PULSE BIOSCIENCES INC

Previous wording

We are a novel ablation company committed to health innovation using our patented Nano-pulse Stimulation (“NPS”) technology, a revolutionary energy modality that delivers nanosecond-duration pulses of electrical energy, each less than a millionth of a second long, to non-thermally clear or kill targeted cells. NPS technology, also referred to as Nanosecond Pulsed-Field Ablation (“nsPFA”) technology when used to ablate cellular tissue, can be used to treat a variety of medical conditions for which an optimal solution remains unfulfilled. We developed our proprietary CellFX System, a novel nsPFA delivery platform, and commercialized the initial application of its nsPFA technology to treat benign lesions of the skin. In parallel, we have designed a variety of applicators, or disposables, to explore the potential use of the CellFX platform to treat disorders in other medical specialties, such as cardiology, gastroenterology, gynecology, and ear, nose and throat. These applicators include devices for open surgical procedures, endoscopic or minimally invasive procedures, and endoluminal catheters, and each has been used in preclinical studies. Based on our preclinical experience and the potential to significantly improve outcomes for patients in a large and growing market, we decided in 2022 to focus our primary efforts on the use of nsPFA energy and the CellFX platform in the treatment of atrial fibrillation and in a select few other markets where it could have a profound positive impact on healthcare for both patients and providers, such as soft tissue ablation.

Current wording

We are a novel ablation company committed to health innovation using our patented Nano-pulse Stimulation (“NPS”) technology, a revolutionary energy modality that delivers nanosecond-duration pulses of electrical energy, each less than a millionth of a second long, to nonthermally clear or kill targeted cells. NPS technology, also referred to as Nanosecond Pulsed-Field Ablation (“nsPFA” or "nano-PFA") technology when used to ablate cellular tissue, can be used to treat a variety of medical conditions for which an optimal solution remains unfulfilled. We developed our proprietary CellFX System, a novel nsPFA delivery platform, and commercialized the initial application of its nsPFA technology to treat benign lesions of the skin. In parallel, we have designed a variety of applicators, or disposables, to explore the potential use of the CellFX platform to treat disorders in other medical specialties, such as cardiology, gastroenterology, gynecology, and ear, nose and throat. These applicators include devices for open surgical procedures, endoscopic or minimally invasive procedures, and endoluminal catheters, and each has been used in preclinical studies. Based on our preclinical experience and the potential to significantly improve outcomes for patients in a large and growing market, we decided in 2022 to focus our primary efforts on the use of nano-PFA energy and the CellFX platform in the treatment of atrial fibrillation and in a select few other markets where it could have a profound positive impact on healthcare for both patients and providers, such as soft tissue ablation.

Previous wording

Our first commercial-ready product for soft tissue ablation in a surgical setting, the CellFX nsPFA Percutaneous Electrode System, consists of a percutaneous needle electrode for use with our proprietary CellFX nsPFA Console. The novel electrode is designed to harness and deliver the key advantages of nsPFA energy, enabling precise nonthermal removal of cellular tissue without inducing thermal necrosis.

Current wording

Our first product for soft tissue ablation in a surgical setting, the CellFX nsPFA Percutaneous Electrode System, consists of a disposable, percutaneous, needle electrode for use with our proprietary CellFX nsPFA Console. This novel electrode is designed to harness and deliver the key advantages of nsPFA energy, enabling precise nonthermal removal of cellular tissue without inducing thermal necrosis.

Previous wording

Since early 2023, we have made progress in our percutaneous electrode program. After years of preclinical development and testing, in June 2023, we initiated a first-in-human study using our novel and proprietary nsPFA-enabled disposable, our percutaneous electrode. This study, which is still ongoing, is being conducted by Professor Stefano Spiezia at the Ospedale del Mare in Naples, Italy, to help us better understand and confirm the mechanism of action and tissue response of nsPFA energy in internal organs such as the thyroid. To date, we have treated over twenty study subjects. All of the initial patients in the study tolerated the procedure well with no reported serious side effects. Ultrasound images post-procedure have shown that the treated portions of the benign thyroid nodules have mostly been resorbed with no sign of scarring or fibrosis, which can be a side effect of other ablation modalities. Based on these positive initial results, in November 2023, we amended the thyroid study protocol in Italy to expand enrollment to gather additional clinical experience and further optimize treatment parameters. We expect to complete this study in 2025.

Current wording

After years of preclinical development and testing, in June 2023, we initiated a first-in-human study using our proprietary nsPFA-enabled percutaneous electrode. This study, which is still ongoing, is being conducted by Professor Stefano Spiezia at the Ospedale del Mare in Naples, Italy, to help us better understand and confirm the mechanism of action and tissue response of nano-PFA energy in internal organs such as the thyroid. To date, we have treated thirty study subjects, all of whom tolerated the procedure well with no reported serious side effects. Ultrasound images post procedure have shown that the treated portions of the benign thyroid nodules have mostly been resorbed with no sign of scarring or fibrosis, which can be a side effect of other ablation modalities. We expect to complete this study in 2025.

Previous wording

In parallel, in November 2023, we filed a premarket notification 510(k) with the FDA for clearance to commercialize our novel CellFX nsPFA Percutaneous Electrode System in the United States. In March 2024, we received FDA 510(k) clearance for our CellFX nsPFA Percutaneous Electrode System for use in the ablation of soft tissue in percutaneous and intraoperative surgical procedures. More recently, in July 2024, we received FDA 510(k) clearance for a second size of the percutaneous electrode needle, which we believe will provide our customers with an increased treatment option for their patients.

Current wording

In parallel, in November 2023, we filed a premarket notification 510(k) with the FDA for clearance to commercialize our novel CellFX nsPFA Percutaneous Electrode System in the United States. In March 2024, we received FDA 510(k) clearance for our CellFX nsPFA Percutaneous Electrode System for use in the ablation of soft tissue in percutaneous and intraoperative surgical procedures. More recently, in July 2024, we received FDA 510(k) clearance for a second size of the percutaneous electrode needle, which we believe will provide our customers with an additional treatment option for their patients.

Previous wording

Having secured 510(k) clearance to market and sell the CellFX nsPFA Percutaneous Electrode System in the United States with different sizes of percutaneous electrode needles, we have engaged with experts in the field of soft tissue ablation to gather information that will help shape our future commercial endeavors. To date, we have placed our CellFX System with five sites in the United States and these sites have been performing initial patient treatments and evaluating the CellFX System under short-term evaluation agreements. We expect to pursue more clinical evidenced-based milestones throughout 2024 and into 2025 in connection with evaluating the early pilot commercialization of our percutaneous electrodes, and we expect to commence a pivotal clinical trial in 2025 to support a specific labeling indication to commercialize the Percutaneous Electrode System in the United States as a treatment for benign thyroid nodules.

Current wording

Having secured 510(k) clearance to market and sell the CellFX nsPFA Percutaneous Electrode System in the United States with different sizes of percutaneous electrode needles, we have engaged with experts in the field of soft tissue ablation to gather information that will help shape our future commercial endeavors. To date, we have placed our CellFX System with seven sites in the United States and these sites have been performing initial patient treatments and evaluating the CellFX System under short-term evaluation agreements. To date, the clinicians in our pilot program have completed more than twenty-five patient procedures. We expect to pursue more clinical evidenced-based milestones throughout 2024 and into 2025 in connection with evaluating the early pilot commercialization of our percutaneous electrodes, and we expect to commence a pivotal clinical trial in mid-2025 to support a specific labeling indication to commercialize the Percutaneous Electrode System in the United States as a treatment for benign thyroid nodules.

Previous wording

Atrial fibrillation (“AF”) is a type of heart arrythmia, or irregular heartbeat, caused by faulty electrical signals in the heart. AF is a highly prevalent condition and is growing significantly with an ageing population. It is estimated that 43 million people worldwide are affected by AF. Treatment requires the precise and safe ablation of heart tissue to block or otherwise prevent these faulty electrical signals from causing the irregular heartbeat, and we believe nsPFA technology is uniquely suited to perform an integral role for this application and that it will prove to be highly differentiated from standard thermal energy modalities in use today.

Current wording

Atrial fibrillation (“AF”) is a type of heart arrythmia, or irregular heartbeat, caused by faulty electrical signals in the heart. AF is a highly prevalent condition and is growing significantly with an ageing population. It is estimated that 43 million people worldwide are affected by AF. Treatment requires the precise and safe ablation of heart tissue to block or otherwise prevent these faulty electrical signals from causing the irregular heartbeat, and we believe nano-PFA technology is uniquely suited to perform an integral role for this application and that it will prove to be highly differentiated from standard thermal energy modalities in use today.

Previous wording

The results of preclinical and clinical testing of both our nsPFA cardiac products, our surgical ablation clamp and our endocardial ablation catheter, have exceeded our expectations and initial data have been presented at physician or industry conferences. While these devices serve different physicians, the application of the energy to safely and effectively ablate cardiac tissue and the treatment of AF are the same, and we believe there will be important synergies realized through their contemporaneous development. The Company’s cardiac surgical ablation clamp and cardiac endocardial ablation catheter both use nsPFA to generate our proprietary pulses of electrical energy. We discuss each of these products under development in more detail below.

Current wording

The results of preclinical and clinical testing of both our nano-PFA cardiac products, namely our surgical ablation clamp and our endocardial ablation catheter, have exceeded our expectations and initial data have been presented at physician and industry conferences. While these devices serve different physicians, the application of the energy to safely and effectively ablate cardiac tissue and the treatment of AF are the same, and we believe there will be important synergies realized through their contemporaneous development. The Company’s cardiac surgical ablation clamp and cardiac endocardial ablation catheter both generate our proprietary nano-PFA pulses of electrical energy. We discuss each of these products under development in more detail below.

Previous wording

Our surgical cardiac ablation clamp is designed for use by cardiac surgeons during the surgical treatment of AF. The standard of care surgical procedure for the treatment of AF is performed by cardiac surgeons and called the Cox-Maze procedure. The Cox-Maze procedure typically uses thermal ablation technologies, such as heat with radiofrequency ablation or cold with cryoablation, to create specific ablation lines in the heart muscle. The ablation lines block the conduction of electrical impulses and can cure the patient of their AF.

Current wording

Our surgical cardiac ablation clamp is designed for use by cardiac surgeons during the surgical treatment of AF. The standard of care surgical procedure for the treatment of AF is performed by cardiac surgeons and called the Cox-Maze procedure. The Cox-Maze procedure typically uses thermal ablation technologies, such as heat with radiofrequency ablation or cold with cryoablation, to create specific ablation lines in the heart muscle. These ablation lines block the conduction of electrical impulses and can cure patients of their AF.

Previous wording

We believe our nsPFA technology can provide important advantages over today’s thermal modalities in creating these ablation lines. For example, surgeons using the System should be able to deliver faster ablations through thicker tissue than thermal modalities because of the nonthermal mechanism of action that nsPFA employs, which is not affected by heatsinks such as the blood in the heart. In preclinical studies, our nsPFA Cardiac Clamp has consistently achieved transmural ablations in less than two seconds, independent of tissue type or thickness. Moreover, thermal modalities may cause char formation on electrode surfaces which can cause gaps in the ablation lines that might lead to treatment failure. This should not be an issue with nsPFA ablation given its nonthermal nature. We believe these advantages will be important to cardiac surgeons, so we are working with leaders in the field to develop this technology quickly.

Current wording

We believe our nsPFA technology can provide important advantages over today’s thermal modalities in creating these ablation lines. For example, surgeons using the CellFX System should be able to deliver faster ablations through thicker tissue than thermal modalities because of the nonthermal mechanism of action that nano-PFA employs, which is not affected by heatsinks such as blood in the heart. In preclinical studies, our nsPFA Cardiac Clamp has consistently achieved transmural ablations in less than two seconds, independent of tissue type or thickness. Moreover, thermal modalities can cause char formation on electrode surfaces which can cause gaps in the ablation lines that might lead to treatment failure. This should not be an issue with nano-PFA ablation given its nonthermal nature. We believe these advantages will be important to cardiac surgeons, so we are working with leaders in the field to develop this technology quickly.

Previous wording

Over the last several years, we have been developing the cardiac ablation clamp from proof-of-concept to prototype, and we now have what we believe is our initial clinical design. We now plan to pursue a PMA application for FDA approval to market the cardiac clamp, which will require pivotal clinical data to support the application. With PMA approval, we expect that we would commercialize the nsPFA Cardiac Surgical System in the United States specifically as a treatment for AF. If granted by the FDA, a specific treatment indication would permit direct marketing of the treatment benefits provided by the device. We expect to begin our pivotal clinical trial for AF in 2025. In parallel, we submitted an ethics committee application including a clinical protocol to treat up to 30 patients in the Netherlands. This study should provide information on first-in-human effectiveness and safety with our cardiac surgical ablation clamp.

Current wording

Over the last several years, we have been developing the cardiac ablation clamp from proof-of-concept to prototype, and we now have what we believe is our initial clinical design. We plan to pursue a PMA application for FDA approval to market the cardiac clamp, which will require pivotal clinical data to support the application. With PMA approval, we expect that we would commercialize the nsPFA Cardiac Surgical System in the United States specifically as a treatment for AF. If granted by the FDA, a specific treatment indication would permit direct marketing of the treatment benefits provided by the device. We expect to begin our pivotal clinical trial for AF in mid-2025. In parallel, we have initiated a multi-site clinical study to treat up to 30 patients in the Netherlands. The first five patients in this cardiac clamp study tolerated the procedure well and acute data have been encouraging. This study should provide information on first-in-human effectiveness and safety with our cardiac surgical ablation clamp.

Previous wording

We believe our cardiac endocardial catheter ablation device will have many of the same advantages that the cardiac surgical ablation clamp appears to have with respect to both performance and safety compared to standard thermal modalities. Our catheter is uniquely designed to provide a circumferential, or circular, ablation in a single treatment cycle. We believe this will enable faster treatment times compared to what is currently performed with thermal modalities, especially when ablating around the pulmonary veins, a common treatment approach for AF.

Current wording

We believe our cardiac, endocardial, catheter ablation device will have many of the same advantages that the surgical ablation clamp appears to have with respect to both performance and safety compared to standard thermal modalities. Our catheter is uniquely designed to provide a circumferential, or circular, ablation in a single treatment cycle. We believe this will enable faster treatment times compared to what is currently performed with thermal modalities, especially when ablating around the pulmonary veins, a common treatment approach for AF.

Previous wording

In recent years, Pulsed Field Ablation (“PFA”) has gained attention in electrophysiology for the treatment of AF because of its safety profile and speed. Current clinical products employing PFA in AF treatment differ from CellFX nsPFA technology in that the pulse widths are longer, typically in the 10’s to 100’s of microseconds. We believe CellFX nsPFA technology, which delivers pulses of electrical energy that are each less than a millionth of a second long, can offer similar safety advantages as PFA and may provide improved efficacy advantages based on the circumferential design of our catheter and because it appears CellFX nsPFA technology can create deeper ablations.

Current wording

In recent years, Pulsed Field Ablation (“PFA”) has gained attention in electrophysiology for the treatment of AF because of its safety profile and speed. Current clinical products employing PFA in AF treatment differ from CellFX nsPFA technology in that the pulse widths are longer, typically in the microsecond domain. We believe CellFX nsPFA technology, which delivers pulses of electrical energy that are each less than a millionth of a second long, can offer similar safety advantages as PFA and may provide improved efficacy advantages based on the circumferential design of our catheter and because it appears CellFX nsPFA technology can create deeper ablations.

Previous wording

Similar to the cardiac ablation clamp, our proprietary catheter has been in development for several years and we have been working with leaders in the electrophysiology field to test the catheter in preclinical studies. After seeing encouraging preclinical results, in December 2023, we initiated a clinical study in Prague, Czech Republic, to test our CellFX nsPFA 360° Cardiac Catheter in patients with AF and early acute data and remapping data from this study have been promising. We have therefore expanded the initial clinical protocol to enroll up to 60 patients, from 30, and to include participation by two additional sites. We believe the catheter will need to go through the PMA process for FDA approval to market and sell our cardiac endocardial catheter in the United States. We expect to commence a U.S. IDE pivotal clinical study sometime in 2025.

Current wording

Similar to the cardiac ablation clamp, our proprietary catheter has been in development for several years and we have been working with leaders in the electrophysiology field to test the catheter in preclinical studies. After seeing encouraging preclinical results, in December 2023, we initiated a clinical study in Prague, Czech Republic, to test our CellFX nsPFA 360° Cardiac Catheter in patients with AF and early acute data and remapping data from this study have been promising. We have therefore expanded the initial clinical protocol to enroll up to 60 patients, from 30, and to include participation by two additional sites. The study is now almost fully enrolled. Investigators have successfully remapped the first half of the study participants and we have been encouraged by the preliminary results seen in the study. We believe the catheter will need to go through the PMA process for FDA approval to market and sell our cardiac endocardial catheter in the United States. We expect to commence a U.S. IDE pivotal clinical study sometime in the middle of 2025.

Previous wording

The CellFX Console is a tunable, software-enabled, console-based platform, designed to accommodate the clinical workflow preferred by physicians. The CellFX System is configured to accept a variety of end-effectors or electrodes across a range of clinical applications. In February 2021, we received 510(k) clearance from the FDA for the CellFX System for dermatologic procedures requiring ablation and resurfacing of the skin. In January 2021, we received Conformité Européene (“CE”) marking approval for the CellFX System, which allows for marketing of the system in the European Union (“EU”). Shortly after these regulatory clearances, we began commercializing the CellFX System in dermatology for the treatment of benign skin lesions. However, in September 2022, we announced a shift in our focus from dermatology to cardiology and the treatment of AF. We have ceased all commercial sales and marketing operations in dermatology. At the present time, we continue to support our remaining commercial users and remain open to a potential commercial partnership. The CellFX System is being used for our current efforts in the treatment of AF and as part of the CellFX nsPFA Percutaneous Electrode System.

Current wording

The CellFX Console is a tunable, software-enabled, console-based platform, designed to accommodate the clinical workflow preferred by physicians. The CellFX System is configured to accept a variety of disposable end-effectors or electrodes across a range of clinical applications. In February 2021, we received 510(k) clearance from the FDA for the CellFX System for dermatologic procedures requiring ablation and resurfacing of the skin. In January 2021, we received Conformité Européene (“CE”) marking approval for the CellFX System, which allows for marketing of the system in the European Union (“EU”). Shortly after these regulatory clearances, we began commercializing the CellFX System in dermatology for the treatment of benign skin lesions. However, in September 2022, we announced a shift in our focus from dermatology to cardiology and the treatment of AF. We have ceased all commercial sales and marketing operations in dermatology. At the present time, we continue to support our remaining commercial users and remain open to a potential commercial partnership. The CellFX System is being used for our current efforts in the treatment of AF and as part of the CellFX nsPFA Percutaneous Electrode System.

Previous wording

We continue to believe nsPFA ablation, as well as NPS technology more broadly, has the potential to provide superior outcomes across a variety of medical disciplines and we may seek partnership opportunities to develop additional applications.

Current wording

We continue to believe nano-PFA ablation, as well as NPS technology more broadly, has the potential to provide superior outcomes across a variety of medical disciplines and we may seek partnership opportunities to develop additional applications.

Previous wording

Over the past few years, Robert Duggan, our majority stockholder and Executive Director, has made significant investments in our Company to fund its operations. In June 2022, we completed a common stock rights offering to our existing stockholders, which raised $15 million in aggregate. Mr. Duggan purchased approximately 56% of the shares offered through this offering. Then, in September 2022, we entered into a loan agreement with Mr. Duggan pursuant to which he lent us $65 million to fund our product development operations. In April 2023, this loan agreement was terminated upon Mr. Duggan and us entering into a Securities Purchase Agreement whereby the shares were paid for through the cancellation of both the principal sum of $65.0 million and all accrued and unpaid interest owed at the time under the 2022 loan agreement, which totaled approximately $0.2 million. In June 2024, we completed a rights offering of units (each unit comprising a share of our common stock and two warrants, each to purchase a one-half share of our common stock) to our existing stockholders, which raised $60 million in aggregate. Mr. Duggan purchased approximately 88% of the shares offered through this offering. Mr. Duggan may or may not elect to participate in any number of future fundraisings by the Company, whether similar to those described above or otherwise, and he may choose to invest more than his current pro rata share in any of these fundraisings, or alternatively he may offer to provide additional debt financing as may be needed in order to maintain the Company as a going concern.

Current wording

Over the past few years, Robert Duggan, our majority stockholder and Co-Chairman, has made significant investments in our Company to fund its operations. In June 2022, we completed a common stock rights offering to our existing stockholders, which raised $15 million in aggregate. Mr. Duggan purchased approximately 56% of the shares offered through this offering. Then, in September 2022, we entered into a loan agreement with Mr. Duggan pursuant to which he lent us $65 million to fund our product development operations. In April 2023, this loan agreement was terminated when Mr. Duggan and the Company entered into a Securities Purchase Agreement whereby the shares were paid for through the cancellation of both the principal sum of $65.0 million and all accrued and unpaid interest owed at the time under the 2022 loan agreement, which totaled approximately $0.2 million. In June 2024, we completed a rights offering of units (each unit comprising a share of our common stock and two warrants, each to purchase a one-half share of our common stock) to our existing stockholders, which raised $60 million in aggregate. Mr. Duggan purchased approximately 88% of the shares offered through this offering. Mr. Duggan may or may not elect to participate in any number of future fundraisings by the Company, whether similar to those described above or otherwise, and he may choose to invest more than his current pro rata share in any of these fundraisings, or alternatively he may offer to provide additional debt financing as may be needed in order to maintain the Company as a going concern.

Previous wording

The source, timing and availability of any future financing will depend largely upon market conditions and perceived progress in the Company’s on-going product development initiatives, as well as future clinical and regulatory developments concerning the CellFX System and our other NPS-based technologies. Funding may not be available when needed, at all or on terms acceptable to us. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate some or all of our commercial activities, reduce headcount, trim research and product development programs, discontinue clinical trials, stop all or some of our manufacturing operations, defer capital expenditures, deregister from being a publicly traded company and delist from Nasdaq, or license our potential products or technologies to third parties, possibly on terms that cannot sustain our current business. In addition, economic instability caused by the armed conflicts in Ukraine and Israel and high interest rates, together with other market factors, could have an adverse impact on potential sources of future financing.

Current wording

The source, timing and availability of any future financing will depend largely upon market conditions and perceived progress in the Company’s on-going product development initiatives, as well as future clinical and regulatory developments concerning the CellFX System and our other NPS-based technologies. Funding may not be available when needed, at all or on terms acceptable to us. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate some or all of our commercial activities, reduce headcount, trim research and product development programs, discontinue clinical trials, stop all or some of our manufacturing operations, defer capital expenditures, deregister from being a publicly traded company and delist from Nasdaq, or license our potential products or technologies to third parties, possibly on terms that cannot sustain our current business. In addition, economic instability caused by the armed conflicts in the Middle East and Ukraine and high interest rates, together with other market factors, could have an adverse impact on potential sources of future financing.

Previous wording

Our stock-based compensation programs include stock options and an employee stock purchase program. We periodically issue stock options to officers, directors, employees, and consultants for their services to the Company. Such issuances vest and expire according to terms established at the issuance date. Stock-based payments to officers, directors and employees, including grants of employee stock options, are recognized in the financial statements based on their grant date fair values, which are estimated using the Black-Scholes option-pricing model. Stock-based compensation expense is charged to operations on a straight-line basis over the requisite service period. We have granted stock options with time-based, performance-based, and market-based vesting conditions.

Current wording

Our stock-based compensation programs include stock options and an employee stock purchase program. We periodically issue stock options to officers, directors, employees, and consultants for their services to the Company. Such issuances vest and expire according to terms established at the issuance date. Stock-based payments to officers, directors and employees, including grants of employee stock options, are recognized in the financial statements based on their grant date fair values, which are estimated using the Black-Scholes option-pricing model. Stock-based compensation expense is charged to operations on a straight-line basis over the requisite service period. We have granted stock options with time-based, performance-based, and market-based vesting conditions. In October 2024, our Board approved changes to the vesting conditions of certain outstanding common stock option awards so that the performance-based vesting criteria of those particular awards will be changed to either time-based or market-based vesting criteria.

Previous wording

The vesting conditions for stock options with market-based vesting conditions relate to the achievement of certain market capitalization targets of the Company. The grant date fair value for these stock options was determined using a Monte Carlo simulation. The expense is recognized over the requisite service period for each tranche of the awards. The requisite service period is the service period derived from the Monte Carlo simulation model. If the market capitalization targets are met sooner than the derived service period, we will accelerate the recognition of stock-based compensation expense to reflect the cumulative expense associated with the vested shares. The Monte Carlo simulation requires the Company to make assumptions and judgements about the variables used in the calculation including the expected term, volatility of the Company's common stock, an assumed risk-free interest rate, and cost of equity. The assumptions used represent management’s best estimates.

Current wording

The vesting conditions for stock options with market-based vesting conditions relate to the achievement of certain market capitalization targets of the Company. The grant date fair value for these stock options was determined using a Monte Carlo simulation. The expense is recognized over the requisite service period for each tranche of the awards. The requisite service period is the service period derived from the Monte Carlo simulation model. If the market capitalization targets are met sooner than the derived service period, we will accelerate the recognition of stock-based compensation expense to reflect the cumulative expense associated with the vested shares. The Monte Carlo simulation requires the Company to make assumptions and judgements about the variables used in the calculation including the expected term, volatility of the Company's common stock, an assumed risk-free interest rate, and cost of equity.

Previous wording

We operate and manage our business as one reportable and operating segment. Our CODM reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. All of our long-lived assets are based in the United States.

Current wording

We operate and manage our business as one reportable and operating segment. Our Chief Operating Decision Maker ("CODM") reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. All of our long-lived assets are based in the United States.

Previous wording

Research and development expenses consist of compensation and other employee related expenses for research and development personnel, clinical trials and consulting costs related to the design, development and enhancement of our potential future products, prototype material and devices. Research and development expenses increased by $0.5 million to $7.2 million for the three-month period ended June 30, 2024, compared to $6.7 million during the same period in 2023 primarily due to increases of $0.5 million in stock-based compensation, $0.4 million in compensation and other employee-related expenses, partially offset by a decrease of $0.4 million in paid services.

Current wording

Research and development expenses consist of compensation and other employee related expenses for research and development personnel, clinical trials and consulting costs related to the design, development and enhancement of our potential future products, prototype material and devices. Research and development expenses increased by $0.2 million to $7.7 million for the three-month period ended September 30, 2024, compared to $7.5 million during the same period in 2023 primarily due to increases of $0.4 million in supplies, $0.3 million in compensation and other employee-related expenses, and $0.1 million in stock-based compensation; partially offset by a decrease of $0.6 million in paid services.

Previous wording

General and administrative expenses consist of compensation and other related employee expenses for executives, finance, legal, human resources, information technology, and administrative personnel, professional fees, patent fees and costs, insurance costs and other general corporate expenses. General and administrative expenses increased by $1.0 million to $4.5 million for the three-month period ended June 30, 2024, compared to $3.5 million during the same period in 2023 primarily due to increases of $0.4 million in stock-based compensation, $0.4 million in compensation and other employee-related expenses, and $0.1 million in paid services and general administrative costs.

Current wording

General and administrative expenses consist of compensation and other related employee expenses for executives, finance, legal, human resources, information technology, and administrative personnel, professional fees, patent fees and costs, insurance costs and other general corporate expenses. General and administrative expenses increased by $2.2 million to $6.0 million for the three-month period ended September 30, 2024, compared to $3.8 million during the same period in 2023 primarily due to increases of $1.1 million in stock-based compensation, $0.6 million in compensation and other employee-related expenses, and $0.5 million in paid services and general administrative costs.

Previous wording

Interest income, net, was flat for the three-month period ended June 30, 2024, compared to the same period in 2023. Interest income decreased by $0.3 million, driven by decreased returns on lower cash balances. Additionally, interest expense decreased by $0.3 million, driven by the extinguishment of the 2022 Loan Agreement.

Current wording

Interest income, net, increased by $0.3 million to $1.0 million for the three-month period ended September 30, 2024, compared to $0.7 million during the same period in 2023. Interest income increased by $0.3 million, driven by increased returns on higher cash balances.

Previous wording

There were no revenues for the six-month periods ended June 30, 2024 and 2023.

Current wording

There were no revenues for the nine-month periods ended September 30, 2024 and 2023.

Previous wording

Research and development expenses consist of compensation and other employee related expenses for research and development personnel, clinical trials and consulting costs related to the design, development and enhancement of our potential future products, prototype material and devices. Research and development expenses increased by $1.5 million to $14.0 million for the six-month period ended June 30, 2024, compared to $12.5 million during the same period in 2023 primarily due to increases of $1.2 million in stock-based compensation and $0.7 million in compensation and other employee-related expenses. These increases were partially offset by decreases of $0.2 million in paid services and $0.2 million in supplies.

Current wording

Research and development expenses consist of compensation and other employee related expenses for research and development personnel, clinical trials and consulting costs related to the design, development and enhancement of our potential future products, prototype material and devices. Research and development expenses increased by $1.7 million to $21.7 million for the nine-month period ended September 30, 2024, compared to $20.0 million during the same period in 2023 primarily due to increases of $1.3 million in stock-based compensation, $0.9 million in compensation and other employee-related expenses, and $0.3 million in supplies. These increases were partially offset by a decrease of $0.8 million in paid services.

Previous wording

General and administrative expenses consist of compensation and other related employee expenses for executives, finance, legal, human resources, information technology, and administrative personnel, professional fees, patent fees and costs, insurance costs and other general corporate expenses. General and administrative expenses increased by $1.1 million to $8.4 million for the six-month period ended June 30, 2024, compared to $7.3 million during the same period in 2023 primarily due to increases of $0.6 million in stock-based compensation, $0.3 million in compensation and other employee-related expenses, and $0.2 million in facilities and IT cost allocations driven by our shift in focus.

Current wording

General and administrative expenses consist of compensation and other related employee expenses for executives, finance, legal, human resources, information technology, and administrative personnel, professional fees, patent fees and costs, insurance costs and other general corporate expenses. General and administrative expenses increased by $3.3 million to $14.3 million for the nine-month period ended September 30, 2024, compared to $11.0 million during the same period in 2023 primarily due to increases of $1.7 million in stock-based compensation, $0.8 million in compensation and other employee-related expenses, $0.6 million in paid services, and $0.2 million in facilities and IT cost allocations driven by our shift in focus.

Previous wording

Interest income decreased by $0.4 million to $0.8 million for the six-month period ended June 30, 2024, compared to $1.2 million during the same period in 2023 driven by decreased returns on lower cash balances. Additionally, interest expense decreased by $1.1 million to zero for the six-month period ended June 30, 2024, compared to $1.1 million during the same period in 2023 driven by the extinguishment of the 2022 Loan Agreement.

Current wording

Interest income, net, increased by $1.0 million to $1.8 million for the nine-month period ended September 30, 2024, compared to $0.8 million during the same period in 2023. Interest income decreased by $0.1 million to $1.8 million for the nine-month period ended September 30, 2024, compared to $1.9 million during the same period in 2023. Interest expense decreased by $1.1 million to zero for the nine-month period ended September 30, 2024, compared to $1.1 million during the same period in 2023 driven by the extinguishment of the 2022 Loan Agreement.

Previous wording

On June 9, 2022, we completed the 2022 Rights Offering resulting in the sale of 7,317,072 Units, at a price of $2.05 per Unit, with each Unit consisting of one share of the Company’s common stock, par value $0.001 per share, and one warrant to purchase one share of common stock at $2.05 per share. 7,317,072 shares of common stock and warrants to acquire up to an additional 7,317,072 shares of common stock were issued in the 2022 Rights Offering. The Company received aggregate gross proceeds from the 2022 Rights Offering of $15 million. In May 2023, the Company delivered an irrevocable notice of redemption to warrant holders and, on June 16, 2023, it redeemed the last of the outstanding 2022 Rights Offering Warrants at a price of $0.01 per warrant share. Prior to the redemption date, warrants to purchase 7,250,897 shares were exercised, generating approximately $14.9 million of total gross proceeds to the Company. As of September 30, 2023, there were no 2022 Rights Offering Warrants outstanding. Robert W. Duggan, the Company’s majority stockholder and Executive Chairman, purchased approximately 56% of the shares offered through the 2022 Rights Offering.

Current wording

On June 9, 2022, we completed the 2022 Rights Offering resulting in the sale of 7,317,072 Units, at a price of $2.05 per Unit, with each Unit consisting of one share of the Company’s common stock, par value $0.001 per share, and one warrant to purchase one share of common stock at $2.05 per share. 7,317,072 shares of common stock and warrants to acquire up to an additional 7,317,072 shares of common stock were issued in the 2022 Rights Offering. The Company received aggregate gross proceeds from the 2022 Rights Offering of $15 million. In May 2023, the Company delivered an irrevocable notice of redemption to warrant holders and, on June 16, 2023, it redeemed the last of the outstanding 2022 Rights Offering Warrants at a price of $0.01 per warrant share. Prior to the redemption date, warrants to purchase 7,250,897 shares were exercised, generating approximately $14.9 million of total gross proceeds to the Company. As of September 30, 2023, there were no 2022 Rights Offering Warrants outstanding. Robert W. Duggan, the Company’s majority stockholder and Co-Chairman, purchased approximately 56% of the shares offered through the 2022 Rights Offering.

Previous wording

In September 2022, we entered into the 2022 Loan Agreement with Robert W. Duggan, our majority stockholder and Executive Chairman, in connection with Mr. Duggan lending the principal sum of $65.0 million to the Company. The 2022 Loan Agreement had a maturity date of March 20, 2024. Under the 2022 Loan Agreement, Mr. Duggan provided us, subject to certain conditions, an unsecured term loan facility in an original aggregate principal amount of $65.0 million. The 2022 Loan Agreement bore interest at a rate per annum equal to 5.0%, payable quarterly, commencing on January 1, 2023. On March 17, 2023, the Company and Mr. Duggan amended certain terms of the Loan Agreement. There were no changes to the interest rate, the principal sum repayment date was changed to September 30, 2024. However, on April 30, 2023, we entered into a Securities Purchase Agreement with Mr. Duggan, pursuant to which we agreed to issue and sell to Mr. Duggan 10,022,937 shares of our common stock, par value $0.001 per share, in a Private Placement, at a price per share of $6.51. These shares were paid for through the cancellation of the amounts then owed by the Company under the 2022 Loan Agreement, the principal sum of $65.0 million and all accrued and unpaid interest outstanding, which totaled approximately $0.2 million as of April 30, 2023. The parties completed the Private Placement on May 9, 2023 and, upon closing and satisfaction of the outstanding debt, the 2022 Loan Agreement terminated, without early termination fees or penalties being owed by the Company. No additional amounts are owed to Mr. Duggan under the 2022 Loan Agreement.

Current wording

In September 2022, we entered into the 2022 Loan Agreement with Robert W. Duggan, our majority stockholder and Co-Chairman, in connection with Mr. Duggan lending the principal sum of $65.0 million to the Company. The 2022 Loan Agreement had a maturity date of March 20, 2024. Under the 2022 Loan Agreement, Mr. Duggan provided us, subject to certain conditions, an unsecured term loan facility in an original aggregate principal amount of $65.0 million. The 2022 Loan Agreement bore interest at a rate per annum equal to 5.0%, payable quarterly, commencing on January 1, 2023. On March 17, 2023, the Company and Mr. Duggan amended certain terms of the Loan Agreement. There were no changes to the interest rate, the principal sum repayment date was changed to September 30, 2024. However, on April 30, 2023, we entered into a Securities Purchase Agreement with Mr. Duggan, pursuant to which we agreed to issue and sell to Mr. Duggan 10,022,937 shares of our common stock, par value $0.001 per share, in a Private Placement, at a price per share of $6.51. These shares were paid for through the cancellation of the amounts then owed by the Company under the 2022 Loan Agreement, the principal sum of $65.0 million and all accrued and unpaid interest outstanding, which totaled approximately $0.2 million as of April 30, 2023. The parties completed the Private Placement on May 9, 2023 and, upon closing and satisfaction of the outstanding debt, the 2022 Loan Agreement terminated, without early termination fees or penalties being owed by the Company. No additional amounts are owed to Mr. Duggan under the 2022 Loan Agreement.

Previous wording

To date, we have generated limited revenue and used cash in our operating activities. As a result, we have incurred significant operating losses in each year since our inception and we may continue to incur additional losses for the next several years. As of June 30, 2024, we had cash and cash equivalents of $26.2 million. In July 2024, we closed a rights offering and raised an additional approximately $60 million. We believe that our existing cash and cash equivalents will be sufficient to fund our projected operating requirements for at least the next twelve months from the filing date of this Quarterly Report on Form 10-Q. However, we plan to raise additional capital in the future. We can give no assurance, at this time, that additional financing or a collaboration will be available when needed on terms acceptable to us, however.

Current wording

To date, we have generated limited revenue and used cash in our operating activities. As a result, we have incurred significant operating losses in each year since our inception and we may continue to incur additional losses for the next several years. As of September 30, 2024, we had cash and cash equivalents of $79.0 million. We believe that our existing cash and cash equivalents will be sufficient to fund our projected operating requirements for at least the next twelve months from the filing date of this Quarterly Report on Form 10-Q. However, we plan to raise additional capital in the future. We can give no assurance, at this time, that additional financing or a collaboration will be available when needed on terms acceptable to us, however.

Previous wording

These expectations are based on our current operating and financing plans which are subject to change. Until we are able to generate sustainable product revenues at profitable levels, we expect to finance our future cash needs through public or private equity offerings, debt financings, and/or potential new collaborations. Such additional funds may not be available on terms acceptable to us or at all. If we raise funds by issuing equity or equity-linked securities, the ownership of some or all of our stockholders may be diluted, and the holders of new equity securities may have priority rights over our existing stockholders. If adequate funds are not available, we may be required to curtail operations significantly or obtain funds by entering into agreements on unattractive terms. Our inability to raise capital could have a material adverse effect on our business, financial condition, results of operations and cash flows. For example, lack of necessary funds may require us to, among other things, reduce headcount, trim research and product development programs, discontinue clinical trials, defer capital expenditures, deregister from being a publicly traded company and delist from Nasdaq, or license our potential products or technologies to third parties, possibly on terms that cannot sustain our current business. In addition, instability in economic activity caused by the armed conflicts in Ukraine and Israel and high interest rates, together with other market factors, could have an adverse impact on potential sources of future financing.

Current wording

These expectations are based on our current operating and financing plans which are subject to change. Until we are able to generate sustainable product revenues at profitable levels, we expect to finance our future cash needs through public or private equity offerings, debt financings, and/or potential new collaborations. Such additional funds may not be available on terms acceptable to us or at all. If we raise funds by issuing equity or equity-linked securities, the ownership of some or all of our stockholders may be diluted, and the holders of new equity securities may have priority rights over our existing stockholders. If adequate funds are not available, we may be required to curtail operations significantly or obtain funds by entering into agreements on unattractive terms. Our inability to raise capital could have a material adverse effect on our business, financial condition, results of operations and cash flows. For example, lack of necessary funds may require us to, among other things, reduce headcount, trim research and product development programs, discontinue clinical trials, defer capital expenditures, deregister from being a publicly traded company and delist from Nasdaq, or license our potential products or technologies to third parties, possibly on terms that cannot sustain our current business. In addition, instability in economic activity caused by the armed conflicts in the Middle East and Ukraine and high interest rates, together with other market factors, could have an adverse impact on potential sources of future financing.

Previous wording

During the six months ended June 30, 2024, we used cash in the amount of $18.2 million in operating activities. The difference between cash used in operating activities and net loss consisted primarily of stock-based compensation, depreciation and amortization, as well as decreases in accounts payable and accrued expenses.

Current wording

During the nine months ended September 30, 2024, we used cash in the amount of $27.2 million in operating activities. The difference between cash used in operating activities and net loss consisted primarily of stock-based compensation, depreciation and amortization, as well as a decreases in accounts payable and an increase in prepaids and other current assets.

Previous wording

During the six months ended June 30, 2023, we used cash in the amount of $15.8 million in operating activities. The difference between cash used in operating activities and net loss consisted primarily of stock-based compensation, depreciation and amortization, as well as increases in accounts payable, accrued expenses, and accrued interest on related party note payable.

Current wording

During the nine months ended September 30, 2023, we used cash in the amount of $26.3 million in operating activities. The difference between cash used in operating activities and net loss consisted primarily of stock-based compensation, depreciation and amortization, as well as increases in accrued expenses and right-of-use assets, offset by accrued interest on related party note payable and lease liabilities.

Previous wording

During the six months ended June 30, 2023, $0.1 million of cash used in investing activities was driven by the purchase of property and equipment.

Current wording

During the nine months ended September 30, 2024, $0.1 million of cash used in investing activities was driven by the purchase of property and equipment.

Previous wording

During the six months ended June 30, 2024, an immaterial amount of cash was used in investing activities which was driven by the purchase of property and equipment.

Current wording

During the nine months ended September 30, 2023, $0.1 million of cash used in investing activities was driven by the purchase of property and equipment.

Previous wording

During the six months ended June 30, 2024, an immaterial amount of cash was provided from financing activities which was driven by $0.3 million of proceeds from issuance of common stock under employee stock purchase plan, offset by $0.3 million of issuance costs in relation to the 2024 Rights Offering.

Current wording

During the nine months ended September 30, 2024, cash provided by financing activities was $61.9 million, primarily due to $59.6 million of net proceeds from the 2024 Rights Offering, $1.5 million of proceeds from the exercise of warrants, $0.5 million of proceeds from issuance of common stock under employee stock purchase plan and $0.5 million of proceeds from the exercise of stock options, offset by $0.2 million of deferred issuance costs in relation to a future at-the-market equity offering.

Previous wording

During the six months ended June 30, 2023, cash provided by financing activities was $13.4 million, primarily due to $14.8 million of proceeds from the exercise of warrants, $0.3 million of proceeds from issuance of common stock under employee stock purchase plan and $0.1 million of proceeds from the exercise of stock options. These were partially offset by $1.7 million of payments made in relation to the 2022 Loan Agreement.

Current wording

During the nine months ended September 30, 2023, cash provided by financing activities was $15.6 million, primarily due to $14.8 million of proceeds from the exercise of warrants, $0.4 million of proceeds from issuance of common stock under employee stock purchase plan and $0.4 million of proceeds from the exercise of stock options.