NanoVibronix, Inc. - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-36445

NanoVibronix, Inc

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (914) 233-3004

(Former name, former address and

former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant has been required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares outstanding of the registrant’s Common Stock as of August 11, 2022 was 27,997,793 shares.

NanoVibronix, Inc.

Quarter Ended June 30, 2022

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NanoVibronix, Inc.

Condensed Consolidated Balance Sheets

(Amounts in thousands except share and per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements

NanoVibronix, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(Amounts in thousands except share and per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements

NanoVibronix, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(Amounts in thousands except share and per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements

NanoVibronix, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Amounts in thousands except share and per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements

NanoVibronix, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(Amounts in thousands except share and per share data)

NOTE 1 – DESCRIPTION OF BUSINESS

NanoVibronix, Inc. (the “Company”), a Delaware corporation, commenced operations on October 20, 2003 and is a medical device company focusing on noninvasive biological response-activating devices that target wound healing and pain therapy and can be administered at home, without the assistance of medical professionals.

The Company’s principal research and development activities are conducted in Israel through its wholly owned subsidiary, NanoVibronix (Israel 2003) Ltd., a company registered in Israel, which commenced operations in October 2003.

NOTE 2 – LIQUIDITY AND PLAN OF OPERATIONS

The Company’s ability to continue to operate is dependent mainly on its ability to successfully market and sell its products and the receipt of additional financing until profitability is achieved. During the first and second quarters of 2022, the Company’s cash used in operations was $3,740 leaving a cash balance of $3,944 as of June 30, 2022. Because the Company does not have sufficient resources to fund our operation for the next twelve months from the date of this filing, management has substantial doubt of the Company’s ability to continue as a going concern. The Company may need to raise additional capital to finance its losses and negative cash flows from operations and may continue to be dependent on additional capital raising as long as our products do not reach commercial profitability.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for the interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. The unaudited consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the financial statement date.

The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Unaudited interim financial information

In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position and results of operations of the Company. These consolidated financial statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2021, as found in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2022, as amended on May 2, 2022.

The balance sheet for December 31, 2021 was derived from the Company’s audited financial statements for the year ended December 31, 2021. The results of operations for the periods presented are not necessarily indicative of results that could be expected for the entire fiscal year due to seasonality and other factors. Certain information and footnote disclosures normally included in the consolidated financial statements in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC for interim reporting.

Use of estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company believe that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Foreign currency translation

Non-U.S. dollar denominated transactions and balances have been re-measured to U.S. dollars. All gains and losses from re-measurement of monetary balance sheet items denominated in non-U.S. dollar currencies are reflected in the statements of operations as other comprehensive income, as appropriate. The cumulative translation gains as of the periods ended June 30, 2022 and 2021 were $51 and $7, respectively.

Revenue recognition

It is the Company’s policy that revenues from product sales is recognized in accordance with ASC 606 “Revenue Recognition.” Five basic steps must be followed before revenue can be recognized; (1) Identifying the contract(s) with a customer that creates enforceable rights and obligations; (2) Identifying the performance obligations in the contract, such as promising to transfer goods or services to a customer; (3) Determining the transaction price, meaning the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer; (4) Allocating the transaction price to the performance obligations in the contract, which requires the company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract; and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation. Adoption of ASC 606 has not changed the timing and nature of the Company’s revenue recognition and there has been no material effect on the Company’s financial statements.

Revenue from product sales is recorded at the net sales price, or “transaction price,” which includes estimates of variable consideration that result from coupons, discounts, chargebacks and distributor fees, processing fees, as well as allowances for returns and government rebates. The Company constrains revenue by giving consideration to factors that could otherwise lead to a probable reversal of revenue. Collectability of revenue is reasonably assured based on historical evidence of collectability between the Company and its customers.

Revenues from sales to distributors are recognized at the time the products are delivered to the distributors (“sell-in”). The Company does not grant rights of return, credits, rebates, price protection, or other privileges on its products to distributors.

NOTE 4 – STOCKHOLDERS’ EQUITY

Common stock

The common stock confers upon the holders the right to receive notice to participate and vote in general meetings of the Company, and the right to receive dividends, if declared, and to participate in the distribution of the surplus assets and funds of the Company in the event of liquidation, dissolution or winding up of the Company.

Stock-based compensation and options

During the six-month period ended June 30, 2022 and 2021, 120,000 and 180,000 options were granted, respectively. The options were granted to employees and board members and were recorded at a fair value and vest over three years. During the three and six-month period ended June 30, 2022, stock-based compensation expense of $220 and $306 was recorded for options that vested, respectively. During the three and six-month period ended June 30, 2021, there was stock-based compensation expense of $99 and $208, respectively. During the second quarter of 2022 and 2021, 0 and 13,845 options expired, respectively.

The fair value for options granted in the second quarter of 2022 and 2021 is estimated at the date of grant using a Black-Scholes-Merton options pricing model with the following underlying assumptions:

 SCHEDULE OF FAIR VALUE ASSUMPTIONS FOR OPTIONS GRANTED

The total stock-based expense recognized in the financial statements for services received from employees and non-employees is shown in the following table.

SCHEDULE OF STOCK BASED EXPENSES RECOGNIZED FOR SERVICES FROM EMPLOYEES AND NON-EMPLOYEES 

As of June 30, 2022, the total unrecognized estimated compensation cost related to non-vested stock options granted prior to that date was $390, which is expected to be recognized over a weighted average period of approximately 2.5 years.

Warrant exercises and modification

On December 2, 2020, we entered into a Securities Purchase Agreement with certain institutional and accredited investors pursuant to which the Company issued and sold to such investors in a private placement an aggregate of (i) 5,914,285 shares of the Company’s common stock at an offering price of $0.70 per share and (ii) pre-funded warrants to purchase up to 2,657,144 shares of common stock at a purchase price of $0.699 per pre-funded warrant, for gross proceeds of approximately $6.0 million, and net proceeds of approximately $5.4 million. In January 2021, two investors exercised an aggregate of 1,657,144 warrants at $0.001 per share.

On January 21, 2021, Company entered into letter agreements (the “Letter Agreements”) with certain existing accredited investors to exercise certain outstanding warrants (the “Existing Warrants”) to purchase up to an aggregate of 1,205,968 shares of the Company’s common stock at an exercise price per share of $1.165 (the “Exercise”). Certain of the Existing Warrants (the “Registered Existing Warrants”) and the shares of common stock underlying the Registered Existing Warrants have been registered pursuant to a registration statement on Form S-3 (File No. 333-251264) and a registration statement on Form S-1 (File No. 333-218871). In consideration for the exercise of the Existing Warrants for cash, the exercising holders received new unregistered warrants to purchase up to an aggregate of 1,205,967 shares of common stock (the “New Warrants”) at an exercise price of $1.04 per share and with an exercise period of seven years from the initial closing date. The gross proceeds to the Company from the Exercise were approximately $1.4 million.

The New Warrants were accounted for in warrant modification expense, which was measured at the amount equal to the incremental value reflecting the change in the fair value of the warrants before and after the Warrant Amendment. Accordingly, warrant modification expense in the amount of $1,627 was recorded with a corresponding increase in additional paid in capital in the second quarter of 2021.

On June 14, 2022, the Company issued warrants to two sales consultants to purchase 250,000 shares of common stock which will expire on June 14, 2029 and have an exercise price of $1.00 per share. Accordingly, expense related to these warrants in the amount of $135,000 was recorded with a corresponding increase in additional paid in capital.

In estimating the warrants’ fair value, the Company used the following assumptions:

 SCHEDULE OF FAIR VALUE ASSUMPTIONS FOR WARRANTS

NOTE 5 – LOSS PER SHARE APPLICABLE TO COMMON STOCKHOLDER

Basic net loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. All outstanding stock options and warrants for the three and six months ended June 30, 2022 and 2021 have been excluded from the calculation of the diluted net loss per share because all such securities are anti-dilutive for all periods presented.

The following table summarizes the Company’s securities, in common stock equivalents, which have been excluded from the calculation of dilutive loss per share as their effect would be anti-dilutive:

SUMMARY OF COMMON SHARE EQUIVALENTS BEEN EXCLUDED FROM DILUTIVE LOSS PER SHARE AS ANTI-DILUTIVE 

The diluted loss per share equals basic loss per share in the three and six months ended June 30, 2022 and 2021 because the Company had a net loss and the impact of the assumed exercise of stock options and the vesting of restricted stock would have been anti-dilutive.

NOTE 6 – GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA

Summary information about geographic areas:

The Company manages its business based on one reportable segment and derives revenues from selling its products directly to patients as well as through distributor agreements. The following is a summary of revenues within geographic areas:

 SUMMARY OF REVENUE WITHIN GEOGRAPHIC AREAS

For the three and six months ended June 30, 2022, one customer comprised approximately 78% and 64% of total revenues, respectively.

NOTE 7 – OTHER ASSETS

On April 9, 2020, pursuant to a licensing agreement entered into in March 2020, the Company received 10-year warrants to purchase 127,000 shares of Sanuwave Health, Inc. at a price of $0.19 per share. The fair value for warrants received is estimated at the date of grant using a Black-Scholes-Merton pricing model with the following underlying assumptions:

SCHEDULE OF WARRANTS ASSUMPTIONS 

The Company considers this to be level 3 inputs and is valued at each reporting period. For the three and six months ended June 30, 2022, changes in the fair value of these warrants amounted to $8 and $10, respectively, leaving a balance of $9 as of June 30, 2022. For the three and six months ended June 30, 2021, changes in the fair value of these warrants amounted to $2, respectively, leaving a balance of $23 as of June 30, 2021.

Financial Instruments Measured at Fair Value on a Recurring Basis

The fair value accounting standards define fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are rated on a three-tier hierarchy as follows:

There were no transfers from Level 3 during the quarters ended June 30, 2022 and 2021.

The following table presents changes in Level 3 asset and liability measured at fair value for the quarters ended June 30, 2022 and 2021:

 SCHEDULE OF CHANGES IN LEVEL 3 AND LIABILITY MEASURED AT FAIR VALUE

The following table sets forth the Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy:

 SCHEDULE OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Other Risks

On March 12, 2020, the World Health Organization declared COVID-19 to be a pandemic, and the COVID-19 pandemic has resulted in significant financial market volatility and uncertainty. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common shares.

In addition, U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. A continuation or worsening of the levels of market disruption and volatility could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common shares.

Lastly, inflation, as well as some of the measures taken by or that may be taken by the governments in countries where we operate in an attempt to curb inflation may have negative effects on the economies of those countries generally. If the United States or other countries where we operate experience substantial inflation in the future, our business may be adversely affected. This could have a material adverse effect on our business, financial condition, results of operations, or cash flows. Specifically, our existing distributor agreements limit the amount that we can increase the price that we sell our products to the distributors. Accordingly, an inflationary environment, including factors such as increasing freight and materials prices, could make it less profitable for us to do business.

Pending litigation

On February 26, 2021, Protrade Systems, Inc. (“Protrade”) filed a Request for Arbitration (the “Request”) with the International Court of Arbitration (the “ICA”) of the International Chamber of Commerce alleging the Company is in breach of an Exclusive Distribution Agreement dated March 7, 2019 (the “Agreement”) between Protrade and the Company. Protrade alleges, in part, that the Company has breached the Agreement by discontinuing the manufacture of the DV0057 Painshield MD device in favor of an updated 10-100-001 Painshield MD device. Protrade claims damages estimated at $3 million.

On March 15, 2022, the arbitrator issued a final award, which, although denied all Protrade’s claims, nevertheless awarded Protrade about $1.5 million, on the grounds that the Company allegedly failed to fulfill an order for reusable hydrogel patches placed after the Agreement was terminated. The arbitrator based her decision on the basis of testimony of Protrade’s president who asserted that a patient would use in excess of 33 reusable patches per each device, which the Company believes is a grossly inflated number.

On April 5, 2022, Protrade filed a Petition with the Supreme Court of New York Nassau County seeking to confirm the Award. On April 13, 2022, the Company submitted an application to the ICA seeking to correct an error in the award based on the evidence that the Company only sold 2-3 reusable patches per device contrary to the 33 reusable patches claimed by Protrade. The same arbitrator who issued the award, denied the application.

On July 22, 2022, the Company filed a motion seeking to vacate arbitration award on the grounds that the arbitrator exceeded her authority, that the award was procured by fraud, and that the arbitrator failed to follow procedures established by New York law. In particular, the Company averred in its motion that Protrade’s witness made false statements in arbitration, and that the arbitrator resolved a claim that was never raised by Protrade and that has no factual basis. The motion is currently pending. The Company will continue to vigorously pursue its opposition to the award in all appropriate fora.

As of June 30, 2022 and December 31, 2021, the Company accrued the amount of the award to Protrade amounting to $1,500,250 as part of “Other accounts payable and accrued expenses”. No additional accrual was made in relation with the legal arbitration since the previous quarter.

NOTE 9 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date of filing this Quarterly Report on Form 10-Q and determined that no material events occurred.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition of NanoVibronix, Inc. (the “Company”) as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2021 and for the year then ended, which are included in the Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 15, 2022, as amended on May 2, 2022. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” elsewhere in this Quarterly Report, in our other reports filed with the SEC, and other factors that we may not know.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. For a discussion of these and other risks that relate to our business and financial performance, you should carefully review the risks and uncertainties described under the heading “Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as amended, and those described from time to time in our future reports filed with the Securities and Exchange Commission. Moreover, new risks regularly emerge, and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this Form 10-Q are based on information available to us on the date of this Quarterly Report on Form 10-Q. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Overview

We are a medical device company focusing on noninvasive biological response-activating devices that target wound healing and pain therapy and can be administered at home, without the assistance of medical professionals. Our WoundShield, PainShield and UroShield products are backed by novel technology which relates to ultrasound delivery through surface acoustic waves.

Recent Events and Developments

On February 26, 2021, Protrade Systems, Inc. (“Protrade”) filed a Request for Arbitration (the “Request”) with the International Court of Arbitration (the “ICA”) of the International Chamber of Commerce alleging the Company is in breach of an Exclusive Distribution Agreement dated March 7, 2019 (the “Agreement”) between Protrade and the Company. Protrade alleges, in part, that the Company has breached the Agreement by discontinuing the manufacture of the DV0057 Painshield MD device in favor of an updated 10-100-001 Painshield MD device. Protrade claims damages estimated at $3 million.

On March 15, 2022, the arbitrator issued a final award, which, although denied all Protrade’s claims, nevertheless awarded Protrade about $1.5 million, on the grounds that the Company allegedly failed to fulfill an order for reusable hydrogel patches placed after the Agreement was terminated. The arbitrator based her decision on the basis of testimony of Protrade’s president who asserted that a patient would use in excess of 33 reusable patches per each device, which the Company believes is a grossly inflated number.

On April 5, 2022, Protrade filed a Petition with the Supreme Court of New York Nassau County seeking to confirm the Award. On April 13, 2022, the Company submitted an application to the ICA seeking to correct an error in the award based on the evidence that the Company only sold 2-3 reusable patches per device contrary to the 33 reusable patches claimed by Protrade. The same arbitrator who issued the award, denied the application.

On July 22, 2022, the Company filed a motion seeking to vacate arbitration award on the grounds that the arbitrator exceeded her authority, that the award was procured by fraud, and that the arbitrator failed to follow procedures established by New York law. In particular, the Company averred in its motion that Protrade’s witness made false statements in arbitration, and that the arbitrator resolved a claim that was never raised by Protrade and that has no factual basis. The motion is currently pending. The Company will continue to vigorously pursue its opposition to the award in all appropriate fora. As of June 30, 2022 and December 31, 2021, the Company accrued the amount of the award to Protrade amounting to $1,500,250 as part of “Other accounts payable and accrued expenses”. No additional accrual was made in relation with the legal arbitration since the previous quarter.

On March 2, 2022, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for the 30 consecutive business day period between January 14, 2022, through March 1, 2022, we did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The letter also indicated that we will be provided with a compliance period of 180 calendar days, or until August 29, 2022, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A). The letter further provided that if, at any time during the 180-day period, the closing bid price of our common stock was at least $1.00 for a minimum of 10 consecutive business days, Nasdaq would provide us with written confirmation that it had achieved compliance with the minimum bid price requirement.

Critical Accounting Policies

A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are more fully described in both (i) “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) Note 3 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as amended. There have not been any material changes to such critical accounting policies since December 31, 2021.

The currency of the primary economic environment in which our operations are conducted is the U.S. dollar (“$” or “dollar”). Accordingly, our functional currency is the dollar.

Results of Operations

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Revenues. For the three months ended June 30, 2022 and 2021, our revenues were approximately $485,000 and $318,000 respectively, an increase of approximately 53%, or $167,000 between the periods. The increase was due to increased orders from our largest customer as well as the addition of selling to veterans administration facilities. Our revenues may fluctuate as we add new consumers or when existing distributors or consumers make large purchases of our products during one period and no purchases during another period. Therefore, any growth or decrease in revenues by quarter may not be linear or consistent.

For the three months ended June 30, 2022 and 2021, the percentage of revenues attributable to our products was: PainShield - 98% and UroShield - 2%. For the three months ended June 30, 2022 and 2021, the portion of our revenues that was derived from distributors was 97% and 3%, respectively.

Gross Profit. For the three months ended June 30, 2022 and 2021, gross profit was approximately $281,000 and $208,000, respectively, an increase of approximately 35% or $73,000, mainly due to increased sales to veteran affairs (VA) facilities and sales of products to distributors at higher margins.

Gross profit as a percentage of revenues was approximately 58% and 65% for the three months ended June 30, 2022 and 2021, respectively. The decrease in gross profit as a percentage is mainly due the increased manufacturing costs due to completing manufacturing in Israel as well as increased costs of manufacturing due to inflation.

Research and Development Expenses. For the three months ended June 30, 2022 and 2021, research and development expenses were approximately $61,000 and $64,000, respectively, between the periods.

Our research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, stock-based compensation expenses, expenses related to subcontracting, patents application and registration, clinical trial and facilities expenses associated with and allocated to research and development activities.

Research and development expenses as a percentage of total revenues were approximately 13% and 20% for the three months ended June 30, 2022 and 2021, respectively.

Selling and Marketing Expenses. For the three months ended June 30, 2022 and 2021, selling and marketing expenses were approximately $333,000 and $296,000, respectively, an increase of approximately 13%, or $37,000, between the periods. The increase was primarily due to the addition of a new sales consultant partially offset by reduction of payroll costs due to re-allocation of a sales executive’s payroll to administrative costs during the quarter.

Selling and marketing expenses consist mainly of payroll expenses to direct sales and marketing employees, stock-based compensation expenses, travel expenses, conventions, advertising and marketing expenses, rent and facilities expenses associated with and allocated to selling and marketing activities.

Selling and marketing expenses as a percentage of total revenues were approximately 69% and 93% for the three months ended June 30, 2022 and 2021, respectively.

General and Administrative Expenses. For the three months ended June 30, 2022 and 2021, general and administrative expenses were approximately $1,155,000 and $839,000, respectively, an increase of approximately 38%, or $316,000, between the periods. The increase was mainly due to the increased legal costs from the appeal of the arbitration litigation, increased consulting costs pertaining to regulatory reviews and the re-allocation of payroll costs of a sales executive’s payroll to administrative costs during the quarter.

Our general and administrative expenses consist mainly of payroll expenses for management and administrative employees, stock-based compensation expenses, accounting, legal and facilities expenses associated with general and administrative activities and costs associated with being a publicly traded company.

General and administrative expenses as a percentage of total revenues were approximately 238% and 264% for the three months ended June 30, 2022 and 2021, respectively.

Other income (expense), net. For the three months ended June 30, 2022 and 2021, other income (expense), net was approximately ($18,000) compared to a other income, net of $1,000, respectively, a decrease of approximately $19,000 between the periods mainly due to the change in fair value of the investment in Sanuwave.

Change in fair value of derivative liabilities. For the three months ended June 30, 2022 and 2021, there was a change in fair value of derivative liabilities resulting in a gain of approximately $0 and $706,000, respectively. The gain in 2021 was derived from the Company’s total potentially dilutive shares exceed the Company’s authorized share limit that was ultimately resolved in the third quarter of 2021.

Gain on purchase of warrants. For the three months ended June 30, 2022 and 2021, there was a gain of approximately $0 and $64,000, respectively. The gain was related to the settlement of derivative liabilities which was the result of the repurchase of warrants from certain investors.

Income tax benefit (expense). For the three months ended June 30, 2022 and 2021, there was a tax expense of ($16,000) and a $4,000 tax benefit, respectively. The tax expense or benefit is computed by multiplying income before taxes at our Israeli subsidiary by the appropriate tax rate.

Net loss. Our net loss increased by approximately $1,086,000 or 503%, to approximately $1,302,000 for the three months ended June 30, 2022 from approximately $216,000 in the same period of 2021. The increase in net loss resulted primarily from the factors described above.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Revenues. For the six months ended June 30, 2022 and 2021, our revenues were approximately $757,000 and $421,000 respectively, an increase of approximately 80%, or $336,000 between the periods. The increase was due to increased orders from our largest customer, as well as the addition of selling to veterans’ administration facilities. Our revenues may fluctuate as we add new consumers or when existing distributors or consumers make large purchases of our products during one period and no purchases during another period. Therefore, any growth or decrease in revenues by quarter may not be linear or consistent.

For the six months ended June 30, 2022 and 2021, the percentage of revenues attributable to our products was: PainShield - 98% and UroShield – 2%. For the six months ended June 30, 2022 and 2021, the portion of our revenues that was derived from distributors was 95% and 94%, respectively.

Gross Profit. For the six months ended June 30, 2022 and 2021, gross profit was approximately $387,000 and $285,000, respectively, an increase of approximately 36% or $102,000, mainly due to sales to veteran affairs (VA) facilities and sales of products to distributors at higher margins.

Gross profit as a percentage of revenues was approximately 51% and 68% for the six months ended June 30, 2022 and 2021, respectively. The decrease in gross profit as a percentage is mainly due the increased manufacturing costs due to completing manufacturing in Israel as well as increased costs of manufacturing due to inflation.

Research and Development Expenses. For the six months ended June 30, 2022 and 2021, research and development expenses were approximately $127,000 and $128,000, respectively, a decrease of approximately 1%, or $1,000, between the periods.

Our research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, stock-based compensation expenses, expenses related to subcontracting, patents application and registration, clinical trial and facilities expenses associated with and allocated to research and development activities.

Research and development expenses as a percentage of total revenues were approximately 17% and 30% for the six months ended June 30, 2022 and 2021, respectively.

Selling and Marketing Expenses. For the six months ended June 30, 2022 and 2021, selling and marketing expenses were approximately $543,000 and $607,000, respectively, a decrease of approximately 11%, or $64,000, between the periods. The decrease was due to reduction of payroll costs due to re-allocation of a sales executive’s payroll to administrative costs during the quarter.

Selling and marketing expenses consist mainly of payroll expenses to direct sales and marketing employees, stock-based compensation expenses, travel expenses, conventions, advertising and marketing expenses, rent and facilities expenses associated with and allocated to selling and marketing activities.

Selling and marketing expenses as a percentage of total revenues were approximately 72% and 144% for the six months ended June 30, 2022 and 2021, respectively.

General and Administrative Expenses. For the six months ended June 30, 2022 and 2021, general and administrative expenses were approximately $2,097,000 and $1,855,000, respectively, an increase of approximately 13%, or $242,000, between the periods. The increase was mainly due to the increased legal costs from the appeal of the arbitration litigation, increased consulting costs pertaining to regulatory reviews and the re-allocation of payroll costs of a sales executive’s payroll to administrative costs during the quarter.

Our general and administrative expenses consist mainly of payroll expenses for management and administrative employees, stock-based compensation expenses, accounting, legal and facilities expenses associated with general and administrative activities and costs associated with being a publicly traded company.

General and administrative expenses as a percentage of total revenues were approximately 277% and 441% for the six months ended June 30, 2022 and 2021, respectively.

Other income (expense), net. For the six months ended June 30, 2022 and 2021, other expenses, net was approximately $31,000 compared to a $6,000, respectively, an increase of approximately $25,000 between the periods mainly due to the change in fair value of the investment in Sanuwave.

Change in fair value of derivative liabilities. For the six months ended June 30, 2022 and 2021, there was a change in fair value of derivative liabilities resulting in losses of approximately $0 and $1,242,000, respectively. The loss in 2021 was derived from the Company’s total potentially dilutive shares exceed the Company’s authorized share limit.

Gain on purchase of warrants. For the six months ended June 30, 2022 and 2021, there was a gain of approximately $0 and $64,000, respectively. The gain was related to the settlement of derivative liabilities which was the result of the repurchase of warrants from certain investors.

Warrant modification expense. For the six months ended June 30, 2022 and 2021, warrant modification expense was approximately $0 and $1,627,000, respectively. The warrant modification expense in 2021 was related to warrants held by a certain investor that were repriced. The investor was also granted new warrants to replace the repriced warrants after they were exercised.

Income tax expenses. For the six months ended June 30, 2022 and 2021, tax expenses were $23,000 and $17,000, respectively. The tax expense is computed by multiplying income before taxes at our Israeli subsidiary by the appropriate tax rate

Net loss. Our net loss decreased by approximately $2,699,000, or 53%, to approximately $2,434,000 for the six months ended June 30, 2022 from approximately $5,133,000 in the same period of 2021. The decrease in net loss resulted primarily from the factors described above.

Liquidity and Capital Resources

We have incurred losses in the amount of approximately $2,434,000 and had negative cash flow from operating activities of $3,740,000 during the six months ended June 30, 2022. Although we expect to continue to incur losses and negative cash flows from operating activities through 2022, we had a cash balance of just over $3,944,000 as of June 30, 2022. The Company’s management believes that the Company does not have sufficient resources to fund our operations for the next twelve months, thus, management has substantial doubt of the Company’s ability to continue as a going concern. The Company may need to raise additional capital to finance its losses and negative cash flows from operations and may continue to be dependent on additional capital raising as long as our products do not reach commercial profitability. If we are unable to obtain stockholder ratification of certain prior issuances of our common stock and approval of an increase in the number of authorized shares of our common stock, we will be unable to issue common stock or convertible instruments. As a result, the Company will be limited in its ability to raise additional capital.

During the six-month period ended June 30, 2022, we met our short-term liquidity requirements from our existing cash reserves. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products, our development of future products and competing technological and market developments as well as our ability to overcome obstacles that may be presented due to developments caused by the coronavirus outbreak. We expect to continue to incur losses and negative flows from operations. We intend to use the proceeds generated from equity financings, or strategic alliances with third parties, either alone or in combination with equity financing to meet our short-term liquidity requirements as well as to advance our long-term plans. We do not believe we have sufficient capital to execute our business plan over the next twelve months and there are no assurances that we will not need to raise additional capital later, or that we would be able to raise additional capital, if required, on terms favorable to us.

We do not have any material commitments to capital expenditures as of June 30, 2022, and we are not aware of any material trends in capital resources that would impact our business.

As of June 30, 2022, we have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Cash flows

As of June 30, 2022, we had cash of approximately $3,944,000, compared to approximately $5,672,000 as of June 30, 2021. We have historically met our cash needs through a combination of issuance of equity, borrowing activities and sales. Our cash requirements are generally for product development, research and development cost, marketing and sales activities, finance and administrative cost, capital expenditures and general working capital.

Cash used in our operating activities was approximately $3,740,000 for the six months ended June 30, 2022 and $2,870,000 for the same period in 2021.

Cash provided by financing activities was $0 for the six months ended June 30, 2022 compared to $1,018,000 for the six months ended June 30, 2021.

Factors That May Affect Future Operations

We believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the ordering patterns of our distributors, timing of regulatory approvals, the implementation of various phases of our clinical trials and manufacturing efficiencies due to the learning curve of utilizing new materials and equipment as well as issues that may continue to occur due to the development of the coronavirus outbreak. While there were significant delays in the production of goods due to COVID-19 issues, presently, we are no longer experiencing such delays in the production of our products. That said, there are no assurances that if subsequent waves of the pandemic occur that we will not experience significant delays in the future. Our operating results could also be impacted by a weakening of the Euro and strengthening of the New Israeli Shekel (NIS), both against the U.S. dollar. Also, other economic conditions we cannot foresee may affect customer demand, such as individual country reimbursement policies pertaining to our products. Lastly, U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. A continuation or worsening of the levels of market disruption and volatility could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common shares.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2022, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on their evaluation, as of the end of the period covered by this Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective because of the material weaknesses in our internal control over financial reporting as described in Item 9A in our Annual Report on Form 10-K for the fiscal ended December 31, 2021, filed with the SEC on April 15, 2022, as amended on May 2, 2022.

Changes in Internal Control over Financial Reporting

Other than described above in this Item 4, there has been no change in our internal control over financial reporting that occurred during the last fiscal quarter to which this report relates that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.

On February 26, 2021, Protrade Systems, Inc. (“Protrade”) filed a Request for Arbitration (the “Request”) with the International Court of Arbitration (the “ICA”) of the International Chamber of Commerce alleging the Company is in breach of an Exclusive Distribution Agreement dated March 7, 2019 (the “Agreement”) between Protrade and the Company. Protrade alleges, in part, that the Company has breached the Agreement by discontinuing the manufacture of the DV0057 Painshield MD device in favor of an updated 10-100-001 Painshield MD device. Protrade claims damages estimated at $3 million.

On March 15, 2022, the arbitrator issued a final award, which, although denied all Protrade’s claims, nevertheless awarded Protrade about $1.5 million, on the grounds that the Company allegedly failed to fulfill an order for reusable hydrogel patches placed after the Agreement was terminated. The arbitrator based her decision on the basis of testimony of Protrade’s president who asserted that a patient would use in excess of 33 reusable patches per each device, which the Company believes is a grossly inflated number.

On April 5, 2022, Protrade filed a Petition with the Supreme Court of New York Nassau County seeking to confirm the Award. On April 13, 2022, the Company submitted an application to the ICA seeking to correct an error in the award based on the evidence that the Company only sold 2-3 reusable patches per device contrary to the 33 reusable patches claimed by Protrade. The same arbitrator who issued the award, denied the application.

On July 22, 2022, the Company filed a motion seeking to vacate arbitration award on the grounds that the arbitrator exceeded her authority, that the award was procured by fraud, and that the arbitrator failed to follow procedures established by New York law. In particular, the Company averred in its motion that Protrade’s witness made false statements in arbitration, and that the arbitrator resolved a claim that was never raised by Protrade and that has no factual basis. The motion is currently pending. The Company will continue to vigorously pursue its opposition to the award in all appropriate fora.

As of June 30, 2022 and December 31, 2021, the Company accrued the amount of the award to Protrade amounting to $1,500,250 as part of “Other accounts payable and accrued expenses”. No additional accrual was made in relation with the legal arbitration since the previous quarter.

There are no other material proceedings in which any of our directors, officers or affiliates or any registered or beneficial stockholder of more than 5% of our common stock, or any associate of any of the foregoing is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

The following description of risk factors includes any material changes to, and supersedes the description of, the risk factors addressed below associated with our business, financial condition and results of operations previously disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on April 15, 2022, as amended on May 2, 2022. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price.

The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Form 10-Q. The following information should be read in conjunction with the condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.

If we fail to maintain effective internal control over financial reporting, our business, financial condition or results of operations may be adversely affected.

As a public reporting company, we are required to establish and maintain effective internal control over financial reporting. Failure to establish such internal control, or any failure of such internal control once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of our internal control over financial reporting could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds.

Rules adopted by the Securities and Exchange Commission pursuant to Section 404 of Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting. The standards that must be met for management to assess the internal control over financial reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. If we cannot assess our internal control over financial reporting as effective, investor confidence and share value may be negatively impacted. In addition, management’s assessment of internal control over financial reporting may identify weaknesses and conditions that need to be addressed in our internal control over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting (including those weaknesses identified in our periodic reports), or disclosure of management’s assessment of our internal control over financial reporting may have an adverse impact on the price of our securities.

As disclosed in Part II, Item 9A, “Controls and Procedures,” we have identified material weaknesses in our internal control over financial reporting due to a lack of a full and complete testing of our disclosure controls and procedures. We concluded that our internal control over financial reporting and related disclosure controls and procedures were not effective as of December 31, 2021. Our management is in the process of implementing remediation measures with respect to the controls and written policies and procedures as described in Part II, Item 9A, “Controls and Procedures,” and management expects that such measures, once fully implemented, will be sufficient to remediate such material weaknesses in our internal control over financial reporting that existed as of December 31, 2021.

If we fail to comply with the continued listing requirements of the NASDAQ Capital Market, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.

Our common stock is currently listed for trading on the NASDAQ Capital Market. We must satisfy NASDAQ’s continued listing requirements, including, among other things, a minimum stockholders’ equity of $2.5 million and a minimum closing bid price of $1.00 per share or risk delisting, which would have a material adverse effect on our business. A delisting of our common stock from the NASDAQ Capital Market could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.

On March 2 2022, the Company received notice from the Listing Qualifications Staff of Nasdaq indicating that, based upon the closing bid price of the Company’s common stock for the 30 consecutive business day period between January 14, 2022, through March 1, 2022, we did not meet the minimum bid price of $1.00 per share required for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 555(a)(2). The letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until August 29, 2022, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

There is no assurance that we can regain compliance with such minimum listing requirements. If our common stock were delisted from NASDAQ, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.

The Company’s financial statements have been prepared on a going concern basis, and do not include adjustments that might be necessary if the Company is unable to continue as a going concern. Management has substantial doubt about the Company’s ability to continue as a going concern.

The Company’s unaudited condensed consolidated 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. During the first and second quarters of 2022, the Company’s cash used in operations was $3,740 leaving a cash balance of $3,944 as of June 30, 2022. Because the Company does not have sufficient resources to fund our operations for the next twelve months from the date of this filing, management has substantial doubt of the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company may need to raise additional capital to finance its losses and negative cash flows from operations and may continue to be dependent on additional capital raising as long as our products do not reach commercial profitability. There are no assurances that the Company would be able to raise additional capital on terms favorable to it. If the Company is unsuccessful in commercializing its products and raising capital, it will need to reduce activities, curtail, or cease operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 1, 2022 we entered into an International Marketing, Sales and Clinical Management Agreement (the “MTSG Agreement”) with MedTech Solutions Group, LLC (“MTSG”). Our Chairman of the Board, Christopher Fashek, is also the Chairman of MedTech. We appointed MTSG to provide international marketing, sales and clinical management expertise for commercialization of our products in certain countries in Europe (excluding England, Scotland, Wales, Rep. of Ireland, Northern Ireland, Malta and Turkey), Africa, Asia, Central and South America, and North America (Excluding the United States and Canada) as well as Israel and Palestine.

The MTSG Agreement provides an incentive and reward to MTSG for meeting revenue targets set forth in the MTSG Agreement by allowing MTSG or its designees to be entitled to additional consideration in the form of annual grants of stock warrants at the Company’s discretion. On June 14, 2022, MTSG was awarded warrants for up to 250,000 shares of common stock, with an exercise price of $1.00 per share, that are exercisable at any time after the date that is six months from the date of issuance and expire at 5:00pm, New York time, on June 14, 2029.

These securities were issued in reliance upon exemptions from registration afforded by Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Not Applicable.

Item 6. Exhibits

EXHIBIT INDEX

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.