Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of the Company. The Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2025. In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and forward-looking information under applicable Canadian securities law requirements (collectively, “forward-looking statements”) which are intended to be covered by the safe harbors created thereby. See “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K. Our actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under the “Part I – Item 1A Risk Factors” section and elsewhere in this Annual Report on Form 10-K, as well as, in other reports and documents we file with the Securities and Exchange Commission from time to time. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
(All amounts are expressed in thousands unless otherwise indicated)
Overview
We are a veterinary health company creating and marketing products for companion animals by focusing on the unmet needs of clinical veterinarians. Our mission is to enrich the lives of the animals we love and the people that care for them by providing products and technologies that improve patient care and enhance the economic health of veterinary practices. While prioritizing animal health, we also strategically leverage our existing manufacturing and engineering capabilities to provide development services beyond animal health. Our product portfolio includes innovative diagnostics and therapeutic medical devices that emphasize patient health and enhancing practice economics.
We currently have six discrete platforms in our product portfolio:
Diagnostic Products
our TRUFORMA ® platform, comprising point-of-care diagnostic products for disease states in dogs, cats and horses, providing assays for use at the point-of-care that provide reference lab accuracy, thereby enabling practitioners to diagnose and treat diseases sooner;
our TRUVIEW ® platform which consists of the TRUVIEW digital cytology instrument providing microscopic images and related pathology services which enable practitioners to receive a Pathologist interpretation of the images;
our VETGuardian ® platform, which provides continuous wireless monitoring of pets’ vital signs and provides them remotely to veterinarian practice staff, along with alert messaging should the vital signs rise or fall out of range, to assist in rapidly diagnosing issues;
Therapeutic Device Products
our world leading PulseVet ® platform, which provides for non-invasive electro-hydraulic shock wave treatment for a wide variety of conditions in horses and small animals, including osteoarthritis, tendon and ligament healing, bone healing, chronic pain relief and wound healing, to promote healing and reduce the need for surgery and/or medication; and
our Assisi Loop ® platform including a series of products that use targeted Pulsed Electromagnetic Field (tPEMF TM ) therapy to decrease pain and inflammation and accelerate healing or reduce anxiety.
our VETIGEL ® product, a fast-acting hemostatic gel that stops bleeding in seconds without applied pressure, enhancing procedural efficiency and improving patient outcomes.
We have focused our development and commercialization efforts on our TRUFORMA, TRUVIEW, VETGuardian, PulseVet, Assisi Loop, and VETIGEL platforms.
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For the foreseeable future, we expect to continue to incur losses, which we expect will begin to decrease from historical levels as we continue to rapidly grow our Therapeutic Device segment, continue the commercialization of our Diagnostic products, and expand our product development and sales and marketing activities.
For further information on the regulatory, business and product pipeline, please see the “Business” section of this Annual Report on Form 10-K. For further information on the risk factors, please see the “Risk Factors” section of this Annual Report on Form 10-K.
Components of Operating Results
Revenue
Our revenue consisted of consumables sold in the U.S. and internationally associated with our Assisi ® products; capital and consumables sold in the U.S and internationally associated with our PulseVet ® platform; consumables sold in the U.S and internationally associated with our TRUFORMA ® platform; subscriptions and services sold in the U.S. associated with our TRUVIEW ® products; capital and service agreements sold in the U.S. and internationally associated with our VETGuardian ® products; consumables sold in the U.S. and internationally associated with our VETIGEL ® products; and contract manufacturing and engineering services and consumables sold in the U.S.
Cost of Revenue
Cost of revenue consisted primarily of the cost of raw materials used in the assembly of: PulseVet ® capital and consumables: TRUFORMA ® capital and consumables; Assisi ® consumables; TRUVIEW ® capital and consumables; VETGuardian ® capital and services; VETIGEL ® consumables sourced under our supply agreement with Cresilon, Inc,; and labor cost associated with contract manufacturing and engineering services. We expense all inventory obsolescence provisions related to normal manufacturing changes as cost of revenue.
Operating Expenses
Our current operating expenses consist of three components — general and administrative expenses, research and development expenses, and selling and marketing expenses.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, wages, stock-based compensation, and overhead costs incurred to support our business as a publicly traded company. The functions involved include Accounting, Business Development, Finance, Human Resources, Information & Innovation Technology, Investor Relations, Legal, and portions of other functional areas. Included within these support costs are significant public company expenses such as stock exchange fees, annual meeting expenses, and audit, tax, Sarbanes-Oxley and other compliance costs.
Research and Development Expenses
Research and development (“R&D”) expenses consist of salaries and related expenses for R&D personnel, fees paid to consultants and outside service providers, travel costs, and materials used in clinical trials and general R&D. These costs are primarily focused on leveraging our acquisition of Qorvo into new assay development for our TRUFORMA ® platform, expanding capabilities and usability within existing products, and exploring new market opportunities.
Selling and Marketing Expenses
Selling and marketing expenses consist of personnel costs, including salaries and related benefits, as well as costs associated with sales and marketing activities including conference and tradeshow attendance, sponsorships, and general advertising and promotional activities.
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U.S. Taxes
As of December 31, 2025, we had net operating loss carryforwards for U.S. federal and state income tax purposes of $21,216 and non-capital loss carryforwards for Canada of $6,513, which will begin to expire in fiscal year 2035. We have evaluated the factors bearing upon the realizability of our deferred tax assets, which are comprised principally of net operating loss carryforwards and non-capital loss carryforwards. In 2021, we concluded that, due to the limitations under Section 382 of the Code, our U.S. federal and state income tax net operating loss carryforwards, as well as R&D credit carryforwards, for the periods prior to February 11, 2021 have been limited to zero. We therefore have derecognized $3,814 of this asset, reducing the carryforward of these amounts to $17,402.
On July 4, 2025, the Unites States enacted tax reform legislation through the One Big Beautiful Bill Act, which changes existing U.S. tax laws, including extending or making permanent certain provisions of the Tax Cuts and Jobs Act and easing the interest expense limitation rules of Section 163(j), among other changes. The changes in tax law are reflected in the December 31, 2025 income tax provision; the law had an immaterial impact on the Company’s income tax provision
Canadian Taxes
In Canada, due to the uncertainty of realizing any tax benefits as of December 31, 2025, we continue to record a full valuation allowance against our Canadian deferred tax assets.
Translation of Foreign Currencies
The functional currency, as determined by management, for our subsidiaries in the United States, Switzerland, and Canada is the U.S. dollar, which is also our reporting currency.
The functional currency, as determined by management, for our Japanese subsidiary is the Japanese Yen. Japanese Yen are translated for financial reporting purposes with translation gains and losses recorded as a component of other comprehensive income or loss.
Stock-Based Compensation
Stock-based compensation expense is recognized for awards granted to employees and directors based on the fair value of the awards on the grant date. The Company’s stock-based compensation includes stock options, which are classified as equity awards, and SARs, which are classified as liability awards.
Equity-Classified Awards (Stock Options)
We measure the cost of equity-settled transactions by reference to the fair value of the equity instruments at the grant date. The fair value of stock options is calculated using the Black-Scholes Option Pricing Model and recognized as compensation expense over the vesting period of the award using the graded vesting method. Since our stock-based compensation plans do not require settlement in cash or other assets, stock options are classified as equity awards.
Compensation expense recognized during the period reflects the fair value of stock-based payment awards that are ultimately expected to vest. We account for forfeitures of employee awards as they occur. The expected term of stock options, which represents the period the options are expected to remain outstanding, is estimated based on the average term of the options. The risk-free interest rate is based on the U.S. treasury yield curve at the time of grant for the expected term. We assume a zero dividend yield at the date of grant, as we do not anticipate paying dividends in the foreseeable future. The expected volatility used in valuing stock options is calculated based on the historical price of the Company’s stock. Changes in volatility would result in a corresponding increase or decrease in the fair value of the options.
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Liability-Classified Awards (SARs)
The Company accounts for SARs as liability-classified awards because they are settled solely in cash and do not result in the issuance of equity. The fair value of SARs is initially measured at the grant date and subsequently remeasured at each reporting date until settlement. The fair value of SARs is calculated using the Black-Scholes Option Pricing Model and recognized as compensation expense over the vesting period of the award using the straight-line method. Changes in fair value are recognized as compensation expense in the consolidated statement of operations during the period of remeasurement based on the proportion of the vesting period that has elapsed. The expected term of SARs, which represents the period the SARs are expected to remain outstanding, is estimated based on the average term of the SARs. The risk-free interest rate is based on the U.S. treasury yield curve at the time of valuation for the expected term. We assume a zero-dividend yield, as we do not anticipate paying dividends in the foreseeable future. The expected volatility used in valuing SARs is calculated based on the historical price of the Company’s stock. Changes in volatility would result in a corresponding increase or decrease in the fair value of the SARs.
Upon exercise, SAR participants receive a cash payment equal to the excess of the fair market value of a share of common stock on the exercise date over the exercise price of the SAR. Since SARs are remeasured at each reporting date, volatility in the Company’s stock price may lead to fluctuations in the recognized compensation expense and recorded liability.
Loss Per Share
Basic loss per share, or EPS (earnings per share), is computed by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding. Diluted EPS reflects the potential dilution that could occur from common shares issuable through the exercise or conversion of stock options, restricted stock awards, warrants and convertible securities. In certain circumstances, the conversion of options, warrants and convertible securities are excluded from diluted EPS if the effect of such inclusion would be anti-dilutive.
Comprehensive Loss
Our comprehensive loss is reported in accordance with ASC 220, Income Statement — Reporting Comprehensive Income (“ASC 220”). Comprehensive loss is net loss plus certain items that are recorded directly to shareholders’ equity.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue, costs and expenses, and related disclosures during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those described below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 3 of the notes to our consolidated financial statements included within this Annual Report on Form 10-K, management has identified the following as “Critical Accounting Policies and Estimates”: Impairment Testing; Valuation and Payback of Property and Equipment; and Revenue Recognition. We believe that the estimates and assumptions involved in these accounting policies may have the greatest potential impact on our financial statements.
Impairment Testing
We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change indicating the carrying value may not be recoverable. When testing goodwill for impairment, we may first assess qualitative factors to determine if it is more likely than not the carrying value of a reporting unit exceeds its estimated fair value. During a qualitative analysis, we consider the impact of changes, if any, to the following factors: macroeconomic industry and market factors; cost factors; changes in overall financial performance; and any other relevant events and uncertainties impacting a reporting unit. If our qualitative assessment indicates a goodwill impairment is more likely than not, we perform additional quantitative analyses. We may also elect to skip the qualitative testing and proceed directly to the quantitative testing. For reporting units where a quantitative analysis is performed, we perform a test measuring the fair values of the reporting units and comparing them to their aggregate carrying values, including goodwill. If the fair value is less than the carrying value of the reporting unit, an impairment is recognized for the difference, up to the carrying amount of goodwill.
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We estimate the fair values of our reporting units using a discounted cash flow method or a weighted combination of discounted cash flows and a market-based method. The discounted cash flow method includes assumptions about a wide variety of internal and external factors. Significant assumptions used in the discounted cash flow method include financial projections of free cash flow, including revenue trends, medical costs trends, operating productivity, income taxes and capital levels; long-term growth rates for determining terminal value beyond the discretely forecasted periods; and discount rates. Financial projections and long-term growth rates used for our reporting units will be consistent with, and use inputs from, our internal long-term business plan and strategies.
Discount rates will be determined for each reporting unit and include consideration of the implied risk inherent in their forecasts. Our most significant estimate in the discount rate determinations involves our adjustments to the peer company weighted average costs of capital reflecting reporting unit-specific factors. We do not make any adjustments to decrease a discount rate below the calculated peer company weighted average cost of capital for any reporting unit. Company-specific adjustments to discount rates are subjective and thus are difficult to measure with certainty.
The passage of time and the availability of additional information regarding areas of uncertainty with respect to the reporting units’ operations could cause these assumptions to change in the future. Additionally, as part of our quantitative impairment testing, we perform various sensitivity analyses on certain key assumptions, such as discount rates, cash flow projections, and peer company multiples to analyze the potential for a material impact. The market-based method requires determination of an appropriate peer group whose securities are traded on an active market. The peer group is used to derive market multiples to estimate fair value.
During the first quarter of 2025, the Company determined that a triggering event occurred, which required interim testing for impairment in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”). The triggering event was related to the Company’s market capitalized value, which is a function of its stock price, which had reduced significantly subsequent to the delisting of the Company’s common shares from NYSE American during the three months ended March 31, 2025. We elected to perform a quantitative analysis as part of our interim goodwill impairment test. Our analysis of the PulseVet reporting unit indicated that its carrying amount, including goodwill, exceeded its fair value by approximately 163%. Our analysis of the Assisi reporting unit indicated that its carrying amount, including goodwill, exceeded its fair value by approximately 128%. As part of the Company’s quantitative analysis, we updated our implied fair value calculations to more closely align with our reduced market capitalization as of March 31, 2025. As a result, a non-cash goodwill impairment charge of $45,556 was recorded for the three months ended March 31, 2025. Given that no goodwill remained on our consolidated balance sheets after March 31, 2025, there were no further impairment considerations for the year ended December 31, 2025.
In connection with our interim impairment analysis during the first quarter of 2025, the Company also evaluated its amortizable intangible assets for recoverability in accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”). It was determined that the carrying values of certain intangible assets exceeded their fair values, which were impacted by the same factors noted in the goodwill impairment analysis. As a result, the Company recognized $8,297 in non-cash impairment charges related to these amortizable intangible assets. Subsequent to the first quarter of 2025, during the nine months ended December 31, 2025, no impairment indicators were identified, which would require a recoverability assessment of intangible assets under ASC 360. Therefore, no additional impairment charges were recorded for the year ended December 31, 2025.
Additionally, as part of the interim impairment analysis the Company evaluated its property and equipment for recoverability under ASC 360. Based on this assessment, it was determined that certain property and equipment assets were not fully recoverable due to the same triggering event described above. As a result, the Company recognized a non-cash impairment charge of $1,981 related to property and equipment during the three months ended March 31, 2025. Subsequent to the first quarter of 2025, during the nine months ended December 31, 2025, no impairment indicators were identified requiring a recoverability assessment of property and equipment under ASC 360. Accordingly, no additional impairment charges were recorded for the year ended December 31, 2025.
During the three months ended June 30, 2024, the Company determined that triggering events occurred, which required interim testing for impairment in accordance with ASC 350. We elected to perform a quantitative analysis as part of our interim goodwill impairment test. This was driven by changes in future sales growth projections and the allocation of operating expenses. As a result, a goodwill impairment charge of $16,024 was recorded for the three months ended June 30, 2024, as part of the Company’s interim goodwill impairment test.
As part of our annual goodwill impairment test for the fiscal year ended December 31, 2024, we performed a quantitative analysis of our reporting units. Our analysis of the PulseVet® and Assisi® reporting units indicated that their fair values exceeded their carrying amounts, including goodwill, by 12% and 14%, respectively.
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While the Company continues to believe its estimates of fair value for its amortizable intangible assets and property and equipment are reasonable, changes in assumptions concerning future financial performance, increases in discount rates, or other market and operational factors could negatively impact the recoverability of these assets. As a result, the Company may be required to recognize additional impairment charges related to its amortizable intangible assets or property and equipment in future periods.
Valuation and Payback of Property and Equipment
Diagnostic based TRUFORMA ® capital is placed in fixed assets once purchased or manufactured, where they remain, undepreciated, until they are placed with our customers under the agreement that they will repeatedly purchase consumables or services which are utilized within. Each instance of this placed capital represents an asset that we own. An estimate is made of the anticipated future revenue over its respective life which is ten years. If the payback period of the initial investment in the asset is less than the ten-year life of the asset, we conclude that the assets have been properly recorded, and no write-down is necessary. We rely on various data points and assumptions, including, but not limited to, the expected volume of consumables which will be sold, anticipated growth rates, and anticipated placements. Realization of the anticipated revenue is dependent on the current assumptions and forecasted models.
The customer is obligated to purchase consumables during the placement period. However, since the customer is not obligated to purchase the capital, and can return it at any time, we are exposed to a risk of loss to the extent the customer returns the capital and discontinues consumable or related service purchases.
As of December 31, 2025, the carrying value of our Diagnostic instruments was $9,545. Significant assumptions included in the realization model are the rate of placement and expected utilization over the life of the instrument.
The effect of a 25% reduction in the estimated revenues associated with annual placements of instruments would increase the payback period on December 31, 2025 from 3.90 years to 5.32 years.
Revenue Recognition
The nature of our Therapeutic Device business segment gives rise to variable consideration, including discounts and applicator (“trode”) returns for refurbishment. Credits are issued for unused shocks on returned trodes, which can be used toward the purchase of replacement trodes. When revenue is recognized, a simultaneous adjustment for returns is estimated, reducing revenue. Estimated return credits are presented as a reduction to gross sales with the corresponding reserve presented as customer contract liabilities.
Variable consideration related to unused shock credits is calculated using the expected value method, which estimates the amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. Estimates of variable consideration are based upon historical experience and known trends. These estimated credits are non-refundable and may only be used towards the purchase of future trode refurbishments. This practice encourages refurbishment purchase prior to complete utilization of the previous trode, enabling the customer to always have a trode on hand with ample capacity to perform treatments.
The number of trodes returned by year is tracked against the number of trodes sold in that same year, creating a current experience rate. It is assumed that the ultimate return rate for the trodes is 98%. For annual calculations, it is assumed that the expected returns in the current year for each layer increase to the experience rate of the year immediately preceding it. Once the 98% is reached the layer is removed from the calculation. The annual incremental change in expected returns is multiplied by an average return credit amount, generating the current liability due to customers.
The average return credit is calculated by dividing the actual shock credits issued by the actual number of trodes returned. A variance in the assumed return rate compared to the actual rate would impact the estimate and potentially understate net sales (overestimated rate) or overstate net sales (underestimated rate) in any given year and create a corresponding misstatement of the liability due to customers.
Results of Consolidated Operations
Our results of operations for the years ended December 31, 2025 and 2024 are as follows:
Revenue
Revenue for the year ended December 31, 2025 was $32,030, compared to $27,285 for the year ended December 31, 2024, an increase of $4,745, or 17%.
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The increase in revenue was primarily due to contract manufacturing and engineering revenue recognized during the current period; growth in consumables sales in our existing PulseVet ® products; growth in TRUFORMA ® products, including the impact of launching new assays since the end of the comparative period; and sales from VETIGEL ® which the Company began to market and sell in the current period. In general, we expect revenue to increase in subsequent periods as we increase our sales, marketing, and commercialization efforts.
Cost of Revenue
Cost of revenue for the year ended December 31, 2025 was $10,351, compared to $8,198 for the year ended December 31, 2024, an increase of $2,153, or 26%.
The increase in cost of revenue was primarily driven by increased manufacturing expenses resulting from higher unit sales as well as higher depreciation expense associated with capital projects completed in the second half of 2024, partially offset by prior period manufacturing costs related to integration of our Minnesota manufacturing facility, which did not recur in the current period. We anticipate that cost of revenue will continue to increase in future periods in line with the expected growth in unit sales, as described above.
Gross Profit
Gross profit margin for the year ended December 31, 2025 was 68%, compared to 70% for the year ended December 31, 2024.
The decrease in gross profit margin percentage was primarily due to higher depreciation expense associated with capital projects completed in the second half of 2024, partially offset by improvements associated with the integration of our Minnesota manufacturing facility, as well as the further absorption of fixed costs driven by increased unit sales.
General and Administrative
General and administrative expense for the year ended December 31, 2025 was $24,496, compared to $29,656 for the year ended December 31, 2024, a decrease of $5,160, or 17%.
The decrease in general and administrative expenses was primarily driven by professional fees for specialized accounting and development work associated with acquisitions incurred during the prior comparative period which did not recur, one-time special meeting and proxy fees incurred in the prior comparative period, lower wages and related benefits, lower amortization expense, lower stock-based compensation expense, lower bad debt expense, and lower rent expense due to our corporate office move during the first quarter of 2025. While we expect general and administrative expenses to increase, we expect it to decrease proportionally relative to sales and related product expansion.
Research and Development
Research and development expense for the year ended December 31, 2025 was $7,166, compared to $7,268 for the year ended December 31, 2024, a decrease of $102, or 1%.
The decrease in research and development expenses was primarily driven by lower wages and related benefits. We anticipate that research and development expense will increase as we maintain and enhance our current product lines and continue to develop new products.
Selling and Marketing
Selling and marketing expense for the year ended December 31, 2025 was $18,537, compared to $17,192 for the year ended December 31, 2024, an increase of $1,345, or 8%.
The increase in selling and marketing expenses was driven primarily by higher commissions associated with increased revenue and higher salaries associated with increased headcount of our sales department as we built our staff through hiring campaigns. We expect future selling and marketing expense to increase in line with product expansion and growth in our commercialization efforts.
Impairment Expense
Impairment expense for the year ended December 31, 2025 was $55,833, compared to $16,024 for the year ended December 31, 2024.
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The impairment expense for the year ended December 31, 2025 was due to impairment charges recognized as a result of a significant decline in the Company’s market capitalization following the delisting of its common shares from NYSE American. The impairment charges consisted of $45,556 related to goodwill, $8,297 related to amortizable intangible assets, and $1,981 related to property and equipment. The impairment charge for the year ended December 31, 2024 was attributable to goodwill impairment recognized as a result of slowed future growth projections and the allocation of operating expenses.
Net Loss
Net loss for the year ended December 31, 2025 was $81,858, compared to a net loss of $46,982 for the year ended December 31, 2024, an increase of $34,876, or 74%.
The net loss was attributed to the matters described above, particularly the significant impairment expense. We expect to continue recording net losses in future periods until we have sufficient revenue from product sales to offset our operating expenses.
Cash Flows
The following table shows a summary of our cash flows for the periods set forth below:
Year Ended December 31,
Change
Cash used in operating activities
Cash provided by investing activities
Cash used in financing activities
Increase (decrease) in cash and cash equivalents
Effect of exchange rate changes on cash
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Net cash used in operating activities for the year ended December 31, 2025 was $17,649, compared to $23,630 for the year ended December 31, 2024, a decrease in cash used of $5,981, or 25%. The decrease in cash used in operating activities resulted primarily from the decrease in operating expenses noted above, excluding the impact of non-cash charges, including stock-based compensation, impairment expense, and amortization of intangible assets.
Net cash provided by investing activities for the year ended December 31, 2025 was $19,575, compared to cash provided of $17,854 for the year ended December 31, 2024, an increase in cash provided of $1,721, or 10%. The increase in cash provided by investing activities resulted primarily from decreased capital expenditures, decreased intangible investment, and decreased investment in nonconsolidated entities as compared to the prior comparative period, partially offset by lower securities matured in the current period. The prior period capital expenditures amount was driven largely by warehouse expansion and automated line spend, which did not recur in the current period.
There was no net cash used in financing activities for the year ended December 31, 2025, compared to $70 for the year ended December 31, 2024. The prior period amount was attributable to stock option issuance costs paid which did not recur.
Liquidity and Capital Resources
We have incurred losses and negative cash flows from operations since our inception in May 2015. As of December 31, 2025, we had an accumulated deficit of $299,773. We have funded our working capital requirements primarily through the sale of our equity and equity-related securities and the exercise of stock options and warrants.
As of December 31, 2025, the Company had working capital (defined as current assets minus current liabilities) of $54,594.
Short-Term Cash Requirements
We believe that our existing cash is sufficient to fund our expected short-term needs (defined as the next twelve months). We currently have fixed obligations in association with our building leases and quarterly inventory orders. We also have payment obligations associated with our on-going clinical studies, and we expect that we have sufficient cash to cover these requirements. We do not expect that our operations will require significant increases in our short-term cash needs.
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Long-Term Cash Requirements
We believe that our existing cash resources will be sufficient to fund our expected operational requirements for the long-term period (defined as beyond the next twelve months). We regularly evaluate our business plans and strategy. These evaluations often result in changes to our business plans and strategy, some of which may be material and significantly change our cash requirements. Ongoing business development activity may also require us to use some of our liquidity and use of additional capital to fund newly acquired operations. If we raise additional funds by issuing equity securities, our existing security holders will likely experience dilution, and the incurring of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict operations.
Our future capital requirements depend on many factors, including, but not limited to:
the costs and timing of our development and commercialization activities;
the cost of manufacturing our existing and future products;
the cost of marketing and selling our existing and future products, including marketing, sales, service, customer support and distribution costs;
the expenses needed to attract and retain skilled personnel;
the costs associated with being a public company;
the costs associated with additional business development or mergers and acquisitions activity, including acquisition-related costs, earn-outs or other contingent payments and costs of developing and commercializing any technologies to which we obtain rights;
third-party costs associated with the development and commercialization of our existing and future products and the ability of our development partners to satisfy our requirements on a timely basis;
the scope and terms of our business plans from time to time, and our ability to realize upon our business plans; and
the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent claims, including litigation costs and the outcome of any such litigation.
Outstanding Share Data
The only class of outstanding voting equity securities of the Company are the common shares. As of March 13, 2026:
There are 979,949,668 common shares issued and outstanding;
There are stock options outstanding under our Stock Option Plan to acquire an aggregate of 94,338,469 common shares;
There are common share purchase warrants issued in July of 2022 that are outstanding and permit the holders to acquire an aggregate of 10,000,000 common shares at an exercise price of $0.2201 per share; and
There are common share purchase warrants issued in July of 2022 that are outstanding and permit the holders to acquire an aggregate of 22,000,000 common shares at an exercise price of $0.2520 per share.
All currently outstanding warrants have a “cashless exercise” feature which is applicable in certain circumstances. The cashless exercise feature could result in the potential issuance of common shares based upon the “in-the-money” value of the applicable warrants at the time of exercise. The number of the common shares that may be issued is not determinable. However, the number of common shares that are issuable is based upon a formula that divides the “in-the-money” value by the then current market price and multiplying this result by the number of common shares that are issuable under the applicable warrants pursuant to cash exercise.
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Recently Adopted Accounting Pronouncements
From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our Consolidated Financial Statements upon adoption.
To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 3 - Significant Accounting Policies to the consolidated financial statements.
Climate Change
Increased public awareness and concern about climate change will likely continue to (1) generate more regional and/or national requirements to reduce greenhouse gas emissions; (2) increase energy efficiency and reduce carbon pollution; and (3) cause a shift to cleaner and more sustainable sources of energy which may be more expensive than using fossil fuels as an energy source.
The potential impact of climate change on our operations and the needs of our customers remains uncertain. Scientists have proposed that the impacts of climate change could include changes in rainfall patterns, water shortages, changes to the water levels of lakes and other bodies of water, changing storm patterns, more intense storms and changing temperature levels. These changes could be severe and vary by geographic location. Climate change may also affect the occurrence of certain natural events, the incidence and severity of which are inherently unpredictable.
The effects of climate change also may impact our decisions to construct new buildings or maintain existing facilities in any areas that are or become prone to physical risks, which could similarly increase our operating costs. We could also face indirect financial risks passed through the supply chain that could result in higher prices for resources, such as energy. Additionally, climate change may adversely impact the demand, price and availability of property and casualty insurance that insures our physical assets. Due to significant economic variability associated with future changing climate conditions, we are unable to predict the impact climate change will have on us in the future.
