GORES HOLDINGS IX, INC. Management's Discussion and Analysis of Financial Condition and
Results of Operations (form 10-K)
Residual Income

FEMASYS INC Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of Operations. (kind 10-Ok)

We’re a biomedical firm targeted on remodeling ladies’s healthcare by
growing novel options and next-generation developments offering
important medical impression to deal with severely underserved areas. Our mission
is to supply ladies with superior minimally-invasive, non-surgical product
applied sciences, accessible within the workplace, bettering affected person care and total
well being economics. We’re a woman-founded and led firm with an expansive,
internally created mental property portfolio with over 150 patents
globally, in-house chemistry, manufacturing, and controls (CMC) and gadget
manufacturing capabilities and confirmed skill to develop and commercialize
merchandise. Our suite of merchandise and product candidates deal with what we imagine
are multi-billion greenback international market segments during which there was little
development for a few years, serving to ladies keep away from pharmaceutical options,
implants and surgical procedure that may be costly and expose ladies to hurt. With an
preliminary focus within the space of reproductive well being, our two lead product
candidates supply options for 2 ends of the spectrum: FemBloc for everlasting
contraception and FemaSeed as a man-made insemination infertility therapy.

FemBloc – Our Everlasting Delivery Management Resolution. Our everlasting contraception
resolution in growth consists of our proprietary FemBloc system, which options
twin intrauterine directional supply concentrating on each fallopian tubes
concurrently with a degradable biopolymer adopted by an ultrasound
affirmation check to substantiate process success. If authorized, we count on FemBloc
to be the primary and solely non-surgical everlasting contraception possibility, utilizing a
minimally invasive supply system that domestically instills a degradable
biopolymer, which is designed to trigger the fallopian tubes to shut utilizing the
affected person’s personal scar tissue, leading to everlasting contraception for the affected person
and not using a everlasting implant. FemBloc has the potential to supply important
benefits over the one current possibility, surgical tubal ligation, or “having
her tubes tied.” FemBloc is a process that may be accomplished in a doctor’s
workplace, with no anesthesia, no incisions or cannulation, no specialty talent set
or capital tools and minimal ache and restoration time, and no residual implant
remaining within the affected person’s physique after the scar tissue develops, which we imagine
will possible be at half the fee. We imagine there are additionally important
benefits over different non permanent or reversible strategies that girls could also be utilizing in
lieu of the surgical tubal ligation possibility, as FemBloc doesn’t use hormones or
go away a long-term implant behind. Our everlasting contraception resolution combines
FemBloc with an ultrasound in-office diagnostic check, which makes use of saline and air
distinction to allow the identical doctor to judge the fallopian tubes in-office
to substantiate the success of FemBloc roughly three months after the FemBloc
process, relatively than requiring the affected person to go to one other supplier for a
radiology-based examination, exposing the affected person unnecessarily to radiation and the
use of x-ray dye.



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Now we have studied FemBloc in three medical trials (a pilot security research, a
pivotal trial, and a validation research) pursuant to an FDA authorized
investigational gadget exemption (IDE) for every research with analysis of security
in a complete of 228 topics. Topics are being adopted for 5 years for
security, and for the preliminary 49 topic pilot research, 4 years of follow-up have
been accomplished. There have been no severe security occasions reported so far in any
of the topics and over 90% of the occasions reported that have been categorized as
associated to the gadget, process or each, have been on the day of the process or
inside seven days after the process. The reported occasions have been anticipated and
the vast majority of these occasions have been bleeding or recognizing and/or ache or cramps and
over 75% have been categorized by the doctor as gentle. Physicians noticed that
their topics discovered the process to be extremely tolerable, with topic
self-reported ache scores much like placement of IUDs. Nearly each case (96%)
was assessed by the doctor to be extraordinarily happy or very happy with
the process and 96% discovered it simpler than tubal ligation surgical procedure. On the
ultrasound affirmation check carried out three months following the FemBloc
process, there was no proof of remaining biopolymer detected in topics,
which can point out that the biopolymer fully degraded and certain exited the
topic with attainable menstruation. Topics discovered the FemBloc process and
affirmation check to be extremely tolerable, with ache or discomfort scores related
to placement of different intrauterine units, reminiscent of IUDs. The imply rating for
FemBloc process was 4.6 and for the affirmation check was 3.3, on visible
analog scale (VAS) from 0-10 the place 10 is the best measure of ache/

Throughout the conduct of the primary two medical research, unintended pregnancies
occurred in topics who have been advised to depend on FemBloc (six pregnancies for the
pilot research and three pregnancies for the pivotal trial). These pregnancies have been
attributable to misinterpretation of the ultrasound check utilizing the FemChec gadget, as
reviewed and confirmed by an unbiased medical occasions committee. FDA seen
these unintended pregnancies as a security concern and, because of this, in February
2019 we paused the pivotal medical trial for FemBloc (though topics are
nonetheless adopted for security via 5 years). Subsequently, the company advisable
conducting a small medical research in a brand new cohort of topics to judge the
adequacy of sure proposed mitigations and validate the ultrasound
affirmation check. The research enrollment concluded in September 2022, during which 45
topics at 5 U.S. websites acquired two affirmation assessments (ultrasound and
conventional radiology). Topics have been knowledgeable to depend on FemBloc provided that each
assessments affirm process success. There have been no pregnancies in topics advised to
depend on FemBloc. We plan to make use of the research information to assist which of the 2
affirmation assessments (ultrasound or radiology) needs to be studied in a brand new pivotal
trial to assist a possible future utility for PMA for FemBloc. Outcomes of
the small research together with the trial design for the pivotal medical trial is
deliberate for submission to the FDA within the first quarter of 2023.

FemaSeed – Our Synthetic Insemination Resolution. Our synthetic insemination
resolution in growth consists of our proprietary FemaSeed product candidate for
synthetic insemination, which options single intrauterine directional supply
with sperm, providing important benefits over current synthetic
insemination options, together with being the one strategy that permits selective
supply of sperm domestically and on to the fallopian tube the place conception
happens. Our synthetic insemination resolution combines FemaSeed with a diagnostic
companion product, our FDA-cleared and marketed FemVue gadget, which, creates
saline and air distinction to securely assess the fallopian tubes for patency prior
to therapy with FemaSeed. FemVue can be utilized with our FDA-cleared and marketed
FemCath gadget, which permits for selective analysis of the fallopian tube.
Fallopian tube patency is important for profitable fertilization, and we imagine
FemVue affords important benefits over different current procedures, together with
having the ability to present ultrasound analysis of a lady’s fallopian tubes as half
of a diagnostic infertility evaluation. The protection profile of FemaSeed so far
is supported by information from our FemBloc medical trials and a post-market research of
an an identical single intrauterine directional supply gadget design, for which
we acquired FDA clearance for an additional indication. The FemaSeed pivotal trial
started in July 2021, pursuant to an FDA-approved IDE acquired in April 2021, at
a number of U.S. websites. In October 2022, we introduced an up to date research design for
the pivotal trial, which is able to now concentrate on {couples} experiencing male issue
infertility. This replace displays a revised technique to deal with this underserved
inhabitants experiencing infertility with a purpose of facilitating accelerated
enrollment. Completion of enrollment is predicted within the second quarter of 2023
adopted by a deliberate submission of the outcomes from the trial to FDA in assist
of a future de novo classification request for FemaSeed. Our FemVue product, a
companion diagnostic to FemaSeed, at present has advertising clearances or
authorization in the US, Canada, and Japan. Our FemCath product,
at present has advertising clearance in the US.

Extenuating circumstances at medical trial websites might end in a slowdown in
enrollment attributable to consolidation actions and the aftermath of the overturn of
Roe v Wade. It has been reported that there have been over 25 transactions
for the reason that begin of 2021 within the infertility market, which is quickly evolving
into giant business entities. This quickly altering market dynamics could also be
disruptive to the apply and have an effect on the conduct of medical research as
integration happens. The American Society of Reproductive Drugs
(ASRM) issued an announcement March 17, 2023 on the abortion coverage proposals
affecting reproductive drugs. ASRM acknowledged, “On the crux of the difficulty lots of
the proposals to ban or in any other case restrict entry to abortion care fail to guard
the usage of assisted reproductive applied sciences, together with IVF, and so-called
“personhood” measures (defining life as starting at conception or
fertilization) are multiplying throughout the nation, inflicting alarm bells to sound
for medical practitioners and infertility sufferers alike. Such proposals might,
deliberately or not, restrict and even ban the usage of IVF and routine, protected, and
medically confirmed procedures, such because the elimination of an embryo that fails to
implant in a uterus, or the disposal of unused embryos.” This uncertainty might
have an effect on topic enrollment in medical research being carried out at amenities
offering infertility providers.

Further Girls’s Well being Options. Now we have additionally developed a novel know-how
platform for tissue sampling supposed to be marketed alongside our different
women-specific medical merchandise within the doctor’s workplace setting. Our
FDA-cleared FemCerv product is a biopsy gadget for endocervical curettage that
can be utilized to pattern cervical cells and tissue circumferentially with pattern
containment inside the gadget to reduce contamination. We sponsored a
post-market research of FemCerv the place topics discovered the process to be comparatively
pain-free and the pattern obtained was full for evaluation, which we imagine
might support in dependable analysis. There have been no antagonistic occasions reported. We started
commercializing the FemCerv product in September 2022. Our FemEMB product
candidate in growth is designed to acquire a complete and
uncontaminated pattern of the endometrial cells and tissue in an workplace
process. We imagine there’s a market alternative to be used of FemEMB in
steady monitoring by a number of sampling procedures which may be employed by
physicians throughout and after remedies for cancers, irregular bleeding, or different
uterine remedies, reminiscent of previous to an endometrial ablation. As well as, we
plan to discover expanded indications for the one or twin intrauterine
directional supply to instill therapeutic medicine for the therapy of illnesses
of the fallopian tubes, for which now we have issued patents.



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Elements Affecting Our Enterprise

There are a selection of things which have impacted, and we imagine will proceed
to impression, our outcomes of operations and progress. These components embody:

• Graduation and conduct of medical trials for our product candidates. We should

   efficiently receive well timed IDE approval to have the ability to start pivotal medical
   trial for FemBloc, in addition to our future merchandise. We should efficiently recruit
   and enroll medical trial contributors in our medical trials for FemBloc and
   FemaSeed, which is additional sophisticated by the after results and public well being
   issues of the COVID-19 pandemic, with a purpose to have the requisite information for
   regulatory submissions, each to the FDA and to worldwide regulatory our bodies,
   for advertising authorization.

• Regulatory approval of our product candidates. We should efficiently receive

   well timed approvals, de novo classifications or clearances for our product
   candidates. For our gross sales to develop, we might want to obtain FDA approval for the
   FemBloc system for everlasting contraception and FDA grant of a de novo
   classification request for the FemaSeed product for synthetic insemination in
   the US, and might want to receive regulatory approval, grant,
   clearance or advertising authorization of our different pipeline merchandise within the
   United States and in worldwide markets.

• Scientific outcomes. Publications of medical outcomes by us, our opponents and

   different third events can have a major affect on whether or not, and the diploma
   to which, our merchandise are utilized by physicians and the procedures and coverings
   these physicians select to supply.

• Market acceptance. The success of our enterprise will finally depend upon our

   skill to achieve broad acceptance of our merchandise, which would require an
   in depth schooling course of for each physicians and sufferers of the advantages of
   our merchandise.

• Competitors. Our trade has quite a few giant, well-capitalized firms. We

   should proceed to efficiently compete in gentle of our opponents' current and
   future merchandise and associated pricing and their assets to efficiently market
   to the physicians who use our merchandise.

Whereas these components might current important alternatives for us, additionally they pose
important dangers and challenges that we should deal with. See the part titled
“Threat Elements” for extra info.

Affect of COVID-19 on Our Enterprise

In March 2020, the World Well being Group declared the outbreak of COVID-19
brought on by a novel pressure of coronavirus as a pandemic. This contagious illness
outbreak continues to unfold all through the US and all over the world,
together with via new variants of the virus which were recognized each
inside and out of doors the US. The worldwide COVID-19 pandemic has
affected and should proceed to have an effect on our skill to finish our present
preclinical research and medical trial, provoke and full our deliberate
preclinical research and medical trials, disrupt regulatory actions or have
different antagonistic results on our enterprise, outcomes of operations, monetary
situation and prospects. As well as, the pandemic has brought on substantial
disruption within the monetary markets and should adversely impression economies
worldwide, each of which might adversely have an effect on our enterprise, operations and
skill to lift funds to assist our operations. Thus far, now we have skilled
delays in web site initiation and topic enrollment in our medical trials and we
might proceed to expertise some delays in our medical trials and delays in information
assortment and evaluation. These delays up to now have had a extreme impression, and the
continued unfold of COVID-19 globally might adversely impression our medical trial
operations additional, together with our skill to provoke websites, recruit and retain
topics and principal investigators and web site employees who, as healthcare
suppliers, might have heightened publicity to COVID-19 if an outbreak happens in
their geography. The pandemic has decreased the variety of elective surgical
procedures, which, if sustained, might impact our future enterprise.
For instance, tubal ligation procedures sustained an 18% decline in December 2020
in comparison with December 2019, in response to a research revealed within the publication
Contraception in 2021. Now we have no assurance that demand for elective
reproductive surgical procedure will return to pre-pandemic ranges sooner or later, or at
all. We’re persevering with to watch the potential impression of the pandemic, however we
can’t be sure what the general impression shall be on our enterprise, monetary
situation, outcomes of operations and prospects.

Elements of Our Complete Loss

Gross sales

Gross sales are primarily from the sale of our FemVue product.



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We promote our product to doctor workplaces, primarily via direct buyer
service, in addition to via distributors in chosen worldwide markets. For
the years ended December 31, 2022 and 2021 Bayer Yakuhin, Ltd. accounted for
roughly 10% and 15%, respectively, of our whole income. For merchandise offered
via direct customer support, management is transferred upon cargo to
prospects. For merchandise offered to distributors internationally, management is
transferred upon cargo or supply to the shopper’s named location, based mostly on
the contractual delivery phrases.

Price of gross sales

Price of gross sales consists primarily of prices of parts to be used in our product,
the supplies and labor which are used to supply our merchandise, and the
manufacturing overhead that immediately helps manufacturing. We count on price of
gross sales to extend in absolute phrases as our income grows.

Gross margin

Our gross margin has been and can proceed to be affected by quite a lot of
components, primarily manufacturing volumes, the price of direct supplies, product
combine, geographic combine, discounting practices, manufacturing prices, product yields,
headcount and cost-reduction methods. Whereas we count on gross margin share
to extend over the long run, it would possible fluctuate from quarter to quarter
as we proceed to introduce new merchandise and undertake new manufacturing processes
and applied sciences.

Analysis and growth

Analysis and growth, or R&D, expense include engineering, product
growth, medical, and regulatory bills. R&D bills embody:

• price of medical trials to assist our product candidates and product

   enhancements, together with bills for actions carried out by third-party
   providers suppliers, primarily medical analysis organizations, or CROs, and
   web site funds;

• sure personnel-related bills, together with salaries, advantages and

stock-based compensation;

• supplies and provides used for inner R&D and medical actions;

• allotted overhead info know-how bills; and

• price of out of doors consultants, who help with know-how growth, regulatory

affairs, medical affairs and high quality assurance, and testing charges.

We monitor outsourced growth prices and different exterior analysis and
growth prices to particular product candidates on a program-by-program foundation,
charges paid to CROs, manufacturing and medical growth actions. Nonetheless,
we don’t monitor our inner analysis and growth bills on a
program-by-program foundation as they primarily relate to compensation, overhead and
early analysis and different prices that are deployed throughout a number of initiatives beneath

R&D prices are expensed as incurred. Sooner or later, we count on R&D bills to
improve in absolute {dollars} as we proceed to develop our product candidates,
broaden our product candidate pipeline, improve our current merchandise and
applied sciences and carry out actions associated to acquiring extra regulatory

Gross sales and advertising

Gross sales and advertising expense include personnel-related bills, together with
salaries, advantages, and stock-based compensation. Different gross sales and advertising
bills embody advertising and promotional actions, together with journey, commerce
reveals and market analysis, and price of out of doors consultants. We count on to develop a
gross sales pressure and improve advertising efforts as we commercialize our merchandise
based mostly on our platform applied sciences. Consequently, we count on gross sales and advertising
bills to extend in absolute {dollars} in future intervals.

Common and administrative

Common and administrative expense include personnel-related bills,
together with salaries, advantages, journey and stock-based compensation. Different basic
and administrative bills embody skilled providers charges, together with authorized,
audit and tax charges, insurance coverage prices, price of out of doors consultants and worker
recruiting and coaching prices. Furthermore, we count on to incur extra bills
related to working as a public firm, together with authorized, accounting,
insurance coverage, alternate itemizing and SEC compliance and investor relations. As a
outcome, we count on basic and administrative bills to extend in absolute
{dollars} in future intervals.

Depreciation and amortization

Depreciation and amortization expense include depreciation expense related
with our mounted belongings and lease proper of-use belongings and amortization expense
related to our patents. We count on to spend money on capital tools to assist
our ongoing and deliberate commercialization efforts and proceed to spend money on our
mental property. Consequently, we count on our depreciation and amortization
bills to extend in absolute {dollars} sooner or later.



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Different revenue (expense)

Different revenue (expense) consists largely of curiosity earned on our money
equivalents and short-term investments, different revenue earned from grants, and
offset by curiosity expense and different bills.

Earnings tax expense

Earnings tax expense consists of the minimal state revenue taxes we’re required to
pay. Now we have a full valuation allowance for deferred tax belongings, together with internet
working loss carryforwards and tax credit associated primarily to R&D.

Outcomes of Operations

Comparability of the Years Ended December 31, 2022 and 2021

The next desk reveals our outcomes of operations for the years ended December
31, 2022 and 2021:

                                   Yr Ended December 31,
                                    2022              2021            Change        % Change
Gross sales                           $   1,206,218        1,179,689           26,529           2.2 %
Price of gross sales                         441,938          370,384           71,554          19.3 %
Gross margin                          764,280          809,305          (45,025 )        -5.6 %
Working bills:
Analysis and growth            5,813,755        4,084,304        1,729,451          42.3 %
Gross sales and advertising                   558,852          208,735          350,117         167.7 %
Common and administrative          5,430,704        4,262,002        1,168,702          27.4 %
Depreciation and amortization         561,233          591,068          (29,835 )        -5.0 %
Whole working bills           12,364,544        9,146,109        3,218,435          35.2 %
Loss from operations              (11,600,264 )     (8,336,804 )     (3,263,460 )        39.1 %
Different revenue (expense):
Curiosity revenue, internet                  228,164            3,768          224,396        5955.3 %
Different revenue                                -          821,515         (821,515 )      -100.0 %
Curiosity expense                      (13,464 )        (19,226 )          5,762         -30.0 %
Different expense                          (2,306 )         (3,098 )            792         100.0 %
Whole different revenue (expense)          212,394          802,959         (590,565 )       -73.5 %
Loss earlier than revenue taxes          (11,387,870 )     (7,533,845 )     (3,854,025 )        51.2 %
Earnings tax expense                      6,300            4,000            2,300          57.5 %
Web loss                        $ (11,394,170 )     (7,537,845 )     (3,856,325 )        51.2 %

Gross sales

Gross sales elevated by $26,529, or 2.2%, to $1,206,218 in 2022 from $1,179,689 in
2021. The rise was attributable to a $84,747 improve in U.S. gross sales and a
$58,218 lower in worldwide gross sales. U.S. gross sales elevated by 8.4% in 2022 as
in comparison with 2021 and have been $1,090,359 in 2022 as in comparison with $1,005,612 in 2021,
representing a forty five.1% improve in models offered however have been offset by a discount in
the common promoting value. Worldwide gross sales decreased by 33.4% in 2022
in comparison with 2021 and have been $115,859 in 2022 as in comparison with $174,077 in 2021,
representing a 33.4% lower in models offered with the common promoting value
remaining the identical.

Price of gross sales and gross margin share

Price of gross sales elevated by $71,554, or 19.3%, to $441,938 in 2022 from $370,384
in 2021. The rise in price of gross sales was primarily due a rise in materials
prices, manufacturing personnel labor and overhead prices utilized to our price of
gross sales in comparison with the identical interval final 12 months. Consequently, gross margin
share was 63.4% in 2022 as in comparison with 68.6% in 2021. We count on to see
enchancment in our gross margin sooner or later as we’re investing in tools
and tooling which is able to allow us to scale back labor in sure manufacturing
processes and cut back materials prices as effectively.



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Analysis and growth

The next desk summarizes our R&D bills incurred throughout the intervals

                                              Yr Ended December 31,
                                                2022            2021

Compensation and associated personnel prices $ 2,935,580 2,384,135
Scientific-related prices

                         1,839,643         882,138
Materials and growth prices                   548,623         587,777

Skilled and out of doors guide prices 344,701 160,120
Different prices

                                      145,208          70,134

Whole analysis and growth bills $ 5,813,755 4,084,304

R&D bills elevated by $1,729,451 or 42.3%, to $5,813,755 in 2022 from
$4,084,304 in 2021. The web improve of $1,729,451 was primarily because of the
improve of $551,445 in compensation and associated personnel prices primarily in
salaries, fringe advantages and share-based compensation expense attributable to an
improve in headcount, a rise of $957,505 in clinical-related prices, an
improve of $184,581 in skilled and out of doors guide prices, and an
improve of $75,074 in different prices all to primarily assist our medical trials.

Gross sales and advertising

Gross sales and advertising bills elevated by $350,117 or 167.7%, to $558,852 in
2022 from $208,735 in 2021. The web improve was primarily attributable to a rise in
compensation and associated personnel prices because of the improve in headcount in
2022 and a rise in gross sales in advertising prices primarily to advertise our FemVue

Common and administrative

Common and administrative bills elevated by $1,168,702, or 27.4%, to
$5,430,704 in 2022 from $4,262,002 in 2021. The rise was largely due numerous
extra prices related to being a public firm together with a rise in
compensation and associated personnel prices, a rise in facility and different
overhead prices primarily for extra administrators & officers insurance coverage, and an
improve in skilled prices.

Depreciation and amortization

Depreciation and amortization bills decreased by $29,835, or 5.0%, to
$561,233 in 2022 from $591,068 in 2021 primarily attributable to discount of
amortization expense related to the Firm’s intangible belongings.

Different revenue (expense)

Whole different revenue (expense) decreased by $590,565, or 73.5%, to $212,394 in
2022 from $802,959 in 2021, the lower is essentially from the $821,515 in different
revenue acknowledged because of the SBA approval of our PPP mortgage forgiveness in 2021,
offset by a rise of $224,396, or 5955.3% in curiosity revenue, internet.

Earnings tax expense

Earnings tax expense elevated by $2,300 or 57.5%, to $6,300 in 2022 from $4,000
in 2021 attributable to a rise in our minimal internet value taxes we’re required to

Liquidity and Capital Assets

Sources of liquidity

Since our inception via December 31, 2022, our operations have been financed
primarily by internet proceeds from the sale of our widespread inventory and convertible
most well-liked inventory, indebtedness and, to a lesser extent, product income. As of
December 31, 2022, we had $12,961,936 of money and money equivalents and an
amassed deficit of $94,134,505.

On June 14, 2021, we have been notified by Georgia Main Financial institution that the Paycheck
Safety Program (PPP) mortgage within the quantity of $812,500 and accrued curiosity of
$9,015 was totally forgiven; and, because of this, we acknowledged $821,515 in different
revenue in June 2021.

On June 22, 2021, we closed our preliminary public providing (the IPO) during which we
issued and offered 2,650,000 shares of our approved widespread inventory. The value per
share within the IPO was $13.00. Web proceeds acquired, after deducting underwriting
reductions, commissions, and authorized bills, have been $31,613,500. Providing prices
incurred by the Firm have been $2,016,143, which incorporates authorized bills incurred
and paid by our underwriters of $425,000. Instantly previous to the closing of
the IPO, all our shares of our convertible Collection A most well-liked inventory and our
redeemable convertible Collection B and Collection C most well-liked inventory robotically
transformed into 8,116,343 shares of widespread inventory.



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On July 1, 2022, we entered into an Fairness Distribution Settlement (the “Fairness
Distribution Settlement”) with Piper Sandler & Co. (“Piper Sandler” or the “Gross sales
Agent”) and filed a associated Prospectus establishing an “at-the-market” facility,
pursuant to which we might supply and promote shares of our widespread inventory having an
combination providing value of as much as $8,800,000 on occasion via the Gross sales
Agent pursuant to the Prospectus. As of December 31, 2022, 51,251 shares of our
widespread inventory had been offered beneath the Fairness Distribution Settlement.

On March 10, 2023, Silicon Valley Financial institution (SVB), at which we maintained money and
money equivalents in a number of accounts, was closed by the California Division
of Monetary Safety and Innovation, which appointed the Federal Deposit
Insurance coverage Company (FDIC) as receiver. The failure of SVB uncovered us to
liquidity and credit score threat previous to the completion of the FDIC decision of SVB
in a fashion that totally protects all depositors. We didn’t expertise any losses
with respect to our funds that had been deposited with SVB.

Funding necessities

Based mostly on our present working plan, our present money and money equivalents are
anticipated to be adequate to fund our ongoing operations into the primary quarter
of 2024. Our estimate as to how lengthy we count on our current money and money
equivalents to have the ability to proceed to fund our operations relies on
assumptions that will show to be mistaken, and we might use our out there capital
assets ahead of we at present count on. Altering circumstances, a few of which
could also be past our management, might trigger us to devour capital considerably
sooner than we at present anticipate. We don’t count on liquidity to be adequate
for twelve months from the date of those monetary statements. Because of
our present restricted monetary liquidity, now we have concluded that substantial
doubt exists about our skill to proceed as a going concern.

Our money and money equivalents as of December 31, 2022 won’t be adequate to
fund all of our product candidates via regulatory approval, and we
anticipate needing to lift extra capital to finish the event and
commercialization of our product candidates. Nonetheless, we can provide no assurances
that we will safe extra sources of funds to assist our
operations, or if such funds shall be out there to us, that such extra
financing shall be adequate to fulfill our wants or be on phrases acceptable to us.
This threat might improve if financial and market circumstances deteriorate. If we’re
unable to acquire extra financing when wanted, we might must terminate,
considerably modify, or delay the event of our product candidates, or we
might must receive funds via collaborations or in any other case on phrases that will
require us to relinquish rights to our applied sciences or product candidates that
we would in any other case search to develop or commercialize independently. If we’re
unable to lift enough extra capital as and when required sooner or later,
we may very well be compelled to stop growth actions and terminate our operations,
and you can expertise a whole lack of your funding.

We count on to proceed to make substantial investments in our ongoing trials and
in extra medical trials which are designed to supply medical proof of
the protection and effectiveness of our merchandise. We additionally count on to proceed to make
investments in analysis and growth, manufacturing, regulatory affairs and
medical trials to develop future merchandise. If our product candidates are
authorized, we might want to make investments in our gross sales and advertising
group. Due to these and different components, we count on to proceed to incur
substantial internet losses and destructive money flows from operations for the
foreseeable future.

Our future capital necessities will depend upon many components, together with:

• the fee, timing and outcomes of our medical trials and regulatory evaluations;

• the fee and timing of creating gross sales, advertising and distribution


• the timing, receipt and quantity of gross sales from our present and potential


• our skill to proceed manufacturing our merchandise and product candidates and

to safe the parts, providers and provides wanted of their manufacturing;

• the diploma of success we expertise in commercializing our merchandise;

• the emergence of competing or complementary applied sciences;

• the price of getting ready, submitting, prosecuting, sustaining, defending and

implementing any patent claims and different mental property rights; and

• the extent to which we purchase or spend money on companies, merchandise or

   applied sciences, though we at present haven't any commitments or agreements relating
   to any of these kind of transactions.



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Money Flows

Comparability of the Years Ended December 31, 2022 and 2021

The next desk summarizes our money flows for the years ended December 31:

                                                         Yr Ended December 31,
                                                          2022              2021
Web money utilized in working actions                 $ (10,731,973 )     (7,930,785 )
Web money utilized in investing actions                      (407,475 )       (306,868 )

Web money (utilized in) offered by financing actions (681,645 ) 29,698,456
Web change in money and money equivalents

               $ (11,821,093 )     21,460,803

Working actions

In 2022, money utilized in working actions was $10,731,973, attributable to a
internet lack of $11,394,170 and a internet change in our internet working belongings and
liabilities of $458,267 and offset by internet non-cash prices of $1,120,464.
Non-cash prices primarily consisted of $224,939 in stock-based compensation and
$889,140 in depreciation and amortization. The change in our internet working
belongings and liabilities was primarily attributable to a rise of $232,553 in stock
and a lower of $383,616 in lease liabilities, offset by a change in different
belongings of $295,862.

In 2021, money utilized in working actions was $7,930,785, attributable to a internet
lack of $7,537,845 and a internet change in our internet working belongings and liabilities
of $732,716 and offset by internet non-cash prices of $339,776. Non-cash prices
primarily consisted of $193,366 in stock-based compensation and $964,287 in
depreciation and amortization offset by the PPP mortgage forgiveness of $821,515.
The change in our internet working belongings and liabilities was primarily attributable to a
lower in accounts payable, accrued bills, and lease liabilities totaling
$1,146,822, offset by a rise in different belongings of $475,993.

Investing actions

In 2022, money utilized in investing actions for the acquisition of apparatus was

In 2021, money utilized in investing actions for the acquisition of apparatus was

Financing actions

In 2022, money utilized in financing actions was $681,645, attributable to
funds of deferred providing prices of $232,845, repayments on notes payable of
$505,205, funds beneath lease obligations of $23,058, and offset by proceeds
from issuance of widespread inventory of $79,463.

In 2021, money offered by financing actions was $29,698,456, attributable to
internet proceeds from our IPO of $30,034,857, train of inventory choices totaling
$126,546, offset by repayments on notes payable of $442,086 and funds beneath
lease obligations of $20,861.

Off-Steadiness Sheet Preparations

Throughout the intervals introduced, we didn’t have, nor will we at present have, any
off-balance sheet preparations as outlined within the guidelines and rules of the

Essential Accounting Insurance policies and Estimates

Administration’s dialogue and evaluation of our monetary situation and outcomes of
operations relies on our monetary statements, which have been ready in
accordance with U.S. typically accepted accounting rules, or GAAP. The
preparation of those monetary statements requires us to make estimates and
assumptions for the reported quantities of belongings, liabilities, income, bills
and associated disclosures. Our estimates are based mostly on our historic expertise
and on numerous different components that we imagine are affordable beneath the
circumstances, the outcomes of which kind the premise for making judgments about
the carrying worth of belongings and liabilities that aren’t readily obvious from
different sources. Precise outcomes might differ from these estimates beneath totally different
assumptions or circumstances and any such variations could also be materials.

Whereas our important accounting insurance policies are extra totally described in Be aware 2 to
our monetary statements showing elsewhere on this Annual Report on Type 10-Ok,
we imagine the next dialogue addresses our most important accounting
insurance policies, that are these which are most essential to our monetary situation and
outcomes of operations and require our most troublesome, subjective and sophisticated



Desk of Contents

Income recognition

Our coverage is to acknowledge income when a buyer obtains management of the
promised items beneath Accounting Requirements Codification 606-Income from
Contracts with Prospects (Matter 606), which we adopted efficient January 1,
2018. The quantity of income acknowledged displays the consideration to which we
count on to be entitled to obtain in alternate for these items, and now we have
elected to exclude quantities collected from prospects for all gross sales (and different
related) taxes from the transaction value. We wouldn’t have a number of efficiency
obligations in our buyer orders, so income is acknowledged upon cargo of
our items based mostly upon contractually acknowledged pricing at customary fee phrases
starting from 30 to 60 days. All income is acknowledged time limit and no
income is acknowledged over time.

The vast majority of merchandise offered on to U.S. prospects are shipped by way of widespread
service, and the shopper pays for delivery and dealing with and assumes management
Free on Board (FOB) delivery level. Merchandise shipped to our worldwide
distributors are in accordance with their respective agreements; nonetheless, the
delivery phrases are typically EX-Works, reflecting that management is assumed by the
distributor on the delivery level. Returns are solely accepted with prior
authorization from the Firm. Gadgets to be returned should be in authentic
unopened cartons and are topic to a 30% restocking price. As of December 31,
2022, now we have not had a historical past of great returns.

Accrued bills

We accrue bills for estimated prices of R&D actions carried out by our
third-party service suppliers, which embody the conduct of preclinical research
and medical trials. We report the estimated prices of R&D actions based mostly upon
the estimated quantity of providers offered however not but invoiced. These prices, at
instances, could also be a major factor of the analysis and growth bills
and the Firm makes estimates in figuring out the accrued expense every interval.
As precise prices develop into recognized, the Firm adjusts its accrual. These accrued R&D
prices are included in accrued bills on the stability sheet and inside R&D
expense on the assertion of complete loss.

Current Accounting Pronouncements

See Notes 2(z) and a couple of(aa) to our monetary statements in Half II, Merchandise 8 for
info associated to lately issued accounting pronouncements.

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