FEMASYS INC

(1) Organization, Nature of Business, and Liquidity

Organization and Nature of Business

Femasys Inc. (the Company or Femasys) was incorporated in Delaware on February 19, 2004 and is headquartered in Suwanee, Georgia. The Company is a leading biomedical innovator, addressing significant unmet needs in women’s health worldwide, with a broad patent-protected portfolio of disruptive, accessible, in-office therapeutic and diagnostic products. The Company is a U.S. manufacturer that has received global regulatory approvals for its product portfolio, which is currently being commercialized in the U.S. and select countries. FemaSeed® Intratubal Insemination, a groundbreaking infertility treatment delivering sperm directly to the site of conception, is U.S. FDA-cleared and approved in Europe, United Kingdom (UK), Canada and Israel. Peer-reviewed publication of positive data from its pivotal clinical trial of FemaSeed demonstrated effectiveness and safety. FemVue®, a companion diagnostic for fallopian tube assessment via ultrasound, is U.S. FDA-cleared and approved in Europe, UK, Canada, Japan and Israel. FemCerv®, an endocervical tissue sampler for cervical cancer diagnosis, is U.S. FDA-cleared and approved in Europe, UK, Canada and Israel. FemBloc® permanent birth control is a revolutionary first-in-class non-surgical solution, that involves the minimally-invasive placement of a patented delivery system for precise delivery of our proprietary synthetic tissue adhesive (blended polymer) into both fallopian tubes simultaneously. Over time, the blended polymer fully degrades and produces nonfunctional scar tissue to permanently block the fallopian tubes in the safest most natural approach. This is in stark contrast to centuries-old surgical sterilization with reported risks that include infection, minor or major bleeding, injury to nearby organs, anesthesia-related events, and even death. Along with the various surgical risks, some patients may not qualify as good surgical candidates due to obesity or medical comorbidities. The FemBloc non-surgical approach has the potential to offer a safer, more accessible in-office alternative with fewer risks, contraindications, and substantially lower cost. Peer-reviewed publication of positive data from its initial clinical trials of FemBloc demonstrated compelling effectiveness and five-year safety. In March 2025, the Company announced CE mark certification under European Union Medical Device Regulation (EU MDR) as the first regulatory approval in the world for the FemBloc delivery system for non-surgical female permanent birth control. For the FemBloc blended polymer, an integral part of the FemBloc permanent birth control, the Company has successfully completed an expedited G12 Special MDR Audit for Class III devices and the Notified Body has recommended for CE mark approval pending the final stages of European Medical Agency (EMA) review, with potential approval expected mid-2025. In March 2025, we announced strategic distribution partnerships for FemBloc in Spain. The pivotal clinical trial (clinicaltrials.gov: NCT05977751) is enrolling participants for U.S. approval. FemChec®, U.S. FDA-cleared and approved in Europe and Canada, is a companion diagnostic product for FemBloc’s ultrasound-based confirmation test. FemCath® is U.S. FDA-cleared and approved in Europe, Canada and Israel for selective fallopian tube evaluation. The Company is a woman-founded and led company with an expansive, internally created intellectual property portfolio with over 200 issued patents globally, in-house chemistry, manufacturing, and controls (CMC) and device manufacturing capabilities and proven ability to develop products with commercialization efforts underway. Our suite of products and product candidate address what we believe are multi-billion dollar global market segments in which there has been little advancement for many years, helping women avoid pharmaceutical solutions, implants and surgery that can be expensive and expose women to harm.

Basis of Presentation

The Company has prepared the accompanying condensed financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been condensed or omitted pursuant to these rules and regulations. These condensed financial statements should be read in conjunction with the Company’s audited financial statements and footnotes related thereto for the year ended December 31, 2024 included in our Annual Report on Form 10-K filed with the SEC on March 27, 2025 (the Annual Report). There have been no material changes to the Company’s significant accounting policies described in Note 2 to the financial statements included in the Annual Report.

In the opinion of management, the unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position and the results of its operations and cash flows at the dates for the periods presented. The results of operations for such interim periods are not necessarily indicative of the results expected for the full year.

Use of Estimates

Thepreparation of financial statements in conformity with U.S. GAAP requires the Company 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 the reported amounts of revenue and expense during the reporting periods. Estimates for these and other items are subject to change and are reassessed by management in accordance with U.S. GAAP. Actual results could differ from those estimates.

Liquidity

As of March 31, 2025, the Company had cash and cash equivalents of $3,820,208. The Company plans to finance its operations and development needs with its existing cash and cash equivalents, additional equity and/or debt financing arrangements, and revenue primarily anticipated from domestic sales of FemaSeed and FemVue and international sales of FemaSeed, FemVue and FemBloc to support the Company’s commercial efforts and research and development activities, primarily focused on FemBloc. There can be no assurance that the Company will be able to obtain additional financing on terms acceptable to the Company, on a timely basis, or at all. If the Company is not able to obtain sufficient funds on acceptable terms when needed, the Company’s business, results of operations, and financial condition could be materially adversely impacted.

For the three months ended March 31, 2025, the Company generated a net loss of $5,896,839. The Company expects such losses to increase over the next few years as the Company commercializes FemaSeed and its other products and advances FemBloc through clinical development if and until FDA approval is received and is available to be marketed in the U.S.

The financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net operating losses in every year since inception and has an accumulated deficit as of March 31, 2025 of $133,095,096 and expects to incur additional losses and negative operating cash flows for at least the next twelve months. The Company’s ability to meet its obligations is dependent upon its ability to generate sufficient cash flows from operations and future financing transactions. Although management expects the Company will continue as a going concern, there is no assurance that management’s plans will be successful because the availability and amount of such funding arenot certain. Accordingly, substantial doubt exists about the Company’s ability to continue as a going concern for at least one year from the issuance of these financial statements. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s annual reporting periods beginning after December 15, 2024. Adoption is either with a prospective method or a fully retrospective method of transition. Early adoption is permitted. The Company adopted the ASU on January 1, 2025, and it did not have a material impact on the Company’s financial statements.* *

Recently Issued Accounting Pronouncements – Not Yet Adopted

Noother new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company’s financial statements.

(2) Fair Value of Financial Instruments

The Company applies a fair value hierarchy that requires the use of observable market data, when available, and prioritizes the inputs to valuation techniques used to measure fair value in the following categories:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model‑based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model‑based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions market participants would use in pricing the asset or liability.

Certain of the Company’s financial instruments, including cash, accounts receivable and other liabilities approximate their fair value because of the short‑term maturity of these financial instruments.

(3) Cash and Cash Equivalents

As of March 31, 2025 and December 31, 2024, money market funds included in cash and cash equivalents on the balance sheets were $2,877,844 and $3,451,761, respectively, which represent level 1 within the fair value hierarchy. The Company considers all highly liquid investments with an initial maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist of amounts invested in money market mutual funds and are stated at fair value.

(4) Inventories

Inventory, stated at cost, consisted of the following:

(5) Accrued Expenses

Accrued expenses included the following:

(6) Revenue Recognition

Revenue is recognized upon shipment of our goods based upon contractually stated pricing at standard payment terms ranging from 30 to 60 days. All revenue is recognized at a point in time. For the three months ended March 31, 2025 and 2024, there wereno unsatisfied performance obligations.

The majority of products sold directly to U.S customers are shipped via common carrier, and the customer pays for shipping and handling and assumes control Free on Board (FOB) shipping point. Products shipped to our international distributors are in accordance with their respective agreements; however, the shipping terms are generally EX-Works, reflecting that control is assumed by the distributor at the shipping point. Returns are only accepted with prior authorization from the Company. Items to be returned must be in original unopened cartons and are subject to a 30% restocking fee. Throughout the periods presented, the Company has not had a history of significant returns.

The Company’s sales for the quarters ended March 31, 2025 and 2024 were exclusively in the United States.

(7)** ** Commitments and Contingencies

Legal Claims

Occasionally, the Company may be a party to legal claims or proceedings, the outcomes of which are subject to significant uncertainty. In accordance with Accounting Standards Codification (ASC) 450,Contingencies, the Company will assess the likelihood of an adverse judgment for any outstanding claim as well as ranges of probable losses. When it has been determined that a loss is probable and the amount can be reasonably estimated, the Company will record a liability. For both periods presented, there were no material legal contingencies requiring accrual or disclosure.

The Company, as permitted under Delaware law and in accordance with its bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The Company entered into employment agreements with its officers, which provide for indemnification protection in the executive’s capacity as an officer for actions taken within the scope of employment. The maximum amount of potential future indemnification is unlimited; however, the Company has obtained directors’ and officers’ insurance that limits its exposure. The Company believes the fair value for these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of March 31, 2025 and December 31, 2024.

(8) Convertible Notes with Warrants (November 2023 Financing)

On November 21, 2023, the Company issued (i) senior unsecured convertible notes in an aggregate principal amount of $6,850,000, convertible into shares of common stock at a conversion price of $1.18 per share, (ii) Series A Warrants to purchase up to an aggregate of 5,805,083 shares of common stock at an exercise price of $1.18 per share, and (iii) Series B Warrants, together with the Series A Warrants, and, together with the convertible notes, to purchase up to an aggregate of 5,805,083 shares of common stock at an exercise price of $1.475 per share. The financing resulted in aggregate gross proceeds of $6,850,000, before $525,144 of transaction costs.

The Notes accrue interest at a rate of 6.0% per annum, payable annually, in cash or shares of common stock at the Company’s option, and mature on November 21, 2025, unless earlier converted or redeemed. In November 2024, the Company paid $111,000 of accrued interest in cash and $300,000 accrued interest in common stock, comprising 315,790 shares.

The Notes are convertible into shares of common stock at the election of the holder at any time at an initial conversion price of $1.18. The Company has agreed not to issue or sell any equity securities of the Company at a price below the then-current conversion price for a period of 18 months after closing, subject to certain exceptions. Beginning six months after issuance, the Company may require holders to convert their Notes into conversion shares if the closing price of the common stock exceeds $2.36 per share for 10 consecutive trading days and the daily dollar trading volume of the common stock exceeds $1,000,000 per day during the same period and certain equity conditions described in the Notes are satisfied. The Notes provide for certain events of default, whereby each holder of Notes will be able to require the Company to redeem in cash any or all of the holder’s Notes at a premium of 115%. The conversion feature did not meet the requirements for separate accounting and is not accounted for as a derivative instrument.

The Warrants

The Series A Warrants are exercisable immediately and expire five years from the date of issuance. The Company has the right to call the exercise of the Series A Warrants if the closing price of the common stock exceeds 200% of the Series A Exercise Price for 10 consecutive trading days and the daily dollar trading volume of the common stock exceeds $1,000,000 per day during the same period and certain equity conditions are satisfied.

The Series B Warrants expired in November 2024.

The Series A Warrants and Series B Warrants are classified as components of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock from which they are issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise.

For the three months ended March 31, 2025, the Company recognized total interest expense of $459,449, including coupon interest expense of $102,750 and amortization of debt discount and issuance costs of $356,699. For the three months ended March 31, 2024, the Company recognized total interest expense of $361,522, including coupon interest expense of $102,750 and amortization of debt discount and issuance costs of $258,802. The Notes, net of unamortized discount costs was $5,762,927 and $5,406,228 as of March 31, 2025 and December 31, 2024, respectively. The fair value of the convertible notes on March 31, 2025 and December 31, 2024, calculated using a discounted cash flow analysis using level 3 inputs, was $6,589,007 and $6,493,720, respectively.

(9) Stockholders’ Equity

On July 1, 2022, the Company filed a shelf registration statement to sell up to $150 million in common and preferred stock, debt securities and warrants. Additionally, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co. (“Piper Sandler” or the “Sales Agent”) and filed a related prospectus establishing an “at-the-market” facility, pursuant to which the Company may offer and sell shares of common stock from time to time through the Sales Agent. In October 2023, the Sales Agent was authorized to sell shares for aggregate proceeds up to $16.7 million at current market prices until all shares are sold.

During the quarter ended March 31, 2025, approximately 3.7 million shares of common stock have been sold for aggregate proceeds of approximately $5.4 million, and as of March 31, 2025, approximately $1.6 million remains available for sale pursuant to the prospectus. As of March 31, 2025, the amount the Company is authorized to sell is subject to baby-shelf limitations.

As of March 31, 2025, the Company had 27,087,886 shares of common stock outstanding, andno dividends have been declared or paid.

(10) **Equity Incentive Plans and Warrants **

Stock-Based Awards

(a)** Stock Option Plans **

Activity under the Company’s stock option plans for the three months ended March 31, 2025 was as follows:

The intrinsic value represents the amount by which the market price of the underlying stock at March 31, 2025 exceeds the exercise price of an option.

Options granted under the 2021 Stock Option Plan for the three months ended March 31, 2025 to employees were 1,466,515, and the weighted average exercise prices were $1.09. The weighted-average fair values of the options granted to employees was $0.84 and were estimated using the following Black-Scholes assumptions:

No options were exercised for the three months ended March 31, 2025 under our stock option plans.

As of March 31, 2025, the total number of shares of common stock reserved for future awards under the 2021 Stock Option Plan was 144,058.

(b) Inducement Grants

Since 2023, the Company has granted 250,000 inducement grants, a stock option grant to certain employees for the right to purchase shares, which were approved by the Compensation Committee. The inducement grants vest in equal installments over four years provided the employee remains employed by the Company on the vesting date. In the first quarter of 2025, there were forfeitures of 100,000 options.

The inducement grants are summarized as follows:

(c) Share-Based Compensation Expense

The following table shows the share-based compensation expense related to vested stock option grants to employees and nonemployees by financial statement line item on the accompanying condensed statement of comprehensive loss:

As of March 31, 2025, the remaining share-based compensation expense that is expected to be recognized in future periods for employees and nonemployees is $2,034,357, which includes $155,222 of compensation expense to be recognized upon achieving certain performance conditions. For service-based awards, the $1,879,135 of unrecognized expense is expected to be recognized over a weighted average period of 3.1 years.

(d)** **Employee Stock Purchase Plan (ESPP)

For the three months ended March 31, 2025, no shares of common stock were issued under the Company’s ESPP Plan. As of March 31, 2025, the total number of shares of common stock reserved for future awards under the ESPP Plan was 768,915.

(11) Related‑Party Transactions

In November 2023, the Company issued unsecured convertible notes and accompanying Series A and Series B Warrants (see Note 8). The transaction included the issuance of a $5 million convertible note and Series A and Series B Warrants to PharmaCyte Biotech, Inc. The interim CEO, President and Director of PharmaCyte Biotech, Inc., Joshua Silverman, serves on the Company’s board of directors. The Series B Warrants expired in November 2024. In November 2024, the Company paid PharmaCyte accrued interest on the convertible note of $300,000 in equity comprising 315,790 common shares.

In addition, during the year ended December 31, 2024 and three months ended March 31, 2025, a family member of the CEO was employed by the Company.

(12) Net Loss per Share Attributable to Common Stockholders

The following table sets forth the computation of the basic and diluted net loss per share:

The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding because they would be anti-dilutive:

(13) Income Taxes

The effective tax rate of 0% for the three months ended March 31, 2025 and 2024 was lower than the statutory rate due to the Company remaining in a full valuation allowance position.

(14) Segment Reporting

In accordance with FASB ASC Topic 280,Segment Reporting, the Company has determined that it operates as asingle business segment, which is the development and commercialization of therapeutic and diagnostic products that service women’s reproductive health needs (infertility and permanent birth control).

The determination of asingle business segment is consistent with the financial information regularly provided to the Company’s chief operating decision maker (“CODM”). As asingle reportable segment entity, the Company’s segment performance measure is net loss attributable to shareholders. The measurement of segment assets is reported on the balance sheet as total assets. The Company’s CODM is its Chief Executive Officer and Chief Financial Officer, who together review and evaluate net income for purposes of assessing performance, making operating decisions, allocating resources, and planning and forecasting for future periods.

Significant segment expenses, as provided to the CODM are as follows:

1 Other research and development expenses include clinical affairs, regulatory, manufacturing and quality assurance expenses.