MOVANO INC. Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the "safe harbor" created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as "believe," "expect," "may," "will," "should," "would," "could," "seek," "intend," "plan," "goal," "project," "estimate," "anticipate," "strategy", "future", "likely" or other comparable terms and references to future periods. All statements other than statements of historical facts included in this Form 10-Q regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding expectations for revenues, cash flows and financial performance, the anticipated results of our development efforts, product features and the timing for receipt of required regulatory approvals and product launches. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
? our limited operating history and our ability to achieve profitability;
? our ability to continue as a going concern and our need for and ability to
obtain additional capital in the future:
? our ability to demonstrate the feasibility of and develop products and
their underlying technologies;
? the impact of competitive or alternative products, technologies and pricing;
? the impact of the COVID-19 on our business and local and global economic
conditions;
? our ability to attract and retain highly qualified personnel;
? our dependence on consultants to assist in the development of our
technologies;
? our ability to manage the growth of our Company and to realize thebenefits from any acquisitions or strategic alliances we may enter in the
future;
? our dependence on the successful commercialization of our proposed solution;
? our dependence on third parties to design, manufacture, market and
distribute our proposed products;
? the adequacy of protections afforded to us by the patents that we own and
the success we may have in, and the cost to us of, maintaining, enforcing
and defending those patents;
? our ability to obtain, expand and maintain patent protection in the
future, and to protect our non-patented intellectual property;
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? the impact of any claims of intellectual property infringement, trade
secret misappropriation, product liability, product recalls or other
claims;
? our need to secure required FCC, FDA and other regulatory approvals from
governmental authorities in United States ;
? the impact of healthcare regulations and reform measures;
? the accuracy of our estimates of market size for our planned solution;? our ability to implement and maintain effective control over financial
reporting and disclosure controls and procedures;
? our success at managing the risks involved in the foregoing items.
The risks included above are not exhaustive. Other important risks and
uncertainties are described in the Risk Factors and in Management's Discussion
and Analysis of Financial Condition and Results of Operations sections of the
2021 Form 10-K and subsequently filed Quarterly Reports on Form 10-Q. Except as
otherwise required by the federal securities laws, we undertake no obligation to
publicly update any forward-looking statement, whether written or oral, that may
be made from time to time, whether as a result of new information, future
developments or otherwise.
Overview
Movano is developing a platform to deliver purpose-driven healthcare solutions
at the intersection of medtech and consumer devices. Our mission is to empower
and inspire you to live a healthier, happier life.
Our proprietary platform uses RF technology, which we believe will enable the
creation of low-cost and scalable sensors that are small enough to fit into
wearables and other small form factors. Combined with our mobile app and cloud
infrastructure, we expect that our platform will provide users with the ability
to measure and continuously monitor vital health data and provide actionable
feedback to jumpstart changes in behaviors.
Our platform is the foundation for our first product in development, the Movano
Ring. The smart ring and its accompanying app will combine vital health metrics
with personalized intelligent feedback and is designed for women of all ages,
who are traditionally an afterthought when it comes to wearable technology. Once
developed, we expect the Ring will measure heart rate, HRV, sleep, respiration
rate, temperature, blood oxygen saturation, steps, calories and incorporate
women-centric features and design. The device will provide users and their
network of caregivers with continuous health data distilled down to simple, yet
meaningful, insights to help users make manageable lifestyle changes and take a
more proactive approach that could mitigate the risks of chronic disease. A
fundamental part of our corporate development strategy is to establish one or
more strategic partnerships that would allow us to more fully exploit the
potential of our technology.
On
Financial Operations Overview
We are a development stage company with a limited operating history. To date, we have invested substantially all of our efforts and financial resources into the research and development of the products we are developing, including conducting clinical studies and related general and administrative costs. To date, we have funded our operations primarily from the sale of our equity securities.
Adoption of New Accounting Pronouncement - Leases
InFebruary 2016 , the FASB issued ASU 2016-02, Leases(ASC 842) which requires lessees to recognize leases on the balance sheet by recording a right-of-use asset and lease liability. We adopted this new guidance as ofJanuary 1, 2022 and applied the modified retrospective approach, whereby prior comparative periods will not be retrospectively presented in the condensed consolidated financial statements. We elected the package of practical expedients not to reassess prior conclusions related to contracts containing leases and lease classification and the lessee practical expedient to combine lease and non-lease components for all asset classes. We made a policy election to not recognize right-of-use assets and lease liabilities for short-term leases for all asset classes. See Note 12 Commitments and Contingencies to our condensed consolidated financial statements covered under Part I, Item 1 of this Quarterly Report on Form 10-Q for further details. Upon adoption onJanuary 1, 2022 , we recognized right-of-use assets and lease liabilities for operating leases of$380,000 and$429,000 , respectively. The difference between the right-of-use asset and lease liability primarily represents the net book value of deferred rent recognized as ofDecember 31, 2021 , which was adjusted against the right-of-use asset upon adoption. 26
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States ("GAAP"). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are 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 and any such differences may be material. There have been no material changes in our critical accounting policies during the three months endedMarch 31, 2022 , as compared to those disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Significant Judgments and Estimates." Results of Operations
Three months ended
Our condensed consolidated statements of operations for the three months ended
Three Months Ended March 31, Change
2022 2021 $ %
(in thousands, except share and per share data)
OPERATING EXPENSES:
Research and development $ 4,591 $ 1,942 $ 2,649 136 %
General and administrative 2,347 1,324 1,023 77 %
Total operating expenses 6,938 3,266 3,672 112 %
Loss from operations (6,938 ) (3,266 ) (3,672 ) -112 %
Other income (expense), net:
Interest expense - (883 ) 883 100 %
Change in fair value of warrant
liability - (1,581 ) 1,581 100 %
Change in fair value of derivative
liability - 121 (121 ) -100 %
Interest and other income, net 6 1 5 500 %
Other income (expense), net 6 (2,342 ) 2,348 100 %
Net loss (6,932 ) (5,608 ) (1,324 ) -24 %
Accretion and dividends on redeemable
convertible preferred stock - (2,489 ) 2,489 100 %
Net loss attributable to common
stockholders $ (6,932 ) $ (8,097 ) $ 1,165 14 %
Net loss per share attributable to
common stockholders, basic and diluted $ (0.21 ) $ (1.01 )
Weighted average shares used in
computing net loss per share
attributable to common stockholders,
basic and diluted 32,744,004 8,049,048
Research and Development
Research and development expenses totaled$4.6 million and$1.9 million for the three months endedMarch 31, 2022 and 2021, respectively. This increase of$2.7 million was due primarily to the growth of the Company and its activities. Research and development expenses for the three months endedMarch 31, 2022 included expenses related to employee compensation of$2.5 million , other professional fees of$1.7 million , research and laboratory expenses of$0.3 million , and other expenses of$0.1 million . Research and development expenses for the three months endedMarch 31, 2021 included expenses related to employee compensation of$0.8 million , research and laboratory expenses of$0.2 million , and other professional fees of$0.9 million . 27 General and Administrative General and administrative expenses totaled$2.3 million and$1.3 million for the three months endedMarch 31, 2022 and 2021, respectively. This increase of$1 million was due primarily to the growth of the Company and its activities. General and administrative expenses for the three months endedMarch 31, 2022 included expenses related to employee and board of director compensation of$1.2 million , professional and consulting fees of$0.7 million , and other expenses of$0.4 million . General and administrative expenses for the three months endedMarch 31, 2021 included expenses related to employee and board of director compensation of$0.8 million and professional and consulting fees
of$0.5 million . Loss from Operations
Loss from operations was
Other Income (Expense), Net
Other income (expense), net for the three months endedMarch 31, 2022 was a net other income of$6,000 as compared to a net other expense of$2.3 million for the three months endedMarch 31, 2021 . Other income (expense), net for the three months endedMarch 31, 2022 included only interest and other income, net. Other income (expense), net for the three months endedMarch 31, 2021 included interest expense of$0.8 million related to the accrual of interest and amortization of debt discounts on the convertible promissory notes, the change in the fair value of the warrant liability of$1.6 million and interest and other income of$1,000 , offset by$0.1 million related to the change in fair value of the derivative liability. 28 Net Loss As a result of the foregoing, net loss was$6.9 million for the three months endedMarch 31, 2022 , as compared to$5.6 million for the three months endedMarch 31, 2021 .
Liquidity and Capital Resources
The Company's condensed consolidated financial statements are presented on a basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have not generated any revenues from operations since inception, and do not expect to do so in the foreseeable future. We have experienced operating losses and negative operating cash flows since inception and expect to continue to do so. We have financed our working capital requirements during this period through the sale of equity securities and convertible notes. AtMarch 31, 2022 andDecember 31, 2021 , we had cash and cash equivalents and short-term investments of$27.7 million and$33.6 million , respectively, available to fund our ongoing business activities. We believe that our cash and cash equivalents and short-term investments as ofMarch 31, 2022 will be sufficient to fund our projected operating requirements for at least 12 months. However, such cash and cash equivalents and short-term investments are not expected to be sufficient to enable us to complete the development and commercialization of our proposed planned solution. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We anticipate that our expenses will increase substantially
as we:
? advance the engineering design and development of our proposed wearable
and other potential products;
? prepare applications required for marketing approval of our proposed
planned solution in the United States ;
? develop our plans for manufacturing, distributing and marketing our
proposed wearable and other potential products; and
? add operational, financial and management information systems andpersonnel, including personnel to support our product development, planned
commercialization efforts and our operation as a public company.
Until we can generate a sufficient amount of revenue from our planned products,
if ever, we expect to finance future cash needs through public or private equity
offerings, debt financings or corporate collaborations and licensing
arrangements. Additional funds may not be available when we need them on terms
that are acceptable to us, or at all. If adequate funds are not available, we
may be required to delay, reduce the scope of or eliminate one or more of our
research or development programs or our commercialization efforts. To the extent
that we raise additional funds by issuing equity securities, our stockholders
may experience additional dilution, and debt financing, if available, may
involve restrictive covenants. To the extent that we raise additional funds
through collaborations and licensing arrangements, it may be necessary to
relinquish some rights to our technologies or applications or grant licenses on
terms that may not be favorable to us. We may seek to access the public or
private capital markets whenever conditions are favorable, even if we do not
have an immediate need for additional capital at that time.
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The following table summarizes our cash flows for the periods indicated (in
thousands):
Three Months Ended
March 31,
2022 2021
Net cash used in operating activities $ (5,782 ) $ (4,040 )
Net cash provided by (used in) investing activities 6,549 (11 )
Net cash provided by financing activities - 45,095
Net increase in cash and cash equivalents$ 767 $ 41,044 Operating Activities
During the three months ended
The$5.8 million used in operating activities during the three months endedMarch 31, 2022 was primarily attributable to our net loss of$6.9 million during the period and changes in our operating assets and liabilities totaling$0.3 million . These items were offset by non-cash items, including stock-based compensation of$0.7 million and accretion of discount on short-term investments of$0.1 million .
The$4.0 million used in operating activities during the three months endedMarch 31, 2021 was primarily attributable to our net loss of$5.6 million during the period and changes in our operating assets and liabilities totaling$1.3 million . These items were offset by non-cash items, including stock-based compensation of$0.4 million , accretion of the debt discount on our convertible promissory notes of$0.8 million , accrued interest on our convertible promissory notes of$0.1 million , nonemployee services of$0.1 million under convertible promissory notes, compensation of nonemployee services upon the issuance of common stock of$0.1 million , the change in the fair value of the warrant liability of$1.6 million and the change in the fair value of the derivative liability of$0.1 million . Investing Activities
During the three months endedMarch 31, 2022 the Company was provided cash of$6.5 million in investing activities, consisting of$6.5 million from maturities of short-term investments.
During the three months ended
Financing Activities
During the three months ended
During the three months endedMarch 31, 2021 , the Company was provided cash of$45.1 million from financing activities, comprised of$45.0 million from the net proceeds of our initial public offering and$0.1 million from the issuance
of common stock.
Off-Balance Sheet Transactions
At
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