10-Q 1 plse-20220331x10q.htm 10-Q plse-20220331x10q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

Form 10-Q

___________________________________

(Mark One)

x

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

For the quarterly period ended March 31, 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: 001-34899

___________________________________

Pulse Biosciences, Inc.

(Exact name of registrant as specified in its charter)

Delaware

46-5696597

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

3957 Point Eden Way

Hayward, CA

94545

(Address of principal executive offices)

(Zip Code)

(510906-4600

(Registrant’s telephone number, including area code)

___________________________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

PLSE

The Nasdaq Stock Market

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 x    No ¨ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes x   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. 

Large accelerated filer   

¨

Accelerated filer

¨

Non-accelerated filer   

x

Smaller reporting company   

x

Emerging growth company

¨

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 x

The number of shares outstanding of the registrant’s common stock as of April 30, 2022: 29,802,280

TABLE OF CONTENTS

PAGE
 No.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited):

3

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three-Month Periods Ended March 31, 2022 and 2021

4
 

Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2022 and 2021

5
 

Condensed Consolidated Statements of Stockholders’ Equity for the Three-Month Periods Ended March 31, 2022 and 2021

6

Notes to Condensed Consolidated Financial Statements  

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  

22

Item 3. Quantitative and Qualitative Disclosures About Market Risk  

32

Item 4. Controls and Procedures  

32

PART II. OTHER INFORMATION

Item 1. Legal Proceedings  

33

Item 1A. Risk Factors  

33

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

68

Item 3. Default Upon Senior Securities  

68

Item 4. Mine Safety Disclosures  

68

Item 5. Other Information  

68

Item 6. Exhibits  

68

Signatures

69

“Pulse Biosciences,” the Pulse logos and other trademarks or service marks that we use in connection with the operation of our business appearing in this quarterly report on Form 10-Q (this “Quarterly Report”), including CellFX, CellFX CloudConnect, CellFX Marketplace, Nano-pulse Stimulation, and NPS, are the property of Pulse Biosciences, Inc. Solely for your convenience, some of our trademarks and trade names referred to in this Quarterly Report are listed without the ® and TM symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks and trade names. Also, this Quarterly Report may contain additional trade names, trademarks or service marks of others, which are the property of their respective owners. We do not intend our use or display of any other company’s trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any of these other companies.

Unless expressly indicated or the context requires otherwise, the terms “Pulse,” “Company,” “we,” “us,” and “our,” in this document refer to Pulse Biosciences, Inc., a Delaware corporation, and, where appropriate, its wholly owned subsidiaries.


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PULSE BIOSCIENCES, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)

March 31,

December 31,

2022

2021

ASSETS

Current assets:

Cash and cash equivalents

$

12,676

$

28,614

Accounts receivable

21

61

Inventory

7,487

5,824

Prepaid expenses and other current assets

1,979

2,131

Total current assets

22,163

36,630

Property and equipment, net

2,554

2,462

Intangible assets, net

3,050

3,216

Goodwill

2,791

2,791

Right-of-use assets

8,611

8,785

Other assets

365

365

Total assets

$

39,534

$

54,249

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

3,486

$

2,904

Accrued expenses

4,604

4,389

Deferred revenue

16

16

Lease liability, current

799

774

Note payable, current

436

Total current liabilities

8,905

8,519

Lease liability, less current

9,833

10,040

Total liabilities

18,738

18,559

Commitments and contingencies (Note 8)

 

 

Stockholders’ equity:

Preferred stock, $0.001 par value;
authorized – 50,000 shares; no shares issued and outstanding

Common stock, $0.001 par value:
authorized – 500,000 shares; issued and outstanding – 29,802 shares and 29,716 shares at March 31, 2022 and December 31, 2021, respectively  

29

29

Additional paid-in capital

274,240

271,861

Accumulated other comprehensive loss

Accumulated deficit

(253,473)

(236,200)

Total stockholders’ equity

20,796

35,690

Total liabilities and stockholders’ equity

$

39,534

$

54,249

See accompanying notes to the condensed consolidated financial statements.

 

PULSE BIOSCIENCES, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share amounts)

(Unaudited)

Three-Month Periods Ended

March 31,

2022

2021

Revenues:

Product revenues

$

444

$

Total revenues

444

Cost and expenses:

Cost of revenues

909

Research and development

6,769

9,063

Sales and marketing

5,541

4,146

General and administrative

4,498

5,316

Total cost and expenses

17,717

18,525

Loss from operations

(17,273)

(18,525)

Other income (expense):

Interest income (expense), net

(114)

Total other income (expense)

(114)

Net loss

(17,273)

(18,639)

Other comprehensive gain (loss):

Unrealized gain (loss) on available-for-sale securities

1

Comprehensive loss

$

(17,273)

$

(18,638)

Net loss per share:

Basic and diluted net loss per share

$

(0.58)

$

(0.71)

Weighted average shares used to compute net loss per common share basic and diluted

29,745

26,072

See accompanying notes to the condensed consolidated financial statements.

 

PULSE BIOSCIENCES, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three-Month Periods Ended

March 31,

2022

2021

Cash flows from operating activities:

Net loss

$

(17,273)

$

(18,639)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation

160

113

Amortization of intangible assets

166

167

Stock-based compensation

2,007

6,965

Net premium amortization and discount on available-for-sale securities

13

Changes in operating assets and liabilities:

Accounts receivable

40

Inventory

(1,663)

(1,135)

Prepaid expenses and other current assets

191

(124)

Other receivables

(39)

48

Right-of-use assets

174

158

Accounts payable

609

433

Accrued expenses

215

291

Lease liabilities

(182)

(95)

Accrued interest on note payable

1

118

Net cash used in operating activities

(15,594)

(11,687)

Cash flows from investing activities:

Purchases of property and equipment

(279)

(51)

Maturities of investments

8,000

Net cash provided by (used in) investing activities

(279)

7,949

Cash flows from financing activities:

Proceeds from issuance of common stock under employee stock purchase plan

372

430

Proceeds from exercises of warrants

4,217

Proceeds from exercises of stock options

619

Proceeds from issuance of common stock

4,892

Proceeds from issuance of related party note

41,000

Payments made on insurance loan agreement

(437)

Net cash provided by (used in) financing activities

(65)

51,158

Net increase (decrease) in cash and cash equivalents

(15,938)

47,420

Cash and cash equivalents at beginning of period

28,614

12,463

Cash and cash equivalents at end of period

$

12,676

$

59,883

Supplemental disclosure of noncash investing and financing activities:

Equipment purchases included in accounts payable and accrued expenses

$

(27)

$

14

Change in unrealized gains on available-for-sale securities

1

Other receivable from issuance of common stock from at-the-market equity offering

(71)

See accompanying notes to the condensed consolidated financial statements. 

PULSE BIOSCIENCES, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

  

Additional

Accumulated Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

Amount

  

Capital

Income (Loss)

Deficit

Equity

Balance, December 31, 2021

29,716 

$

29 

$

271,861 

$

$

(236,200)

$

35,690 

Issuance of shares under employee stock purchase plan

86 

372 

372 

Stock-based compensation expense

2,007

2,007

Unrealized gain on available-for-sale securities

Net loss

(17,273)

(17,273)

Balance, March 31, 2022

29,802 

$

29 

$

274,240

$

$

(253,473)

$

20,796

  

Additional

Accumulated Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

Amount

  

Capital

Income (Loss)

Deficit

Equity

Balance, December 31, 2020

25,550 

$

25 

$

195,410 

$

(1)

$

(172,540)

$

22,894 

Issuance of shares upon exercise of stock options

40 

449 

449 

Issuance of shares under employee stock purchase plan

68 

430 

430 

Issuance of shares upon exercise of warrants

585 

1 

3,333 

3,334 

Issuance of common stock in an at-the-market equity offering, net of issuance costs of $446

158 

4,963 

4,963 

Stock-based compensation expense

6,965 

6,965 

Unrealized gain on available-for-sale securities

1 

1 

Net loss

(18,639)

(18,639)

Balance, March 31, 2021

26,401 

$

26 

$

211,550 

$

$

(191,179)

$

20,397 

See accompanying notes to the condensed consolidated financial statements.

PULSE BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Description of the Business

Pulse Biosciences, Inc. is a novel bioelectric medicine company committed to health innovation using an entirely new and proprietary energy modality. The Company’s CellFX System is the first commercial product to harness the distinctive advantages of the Company’s proprietary NPS technology. The CellFX System delivers nanosecond duration pulses of electrical energy, each less than a millionth of a second long, to non-thermally clear targeted cells while sparing adjacent non-cellular tissue, to treat a variety of medical conditions for which an optimal solution remains unfulfilled.

In February 2021, the Company received 510(k) clearance from the FDA for the CellFX System for dermatologic procedures requiring ablation and resurfacing of the skin. In January 2021, the Company received CE marking approval for the CellFX System, which allows for marketing of the system in the EU and, in June 2021, the Company received Health Canada approval for the CellFX System, which allows for marketing of the system in Canada. The CE mark and Health Canada approvals allow for use of the CellFX System in dermatological procedures requiring ablation and resurfacing of the skin for the reduction, removal, and/or clearance of cellular-based benign lesions, including SH, SK, and cutaneous non-genital warts. The Company will continue to pursue specific indications for the CellFX System in the United States similar to the regulatory clearances already received in Europe and Canada. This will require additional 510(k) submissions for each subsequent indication, and will likely be based on comparative clinical data. In December 2021, the Company submitted a 510(k) to add the treatment of SH to the CellFX System’s indications for use in the United States. In February 2022 the Company received an AI letter from the FDA in response to the 510(k) submitted. In the AI letter, the FDA stated it did not believe the Company provided sufficient clinical evidence at this time to support the expanded indication for use, and that the Company had not met the primary endpoints of the SH FDA-approved IDE study. The Company met with the FDA at the end of April 2022 to gain clarification regarding the AI letter and to discuss the appropriate next steps. Following the meeting and at the FDA’s request, the Company provided additional analysis of the sebaceous hyperplasia comparative clinical data. The Company anticipates a follow-on discussion with the FDA to review the additional datasets and expects to continue to collaborate with the FDA to formally respond to the AI letter.

In February 2021, the Company initiated controlled launch programs (Note 9) in the United States and the European Union and in June 2021 the Company initiated a controlled launch program in Canada (collectively, our “Controlled Launch”). In August 2021, the Company began to convert Controlled Launch program participants into sales agreements, thereby triggering revenue recognition.

On March 31, 2022, the Company initiated a plan to reduce its operating expenses, preserve financial resources, and focus its sales and marketing efforts on increasing utilization of CellFX Systems. The Company’s Board of Directors has approved changes to the Company’s commercial leadership, restructuring of its commercial field organization and reductions in other personnel and expenses across the Company. The Company announced a reduction in force effective as of March 31, 2022. See Note 13 for additional details.

The Company was incorporated in Nevada on May 19, 2014. On June 18, 2018, the Company reincorporated from the State of Nevada to the State of Delaware. The Company is located in Hayward, California.

The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital. The Company does not currently have any cash flows from operations. It has recently commenced revenue-generating operations and will need to raise additional capital to finance its operations. However, there can be no assurances that the Company will be able to obtain additional financing on acceptable terms and in the amounts necessary to fully fund its operating requirements.

 

2. Summary of Significant Accounting Policies

Going Concern

As of March 31, 2022, the Company had an accumulated deficit of $253.5 million, cash outflows from operations of $15.6 million for the three months then ended, cash and cash equivalents of $12.7 million and a net loss of $17.3 million. The Company has recently begun to generate revenue from product sales, but anticipates net losses for the next several years or until it can generate substantial product revenue and achieve profitability. Based on the Company’s current operating plan, the Company has determined that, with its current financial resources, the Company would be able to operate through the second quarter of 2022. As the Company’s operating plan does not allow the Company to operate for a period of twelve months from the date the condensed consolidated financial statements are issued without additional financing, based on the Accounting Standards Codification (“ASC”) 205-40, Presentation of Financial Statements – Going Concern, the Company is required to disclose that substantial doubt regarding the Company’s ability to continue as a going concern exists. This evaluation initially cannot take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. To continue to fund the operations of the Company beyond this time period, management has developed plans, which primarily consist of raising additional capital through some combination of public or private equity offerings, debt financings, the Company’s at-the-market equity offering program, and/or potential new collaborations. Refer to Note 14 for details of a rights offering announced on April 14, 2022 to raise additional capital. There is no assurance, however, that any additional financing or any revenue-generating collaboration will be available when needed or that management of the Company will be able to obtain financing or enter into a collaboration on terms acceptable to the Company. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared on a basis consistent with the Company’s December 31, 2021 audited Consolidated Financial Statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth herein. The condensed consolidated financial statements have been prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and, as permitted by such rules and regulations, omit certain information and footnote disclosures necessary to present the financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The condensed consolidated balance sheet as of December 31, 2021 was derived from the audited consolidated financial statements as of that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The results of operations for the three-month periods ended March 31, 2022, are not necessarily indicative of the results to be expected for the entire year or any future periods.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the financial statements of Pulse Biosciences, Inc. and its wholly-owned subsidiaries. Intercompany balances and transactions, if any, have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the Financial Statements and accompanying notes to the condensed consolidated financial statements. Estimates include, but are not limited to, the valuation of cash equivalents and investments, the valuation and recognition of share-based compensation, inventory valuation, warranty obligations, and the useful lives assigned to long-lived assets. The Company evaluates its estimates and assumptions based on historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from these estimates.

Significant Accounting Policies

The Company’s significant accounting policies are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The Company continually evaluates the accounting policies and estimates used in preparing the consolidated financial statements. There have been no material changes to the Company’s significant accounting policies during the three-month period ended March 31, 2022, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Valuation of Inventory

Inventory is stated at lower of cost or net realizable value. The Company establishes the inventory basis by determining the cost based on standard costs approximating the purchase costs on a first-in, first-out basis. Net realizable value is the estimated selling price in the ordinary course of the Company’s business, less reasonably predictable costs of completion, disposal, and transportation. The cost basis of the Company’s inventory will be reduced for any products that are considered excessive or obsolete based upon assumptions about future demand and market conditions. At March 31, 2022, there is no reduction to the balance of inventory for excessive and obsolete inventory.

Revenue from Contracts with Customers

The Company recognizes revenue at a point in time when it satisfies performance obligations by transferring control of promised goods to its customers. The amount of revenue recognized is equal to the consideration which the Company is entitled to in exchange for the promised goods, excluding any amounts assessed by government authorities for taxes which might be collected from a customer. Sales contracts often involve the sale and delivery of multiple products, each of which typically represent a separate performance obligation in the contract. While the Company sells these products on a stand-alone basis at their respective stand-alone selling prices (“SSP”), initial customer contracts will primarily involve the bundling of products which will be delivered concurrently to the customer. In such instances, the full consideration of the contract will be recognized upon shipment of the products. The Company generally requires receipt of full payment prior to shipment, however, from time to time, payment terms may be extended to customers upon which the Company will perform a necessary credit evaluation to ensure future collectability of the outstanding balance. The Company does not believe any portion of the outstanding accounts receivable balance to be uncollectible, and has therefore not recorded an allowance against the accounts receivable balance. Refer to Note 10 for further details.

Product Warranty

The Company provides a standard warranty on eligible products which provides the customer assurances that the products comply with the agreed-upon specifications. The standard warranty does not provide any services in addition to those assurances. The Company accrues a warranty reserve for products sold based upon the best estimate of the nature, frequency, and costs of future claims. These estimates are inherently uncertain given the short history of sales, and changes to the historical or projected warranty experience may cause material changes to the warranty reserve in the future. The warranty reserve is included within Accrued expenses on the consolidated balance sheets. Warranty expense is recorded as a component of Cost of Revenues in the consolidated statements of operations and comprehensive loss.

Warranty accrual activity consisted of the following for the three-month periods ended March 31, 2022 and 2021 (in thousands):

Three-Month Periods Ended

March 31,

2022

2021

Beginning balance

$

80

$

Add: Accruals for warranties issued during the period

17

Less: Settlements made during the period

Ending balance

$

97

$

Net Loss per Share

The Company calculates basic net loss per share by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding during the period. For purposes of this calculation, options to purchase common stock and common stock warrants are considered common stock equivalents. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted net loss per share.

Basic and diluted net loss per common share is the same for all periods presented because all warrants, stock options and restricted stock units outstanding are anti-dilutive.

The following outstanding stock options, warrants and restricted stock units were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:

Three-Month Periods Ended

March 31,

2022

2021

Common stock warrants

600

Common stock options

5,558,884

5,476,636

Restricted stock units

111,305

Total

5,558,884

5,588,541