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Risks and Uncertainties | 9 Months Ended
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Sep. 30, 2022
Risks and Uncertainties |
Risks and Uncertainties | 2. RISKS AND UNCERTAINTIES Going Concern Uncertainty As of September 30, 2022, the Company had cash and cash equivalents of $16.7 million. For the nine months ended September 30, 2022, the Company had an operating loss of $12.8 million, and as of September 30, 2022, its accumulated deficit was $146.2 million. For the nine months ended September 30, 2022, the Company had $0.5 million of net revenue from the commercial sale of products. The Company expects to continue to incur operating losses and net cash outflows until such time as it generates a level of revenue to support its cost structure. There is no assurance that the Company will achieve profitable operations, and, if achieved, whether it will be sustained on a continued basis. These factors indicate substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are filed. The Company’s unaudited condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business; no adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern. The Company intends to fund ongoing activities by utilizing its current cash and cash equivalents on hand, cash received from the sale of its PoNS device in the U.S. and Canada and by raising additional capital through equity or debt financings. There can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company. If the Company is unable to raise sufficient additional capital, the Company may be compelled to reduce the scope of its operations and planned capital expenditures. COVID-19, Increased Inflation and Worldwide Economic Conditions Generally, worldwide economic conditions remain uncertain, particularly due to the effects of the COVID-19 pandemic and increased inflation. Access to capital markets is critical to the Company’s ability to operate. Declines and uncertainties in these markets in the past have severely restricted raising new capital and have affected companies’ ability to continue to expand or find existing development, manufacturing, regulatory and commercialization efforts. The Company requires significant capital for its current and expected operations. The general economic and capital market conditions both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected the Company’s access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, the Company’s future cost of equity or debt capital and access to the capital markets could be adversely affected. COVID-19 On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which has spread throughout the U.S. and around the world. The Company’s business, results of operations and financial condition have been and may continue to be adversely impacted by the COVID-19 pandemic and global economic conditions. The outbreak and spread of COVID-19 have significantly increased economic uncertainty. Authorities implemented, and continue to implement, numerous measures to try to contain COVID-19, such as travel bans and restrictions, quarantines, shelter in place orders and business shutdowns. The COVID-19 pandemic initially led to the closure of PoNS authorized clinic locations across Canada from March until June 2020. Patients who completed their initial training in the clinics prior to the closures were able to continue working independently in the at-home portion of the treatment, with remote check-ins with their certified therapists. While all clinics had re-opened, as of December 31, 2021, they were all operating at reduced capacity, which limited operations to 50% capacity during the second half of 2021. Some patients returned to these clinics for treatment, but patients have been and may continue to be less willing to return to the clinics due to COVID-19, impacting the Company’s commercial activities and its customer engagement efforts. This was especially true in the first half of 2021, as cases of COVID-19 increased significantly in Canada and additional restrictions, shelter in place orders and business shutdowns were imposed. The rate of vaccination increased throughout all provinces throughout 2021, facilitating the lifting of some of the previously imposed restrictions. As of April 2022, capacity has returned to 100%. The Company continues to monitor the impact of COVID-19 and adjust its operations as the circumstances change. The Company expanded its services to include remote training and treatment, but the long-term viability of these remote programs is still being assessed. Additionally, clinical experience programs and clinical trials in Canada have experienced and may continue to experience delays in the programs as trial participant attendance has generally decreased as a result of the pandemic, and clinics and clinical research sites have experienced delays and difficulties in recruiting and re-hiring clinical site staff. The COVID 19 pandemic has and may continue to cause delays in or the suspension of the Company’s business partners’ manufacturing operations as well as the Company’s research and product development activities, regulatory workstreams and other important commercial functions. The Company is also dependent upon its suppliers for the manufacture of its PoNS device. In the second quarter of 2020, two of the Company’s business partners diverted resources towards other activities related to COVID 19, resulting in delays in the Company’s product development activities. Such diversion of suppliers’ resources may occur again in the future, and the pandemic could limit the Company’s suppliers’ ability to travel or ship materials or force temporary closure of facilities that it relies upon. Manufacturing delays have occurred and may also occur as the result of labor shortages. Two of the Company’s suppliers experienced significant labor shortages as a result of COVID 19 from the end of November 2021 through early January 2022. In addition, during March 2022 and continuing into the second quarter of 2022, an increase in COVID 19 related cases in certain parts of China resulted in the re-imposition of widespread shutdowns and restrictions in China and additional supply chain disruptions. These labor shortages and increases in COVID-19 cases reduced the available resources needed to build and test product which may delay the timing for the submission and approval of the Company’s marketing applications with regulatory agencies. Further, the economic impact of the COVID 19 pandemic had affected, and may in the future affect, the Company’s ability to access the public markets and obtain necessary capital in order to properly capitalize and continue its operations. The extent to which the COVID 19 pandemic will continue to impact the Company’s business, including its U.S. commercial launch and sales in Canada, as well as the Company’s results of operations and its financial condition will depend on future developments, which are highly uncertain and cannot be predicted. The Company does not yet know the full extent of the impact of COVID 19 on its business, operations or the global economy as a whole. Inflationary Environment The Company’s operating results could be materially impacted by changes in the overall macroeconomic environment and other economic factors that impact customer confidence and spending, including capital spending. Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, the conflict in Ukraine, and steps taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other stimulus and spending programs, have led to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates. As a result of inflation, we have experienced and may continue to experience, cost increases. Although the Company may take measures to mitigate the impact of this inflation, if these measures are not effective, the Company’s business, financial condition, results of operations, and liquidity could be materially adversely affected.

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