RETINALGENIX TECHNOLOGIES INC. You should read the following discussion and analysis of our financial condition
and results of operations together with and our consolidated financial
statements and the related notes appearing elsewhere in this Annual Report on
Form 10-K. In addition to historical information, this discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those discussed
below. Factors that could cause or contribute to such differences include, but
are not limited to, those identified below, and those discussed in the section
titled "Risk Factors" included elsewhere in this Annual Report on Form 10-
Overview
We are an ophthalmic research and development company focused on developing technologies to screen, monitor, diagnose and treat ocular, optical, and sight-threatening disorders. Our mission is to prevent vision loss and blindness due to diabetic retinopathy and maculopathy through two devices: (1) Retinal Imaging Screening Device, a portable, retinal imaging system providing a 200-degree field of view without requiring pupil dilation; and (2) RetinalCamTM, a home monitoring and imaging device offering real-time communication with physicians available 24/7.
To date, we have devoted substantially all of our resources to organizing, business planning, raising capital, designing and developing product candidates, and securing manufacturing and sales/distribution partners. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through the private placement of common stock.
We anticipate that we will need an additional
We do not expect to generate any revenues from product sales unless and until we successfully complete development of RetinalCamTM, and we do not expect to generate any revenues from product sales unless and until we successfully obtain regulatory clearance for RetinalGenixTM. In addition, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations, compliance and other expenses.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity offerings, debt financings, strategic partnerships, collaborations and licensing arrangements or other capital sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms or at all.
Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates.
We have been issuing shares of our common stock pursuant to a private placement
raising approximately
Because of the numerous risks and uncertainties we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
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Trends and Uncertainties-COVID-19
The global COVID-19 pandemic continues to evolve, and we continue to monitor the COVID-19 situation closely. The extent of the impact of COVID-19 on our business, operations, research and development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the outbreak and its future impact on our operations, including our ability to obtain components such as sensors and other materials in a timely manner required to complete the development of RetinalGenixTM and RetinalCamTM and seek 510(k) regulatory clearance from the FDA for RetinalGenixTM . The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and with many of our employees and consultants working remotely. We will continue to actively monitor the evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. At this point, the extent to which the COVID-19 pandemic may affect our business, operations and clinical development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain.
Basis of presentation:
These accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in
Components of Results of Operations
Revenue
We have not generated any revenue since our inception.
Research and Development Expenses
Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, product and prototype development, and testing of materials. Research and development expenses are charged to operations as incurred.
We accrue for costs incurred by external service providers based on our estimates of services performed and costs incurred. These estimates include the level of services performed by third parties and other indicators of the services completed.
We cannot determine with certainty the duration and costs of future clinical trials and product development or if, when or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing clearance. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of product development will depend on a variety of factors, including:
? the scope, rate of progress, expense and results of product development, as
well as of any future clinical trials of other product candidates and other
research and development activities that we may conduct;
? the actual probability of success for our product candidates, including their
safety and efficacy, early clinical data, competition, manufacturing
capability and commercial viability;
? significant and changing government regulation and regulatory guidance;
? the timing and receipt of any marketing approvals; and
? the expense of filing, prosecuting, defending, and enforcing any patent claims
and other intellectual property rights.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.
30 Administrative Expenses
Administrative expenses consist primarily of compensation and consulting related expenses. Administrative expenses also include professional fees and other corporate expenses, including legal fees relating to corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses, marketing activities and other operating costs that are not specifically attributable to research activities.
We expect that our administrative expenses will increase in the future as we
increase our personnel headcount to support our continued research activities
and development of our product candidates. We also expect increased expenses
associated with being a public company, including costs related to accounting,
audit, legal, regulatory and tax-related services associated with compliance
with
Interest Expense
Interest expense is the coupon interest rate charged on loans from stockholders.
Results of Operations
Comparison of the Years Ended
The following table sets forth key components of our results of operations for
the years ended
For The Years Ended
December 31,
2021 2020 Change % Change
Revenue $ - $ -
Expenses
Administrative expenses 1,188,464 1,426,230 (237,766 ) -17 %
Research and development 680,293 431,557 248,736 58 %
Stock-based compensation 307,918 220,206 87,712 40 %
Total Expenses 2,176,675 2,077,993 98,682 5 %
Interest expense 2,619 - 2,619 100 %
Net Loss $ (2,179,294 ) $ (2,077,993 ) 101,301 5 %
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Revenues
We did not recognize revenues for the years ended
Research and Development Expenses
For The Years Ended
December 31,
2021 2020
Direct costs $ 635,108 $ 318,671
Allocated costs from Sanovas 45,185 112,886
Research and development expenses increased by
Stock Based Compensation Expenses
Stock-based compensation expenses increased by
Administrative Expenses
For The Years Ended
December 31,
2021 2020
Direct costs $ 361,580 $ 207,732
Allocated costs from Sanovas 826,884 1,218,498
Total Administrative expenses $ 1,188,464 $ 1,426,230 Administrative expenses decreased by
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Liquidity and Capital Resources
To date, we have devoted substantially all of our resources to organizing, business planning, raising capital, designing and developing product candidates, and securing manufacturing and sales/distribution partners. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily from the sale of common stock and by utilizing Sanovas personnel and facilities. We have settled a portion of the amounts due to Sanovas through the periodic issuance of shares of common stock.
Cash Flow Activities for the Year Ended
The following table sets forth a summary of our cash flows for the periods
presented:
Years Ended December 31,
2021 2020
Net cash used in operating activities $ (1,210,758 ) $ (1,422,303 )
Net cash used in/provided by investing activities - -
Net cash provided by financing activities 1,213,486 1,370,141
Net (decrease) increase in cash 2,728 (52,162 )
Cash at beginning of the year 2,219 54,381
Cash at end of the year $ 4,947 $ 2,219
Operating Activities
Net cash used in operating activities was
Investing Activities
There was no cash used in or provided by investing activities for the years
ended
Financing Activities
Net cash provided by financing activities was
We anticipate that we will need
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As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity offerings, debt financings, strategic partnerships, collaborations and licensing arrangements or other capital sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates.
Because of the numerous risks and uncertainties, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures in the financial statements and accompanying notes. Management bases it estimates on historical experience and on assumptions believed to be reasonable under the circumstances. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Estimates are used in areas including, but not limited to: research and development expense recognition, valuation of stock options, allowances of deferred tax assets, accrued expenses and liabilities, and cash flow assumptions regarding going concern considerations.
Stock-based Compensation
Stock-based compensation represents the cost related to stock-based awards
granted to employees. We measure stock-based compensation costs at the grant
date, based on the estimated fair value of the award and recognize the cost (net
of estimated forfeitures) over the vesting period. Forfeitures are estimated on
the date of grant and revised if actual or expected forfeiture activity differs
materially from the original estimates. We estimate the fair value of stock
options using a Black-Scholes valuation model. The cost is recorded in the
consolidated statements of operations based on the employees' respective
function. The fair value of common stock was determined based upon the sale of
common stock to third parties pursuant to the offering which commenced in 2019,
which offering continued through
The risk-free interest rate assumption is determined using the yield currently
available on
Allocated costs from Sanovas
A substantial portion of our expenses are costs and expenses paid by Sanovas and costs and expenses allocated to the Company by Sanovas. We expect that to continue until we have sufficient resources to build our own team and infrastructure to support our operations. The allocations our payroll related expenses are based upon the estimated percentage of effort incurred by each employee on operations. Allocation of non-payroll related expenses are based upon whether the expense related to our operations.
34 Income taxes
We account for income taxes using the asset-and-liability method in accordance with Accounting Standards Codification 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rate is recognized in the period that includes the enactment date. A valuation allowance has been recorded for all of the deferred tax assets.
Recently Issued and Adopted Accounting Standards
The following pronouncement may have an impact on the accounting policies of the Company:
In
A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether the implementation of such proposed standards would be material to the financial statements of the Company.
JOBS Act
We are an "emerging growth company," as defined in Section 2(a) the Securities
Act, as modified by the JOBS Act. Emerging growth companies can delay adopting
new or revised accounting standards until such time as those standards apply to
private companies. Therefore, we may not be subject to the same new or revised
accounting standards as other public companies that are not "emerging growth
companies." For as long as we continue to be an emerging growth company, we also
intend to take advantage of certain other exemptions from various reporting
requirements that are applicable to other public companies including, but not
limited to, reduced disclosure obligations regarding executive compensation in
our periodic reports and proxy statements, exemptions from the requirements of
holding a nonbinding advisory stockholder vote on executive compensation and any
golden parachute payments not previously approved, exemption from the
requirement of auditor attestation in the assessment of our internal control
over financial reporting and exemption from any requirement that may be adopted
by the
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