue to pose a material risk for the Company in the near term, we are continuing to evaluate alternative and secondary source suppliers in order to ensure that we are able to source sufficient components and materials to manufacture our products. Global supply chain shortages (especially when coupled with the increase in inflation and other economic factors) could result in an increase in the cost of the components used in our products, which could result in a decrease of our gross margins or in us having to increase the price at which we sell our products until supply chain constraints are resolved. Additionally, in the event that the price of our components increases significantly or we are unable to source sufficient components and materials from our current suppliers, or to develop relationships with additional suppliers, to manufacture enough of our products to satisfy demand, we may have to cease or slow down production and our business operations and financial condition may be materially harmed and we may need to alter our plan of operation.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the ongoing military conflict between Russia and Ukraine and more recent conflict in Israel. Although the length and impact of the ongoing military conflicts are highly unpredictable, the conflicts in Ukraine and Israel could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as further supply chain interruptions. Russian military actions and the resulting sanctions that have been imposed by the United States and other countries could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. Although our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine or the conflict in Israel to date, it is impossible to predict the extent to which our operations, or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the military actions, sanctions and resulting market disruptions are impossible to predict, but could be substantial. We are continuing to monitor the situation and assessing its potential impact on our business.
Additionally, in March 2023, Silicon Valley Bank and Signature Bank, and most recently on May 1, 2023, First Republic Bank, were closed and taken over by the FDIC, which created significant market disruption and uncertainty for those who bank with those institutions, and which raised significant concern regarding the stability of the banking system in the United States, and in particular with respect to regional banks. If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our cash and cash equivalents may be threatened and such events could have a material adverse effect on our business and financial condition.
As a result of these global issues and other macroeconomic factors, it has been difficult to accurately forecast our revenues or financial results, especially given the near and long term impact of the pandemic, and geopolitical issues, inflation, the Federal Reserve interest rate increases and the potential for a recession. In addition, while the potential impact and duration of these issues on the economy and our business may be difficult to assess or predict, these world events have resulted in, and may continue to result in, significant disruption of global financial markets, and may reduce our ability to access additional capital, which could negatively affect our liquidity in the future. Our results of operations could be materially below our forecasts as well, which could adversely affect our results of operations, disappoint analysts and investors, or cause our stock price to decline. Furthermore, a decrease in orders in a given period could negatively affect our revenues in future periods.
These global issues and events may also have the effect of heightening many risks associated with our customers and supply chain. We may take further actions that alter our operations as may be required by federal, state, or local authorities from time to time, or which we determine are in our best interests. In addition, we may decide to postpone or abandon planned investments in our business in response to changes in our business, which may impact our ability to attract and retain customers and our rate of innovation, either of which could harm our business.
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Inflation
Inflation has increased recently and is expected to continue to increase for the near future. Inflationary factors, such as increases in the cost of our products (and components thereof), interest rates, overhead costs and transportation costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future (especially if inflation rates continue to rise) due to supply chain constraints, consequences associated with employee availability and wage increases, trade tariffs imposed on certain products from China and increased product pricing due to semiconductor product shortages.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Contractual Obligations and Commitments
Office Lease
The Company executed a noncancelable operating lease for approximately 9,091 square feet of office space in Hayward, California in November 2021 as its headquarters. The lease expires in October 2025 and there is no option to renew for an additional term. The Company is obligated to pay, on a pro-rata basis, real estate taxes and operating costs related to the premises.
Lease cost recorded during each of the nine month periods ended September 30, 2023 and 2022 was $151 thousand.
We enter into contracts in the normal course of business with our contract manufacturer and other vendors to assist in the manufacturing of our products and performance of our research and development activities and other services for operating purposes. These contracts generally provide for termination for convenience after expiration of an advance notice period ranging from 0 to 60 days, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments. There have been no material changes to our previously disclosed business strategy with respect to our contractual obligations as disclosed under Management’s Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to sales return reserves, warranty reserves, stock-based compensation, and going concern. Management bases its estimates and judgments on historical experience and on various other factors, including the macro-economic factors, that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The methods, estimates, and judgments used by us in applying these critical accounting policies have a significant impact on the results we report in our condensed consolidated financial statements. Our significant accounting policies and estimates are included in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2022, filed with the SEC on March 31, 2023.
Information regarding our significant accounting policies and estimates can also be found in Note 2 to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note 2 to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and our interim Chief Financial Officer, after evaluating our “disclosure controls and procedures” (as defined in Exchange Act Rules 13a 15(e) and 15d 15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and interim Chief Financial Officer, where appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and our interim Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently a party to any legal proceedings, litigation or claims, nor are aware of any pending, threatened, or unasserted claims, which, if determined adversely to us, would have a material adverse effect on our business, financial condition, results of operations or cash flows. We may from time to time, be a party to litigation and subject to claims incident to the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Item 1A. Risk Factors
Please carefully consider the information set forth in this Quarterly Report on Form 10-Q and the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”). The risks described in our Annual Report, as well as other risks and uncertainties, could materially and adversely affect our business, results of operations, and financial condition, which in turn could materially and adversely affect the trading price of shares of our common stock. The occurrence of any of the risks discussed in such filings, or other events that we do not currently anticipate or that we currently deem immaterial, could harm our business, prospects, financial condition and results of operations. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Except as set forth below, there have been no material updates or changes to the risk factors previously disclosed in our Annual Report; provided, however, additional risks not currently known or currently material to us may also harm our business.
Although we have regained compliance with the requirements for continued listing on The Nasdaq Capital Market, we could in the future fail to satisfy the Nasdaq continued listing requirements and our common stock could be delisted from trading, which would adversely affect the liquidity of our common stock and our ability to access the capital markets.
Our common stock is listed on the Nasdaq Capital Market. As discussed elsewhere in this Quarterly Report on Form 10-Q, in January 2023 we received notice from Nasdaq that we were not in compliance with Nasdaq’s minimum bid price continued listing rule, and received a subsequent Nasdaq notice in July 2023 that, as required by applicable Nasdaq rules, the Staff had determined to delist our common stock from the Nasdaq Capital Market due to the fact that our common stock had a closing bid price of $0.10 or less for ten consecutive trading days. Although we successfully appealed the delisting determination and regained compliance with the Nasdaq continued listing rules by effecting the 1-for-100 reverse stock split in August 2023, no assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continued listing standards in the future would result in the issuance of another Nasdaq notice, and if we are unable to regain compliance with the applicable rule within the period provided by Nasdaq, could result in a delisting of our common stock, which would materially reduce the liquidity of our common stock and could result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the inability to advance our development programs, potential loss of confidence by investors and employees, and fewer business development opportunities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
During the quarter ended September 30, 2023, there were no unregistered sales of our securities that were not reported in a Current Report on Form 8-K.
Repurchases
The Company did not repurchase any of the Company's outstanding equity securities during the nine months ended September 30, 2023.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
None.
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Item 6. Exhibits
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Exhibit Number |
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Exhibit description |
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Incorporated |
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Filing Date |
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Filed herewith |
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3.1 |
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Amended and Restated Certificate of Incorporation, dated November 12, 2021. |
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8-K |
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11/15/21 |
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3.2 |
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8-K |
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11/15/21 |
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3.3 |
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Certificate of Amendment to the Amended and Restated Bylaws of the Company, dated July 5, 2023. |
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8-K |
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7/6/2023 |
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3.4 |
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8-K |
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8/22/2023 |
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4.1 |
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S-1/A |
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9/9/2021 |
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4.2 |
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S-1/A |
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9/9/2021 |
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4.3 |
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Warrant to Purchase Common Stock issued to Hannover International, Inc., dated July 1, 2021. |
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S-1/A |
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10/29/2021 |
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4.4 |
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8-K |
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2/13/2023 |
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4.5 |
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8-K |
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7/11/2023 |
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4.6 |
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8-K |
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7/19/2023 |
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4.7 |
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8-K |
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8/9/2023 |
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10.1 |
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8-K |
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7/11/2023 |
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10.2 |
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8-K |
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7/11/2023 |
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10.3 |
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8-K |
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7/19/2023 |
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10.4 |
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8-K |
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7/19/2023 |
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10.5 |
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8-K |
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8/9/2023 |
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10.6 |
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8-K |
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8/9/2023 |
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31.1 |
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X |
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31.2 |
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X |
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32.1 |
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* |
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101.INS |
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Inline XBRL Instance Document. |
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** |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
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** |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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** |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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** |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document. |
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** |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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** |
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104 |
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Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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** |
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* |
Furnished herewith. |
** |
The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document. |
SIGNATURE
In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the Hayward, State of California, on November 14, 2023.
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Date: November 14, 2023 |
By: |
/s/ Jennifer Ernst |
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Jennifer Ernst |
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Title: Chief Executive Officer |
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(Principal Executive Officer) |
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Date: November 14, 2023 |
By: |
/s/ Kimberly Bambach |
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Title: Interim Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
32
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jennifer Ernst, certify that:
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Date: November 14, 2023
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By: |
/s/ Jennifer Ernst |
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Jennifer Ernst |
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Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kimberly Bambach, certify that:
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Date: November 14, 2023
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By: |
/s/ Kimberly Bambach |
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Kimberly Bambach |
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Interim Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Tivic Health Systems, Inc. (the “Company”) for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jennifer Ernst, Chief Executive Officer of the Company, and Kimberly Bambach, Interim Chief Financial Officer of the Company, do each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to her knowledge:
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Date: November 14, 2023 |
By: |
/s/ Jennifer Ernst |
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Jennifer Ernst |
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Chief Executive Officer |
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(Principal Executive Officer) |
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Date: November 14, 2023 |
By: |
/s/ Kimberly Bambach |
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Kimberly Bambach |
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Interim Chief Financial Officer |
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(Principal Financial and Accounting Officer) |