You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed financial statements and
related notes appearing elsewhere in this quarterly report on Form 10-Q. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. The actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including, but not limited to, those set forth under 'Risk Factors' in
our annual report on Form 10-K for the fiscal year ended
Company Overview
Impact of Covid-19 on our Business
In late 2019 the novel coronavirus, Covid-19, was identified. By
The extent of the long-term adverse effect of the Covid-19 pandemic on the economy, our industry and our results of operations and financial condition is unknown and largely dependent on future developments, most of which, including the severity and duration of this pandemic, are beyond our control.
Our HemoStyp Gauze Products
HemoStyp Hemostatic Gauze is a collagen-like natural substance created from chemically treated cellulose. It is an effective hemostatic agent registered with the FDA to help control bleeding from open wounds and body cavities. The HemoStyp hemostatic material contains no chemical additives, thrombin or collagen, and is hypoallergenic. When the product comes in contact with blood it expands slightly and converts to an adhesive gel that subsequently dissolves into glucose and saline. Because of its purity and the fact that it simply degrades to non-toxic end products, HemoStyp does not cause significant delay in healing as do certain other hemostatic materials. Additional testing has shown HemoStyp to be 100% absorbable in 24 hours or less. Tests have also been conducted to demonstrate the effectiveness of HemoStyp in thoracic and abdominal procedures.
HemoStyp Hemostatic Gauze is a flexible cloth-like material that is applied by folding the gauze as needed to fit the size of the wound or incision, and then placing the gauze onto the bleeding tissue. In surgical situations, the product converts to a transparent gel with a neutral pH level that allows the surgeon to monitor the coagulation process and also avoids damage to the surrounding tissue. In first responder or other non-surgical situations, putting a bandage on top of the gauze is optional and, in many cases, unnecessary. Since EMS (Emergency Medical Services) work is pre-hospital, rinsing the gauze out with saline or water is not necessary, as a wound will be debrided and possibly reopened prior to suturing at the hospital.
14 Table of Contents Potential Target Markets
Our technology can be marketed as HemoStyp Gauze in various configurations and sizes both nationally and internationally. Our potential customer base for our HemoStyp includes, without limitation, the following (noting that we have several formats of Trauma Gauze):
• Hospitals andSurgery Centers for all Internal Surgical usage, post FDA Class III approval • Hospitals, Clinics and Physicians - For external trauma • EMS, Fire Departments and Other First Responders • Public Safety, Police Departments and Military • Correctional Facilities • Schools, Universities and Day Care Facilities •Nursing Homes and Assisted Living Environments • Home Care Providers • Dental offices for oral surgery • Sports Medicine Providers • Veterinarians • Municipalities and Government Agencies • Occupational and Industrial Healthcare Professionals • Consumers • Island dressings to support intravenous procedures such as kidney dialysis Primary Strategy
In 2018, management made the decision that rather than focusing on immediate
sales activities of our products in targeted markets during this period of time
before receiving anticipated FDA approval for Class III surgical markets, the
Company would refocus efforts to become a stronger, medical technology company
with a patented technology for Class III surgical markets that would enhance the
Company's value and overall market strength. The FDA approval process requires
substantial amount of the Company's resources and energy so the focus was
removed from sales and marketing and full attention was focused on the FDA
process and seeking an acquisition/commercial partner candidate. Thus we made a
determination not to engage new distribution partners while pursuing this
strategy as that could create conflicts and limit or preclude opportunities with
a potential acquiror/commercial candidate and tie the Company's hands from a
revenue or branding perspective. The Class III surgical markets, both domestic
and international, represent the most attractive market for our products due to
the limited competition from other Class III approved ORC (Oxidized Regenerated
Cellulose) products and the resulting premium pricing for hemostatic agents that
can meet the demanding requirements of the human surgical environment. In
addition, our preliminary tests and our completed Human Trial study, leads us to
believe that the HemoStyp technology can compete against established market
participants and allow us to gain market share. Given this assessment, we have
devoted considerable resources since 2018 to completing the FDA process and
gaining access to this market in the
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In anticipation of receiving Class III approval, we are evaluating the best paths to rapidly grow our revenue and profits in all potential market segments, which could include seeking (i) a potential sale or merger, which may include a pre-sale commercialization component, (ii) one or more commercial partnerships and licensing agreements with established market participants, without there being a sale or merger, or (iii) to raise the necessary capital to establish and grow our own marketing and distribution capabilities via organic growth.
The Company has been contacted by several medical technology companies that are active in the surgical equipment and hemostatic products sectors, and who have expressed an interest in the Company's products and business strategy. In response to these inbound contacts, and to maximize shareholder value, the Company's board of directors has determined to conduct a review of strategic alternatives, which include, without limitation, identifying an acquisition candidate, joint ventures or other commercial partnerships, or a standalone growth plan. To assist in this review and strategy, the Company is working with a financial advisory firm. There can be no assurances that any specific transaction will occur as a result of the retention of this firm. No assurances can be given that the Company will identify an acquisition or commercialization candidate(s) or complete a transaction with one or more candidates on terms satisfactory to us, if at all.
Manufacturing and Packaging of our Products
The Company's cellulose products are manufactured in
Patents and Trademarks
The Company's hemostatic gauze products are patented in the
The Company has registered trademarks for the following:
· Boo Boo Strips: · The Ultimate Bandage · Hemostrips ·Nik Fix 16 Table of Contents
Results of Operations for the three months ending
The following table sets forth a summary of certain key financial information
for the three months ended
For the Three Months Ended March 31, 2020 2019 Revenue $ 291 $ - Gross profit $ 186 $ - Operating (expenses)$ (623,992 ) $ (2,663,398 ) Operating (loss)$ (623,806 ) $ (2,663,398 ) Other income (expense)$ (2,015 ) $ - Net (loss)$ (625,821 ) $ (2,663,398 ) Basic and diluted$ (0.00 ) $ (0.02 )
Three Months ended
During the first quarter of 2020 and 2019, the Company had
Total operating expenses for the first quarter of 2020 and 2019 were
Our net loss for the quarter ended
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Financial Condition, Liquidity and Capital Resources
As of
Cash Flows
The Company's cash on hand at
The following table summarizes selected items from our statements of cash flows
for the three months ended
For the Three Months Ended March 31, 2020 2019 Net cash used in operating activities$ (503,484 ) $ (220,963 ) Net cash used in investing activities - - Net cash provided by financing activities 497,846 196,000
Net increase (decrease) in cash and cash equivalents
Net Cash Provided by (Used in) Operating Activities
Net cash used in operating activities for the three months ended
Net cash used in operating activities for the three months ended
The Company did not have any investing activities during the three months ended
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Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities for the three months ended
Net cash provided by financing activities for the three months ended
Off-Balance Sheet Arrangements
As of
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with generally accepted accounting principles in
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sale of its HemoStyp product by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The Company receives orders for its HemoStyp products directly from its customers. Revenues are recognized based on the agreed upon sales or transaction price with the customer when control of the promised goods are transferred to the customer. The transfer of goods to the customer and satisfaction of the Company's performance obligation will occur either at the time when products are shipped or when the products arrive and are received by the customer. No discounts were offered by the Company. The Company does not provide an estimate for returns as there is no anticipation for any returns in the normal course of business.
Stock Based Compensation
The Company accounts for share-based compensation under the provisions of ASC 718, Compensation-Stock Compensation. Under the fair value recognition provisions, stock-based compensation expense is measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measured. Share-based compensation for all stock-based awards to employees and directors is recognized as an expense over the requisite service period, which is generally the vesting period.
The Company accounts for stock compensation arrangements with non-employees in accordance with Accounting Standard Update (ASU) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which requires that such equity instruments are recorded at the value on the grant date.
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