ACLARION, INC. You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with the audited financial statements
(prepared in accordance with accounting principles generally accepted in
Overview
We have funded our operations with proceeds from the
· identify and support Key Opinion Leader ("KOL") physicians and
radiologists to help secure local payer coverage decisions and spine
society support for our technology;
· expand the network of imaging centers and physicians using NOCISCAN in
each market such that the technology is widely available to patients
covered by payers;
· support surgeons, radiologists, Physical Medicine and Rehabilitation
physicians, chiropractors, physical therapists, regenerative therapy
physicians and medical device companies that address low back pain to
initiate studies and report results;
· build and expand clinical trials and registries to provide real world
evidence of better outcomes when using Nociscan to help determine which
discs to treat;
· pursue value-based care contracts to share in the profits that result from
the improved surgical outcomes we believe our technology enables in DLBP
patients;
hire additional business development, product management, operational and
marketing personnel;
· add operational and general administrative personnel which will support
our product development programs, commercialization efforts, and our
transition to operating as a public company.
Our primary near-term growth strategy is to secure payer contracts (including insurance companies, self- insured employers, Medicare, Medicaid, workmen's compensation boards et. al.) to cover our Category III CPT codes. We believe that with favorable payer coverage, the Company has the opportunity to more efficiently engage physicians and imaging centers that will adopt our technology.
As a result, we may need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions.
82
As of
Corporate Information
We were formed under the name
Effect of COVID-19 Pandemic on business operations
The COVID-19 Pandemic is not currently impacting plans for marketing our products or our continuing development efforts, as all such activities have been conducted by us using remote work strategies. The Company cannot accurately predict the longer- term impact of the COVID-19 Pandemic on its business.
Results of operations Operating activities:
The following table summarizes our results of operations for the twelve months
ended
Year Ended December 31, 2021 to 2022
2022 2021 $ Change
Revenue
Revenue $ 60,444 $ 60,292 $ 152
Cost of revenue 65,298 69,175 (3,877 )
Net profit (loss) (4,854 ) (8,883 ) 4,029
Operating expenses:
Sales and marketing 537,069 330,814 206,255
Research and development 1,088,778 787,850 300,928
General and administrative 4,467,815 1,825,491 2,642,324
Total operating expenses 6,093,662 2,944,155 3,149,507
Income (loss) from operations (6,098,516 ) (2,953,038 ) (3,145,478 )
Other income (expense):
PPP loan forgiveness - 373,511 (373,511 )
Interest expense (1,507,546 ) (474,911 ) (1,032,635 )
Changes in fair value of redeemable
preferred stock - (1,900,310 ) 1,900,310
Other, net 520 4,458 (3,938 )
Total other income (expense) (1,507,026 ) (1,997,252 ) 490,226
Income (loss) before income taxes (7,605,542 ) (4,950,290 ) (2,655,252 )
Income tax provision - - -
Net income (loss) $ (7,605,542 ) $ (4,950,290 ) $ (2,655,252 ) Dividends accrued for preferred stockholders
$ (8,021,064 ) $ (5,955,888 ) $ (2,065,177 ) Net income (loss) per share allocable to common shareholders$ (1.31 ) $ (6.58 ) $ 5.26 Weighted average shares of common stock outstanding, basic and diluted 6,105,569 905,685 5,199,884 83
Years ended
Total revenues. Total revenues for the year ended
Cost of Revenue. Cost of Revenue is comprised of hosting and software costs,
field support, UCSF royalty cost, NuVasive commission of 6%, partner fees
(Radnet), and credit card fees. Total Cost of Revenue was
Sales and Marketing. Sales and marketing expenses were
Research and Development. Research and development expenses were
General and Administrative. General and administrative expenses were
Interest Expense. Total Interest expense was
Changes in Fair Value of Redeemable Preferred Stock. In the year ended
Other Net Expenses. During the year ended
Net income (loss). The Company experienced a net loss of
84
Critical accounting policies and use of estimates
Our Management's Discussion and Analysis of Financial Condition and Results of
Operations is based on our financial statements, which have been prepared in
accordance with generally accepted accounting principles in
While our significant accounting policies are described in more detail in the notes to our financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
The Company derives its revenues from one source, the delivery of Nociscan
reports to medical professionals. Revenues are recognized when a contract with a
customer exists, and the control of the promised services are transferred to our
customers. The amount of revenue recognized reflects the consideration we expect
to receive in exchange for those services. Substantially all our revenues are
generated from contracts with customers in
Equity-based compensation
The Company accounts for stock-based awards in accordance with provisions of ASC Topic 718, Compensation-Stock Compensation, under which the Company recognizes the grant-date fair value of stock-based awards issued to employees and nonemployee board members as compensation expense on a straight-line basis over the vesting period of the award, while awards containing a performance condition are recognized as expense when the achievement of the performance criteria is considered probable. The Company uses the Black-Scholes option pricing model to determine the grant-date fair value of stock options. The Company adjusts expense for actual forfeitures in the periods they occur.
Until our
Going Concern
The Company believes that cash on hand of approximately
As a result of the Company's recurring losses from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company's ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company's ability to continue as a going concern.
85
Liquidity and capital resources
Sources of liquidity
To date, we have financed our operations primarily through private placements of
preferred shares and debt financing, PPP loans that were forgiven, and an
initial public offering on
Through the year ended
Cash flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Year Ended December 31,
2022 2021
Cash used in operating activities $ (5,314,171 ) $ (2,399,949 )
Cash used in investing activities (207,870 ) (102,005 )
Cash provided by financing activities 6,552,318 2,939,500
Net increase (decrease) in cash and cash equivalents
Operating activities
During the year ended
Investing activities
During the year ended
Financing activities
During the year ended
86 Funding requirements
Developing medical technology products is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate meaningful revenues. Accordingly, we may need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity securities, current stockholders' ownership interests may be diluted. Any debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute existing stockholders' ownership interests.
If we raise additional funds through licensing agreements and strategic collaborations with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds, we may be required to delay, limit, reduce and/or terminate development of our product candidates or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual obligations and commitments
Our current office lease and sublease expired on
Off-balance sheet arrangements
We did not have, during the periods presented, and we do not currently have any
off-balance sheet arrangements as defined in the rules and regulations of the
Recently issued accounting pronouncements
We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our financial statements appearing at the end of this annual report, such standards will not have a material impact on our financial statements or do not otherwise apply to our operations.
Emerging growth company status
The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to apply of this extended transition period and, as a result, we will not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for public entities. Accordingly, our financial statements may not be comparable to other public companies that do not elect the extended transition period.
87
© Edgar Online, source
