# Nuo Therapeutics, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Nuo Therapeutics, Inc.](/companies/aurx.md) (CIK 1091596)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 13:00 ET
- Period: 2024-09-30
- Accession: 0001437749-24-034325
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1091596/000143774924034325/aurx20240930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1091596/000143774924034325/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $371.0k | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $970.3k | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $100.5k | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $216.4k | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $270.4k | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $753.9k | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $847.8k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $2.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$577.4k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$1.8m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$578.2k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$1.8m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.04 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$1.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $155.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $683.8k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $1.3m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $1.7m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $714.0k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $828.7k | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $890.4k | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 27,313 characters.

*The following discussion and analysis of the financial condition and results of operations of Nuo Therapeutics, Inc. ("Nuo," the "Company," "we," "us," or "our") should be read in conjunction with the financial statements and related notes appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”), filed with the U.S. Securities and Exchange Commission (the "SEC") on April 19, 2024.*

### Special Note Regarding Forward Looking Statements

Certain statements, other than purely historical information in this Quarterly Report (including this section) constitute “forward-looking statements”. Forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “will be,” “will continue,” “will likely result,” “could,” “may” and words of similar import. These statements reflect the Company’s current view of future events and are subject to certain risks and uncertainties as noted in this Quarterly Report and in other reports filed by us with the SEC, including Forms 8-K, 10-Q, and 10-K. These risks and uncertainties include, among others, the following:

- our limited revenue base and sources of working capital;
- our limited operating experience;
- our ability to continue as a going concern
- the dilutive impact of raising additional equity or debt;
- our ability to timely and accurately report our financial results and prevent fraud if we are unable to maintain effective disclosure and internal controls;
- acceptance of our product by the medical community and patients;
- our ability to obtain adequate reimbursement from third-party payors;
- our ability to contract with healthcare providers;
- our reliance on several single source suppliers and our ability to source raw materials at affordable costs;
- our ability to protect our intellectual property;
- our compliance with governmental regulations;
- our ability to successfully sell and market the Aurix System;
- our ability to attract and retain key personnel, including both our executive officers; and
- our ability to successfully pursue strategic collaborations to help develop, support, or commercialize our current and future products.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results could differ materially from those anticipated in these forward-looking statements.

In addition to the risks identified under the heading “Risk Factors” in our Annual Report and the other filings referenced above, other sections of this report may include additional factors which could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business, or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

The Company undertakes no obligation and does not intend to update, revise or otherwise publicly release any revisions to its forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events.

### Business Overview

We are a regenerative therapies company focused on developing and marketing products for chronic wound care primarily within the U.S. We commercialize innovative cell-based technologies that harness the regenerative capacity of the human body to trigger natural healing. The use of autologous (i.e., from self, the patient’s own) biological therapies for tissue repair and regeneration is part of a clinical strategy designed to improve long-term recovery in inherently complex chronic conditions with significant unmet medical needs.

Our current commercial offering consists of point of care technology for the safe and effective separation of autologous blood to produce a platelet-based therapy for the chronic wound care market. This offering is known as “Aurix” or the “Aurix System”. The FDA cleared the Aurix System for marketing in 2007 as a device under Section 510(k) of the Federal Food, Drug, and Cosmetic Act (“FDCA”). Aurix is one of two platelet derived products cleared by the FDA for chronic wound care use and is indicated for most exuding wounds. The advanced wound care market, within which Aurix competes, is composed of advanced wound care dressings, wound care devices, and wound care biologics. Advanced wound care was estimated to be an approximate $10.8 billion global market in 2021 and estimated to be an approximately $4.15 billion North American market in 2020. Estimates indicate that 1-2% of the population in developed countries will suffer from a chronic wound at least once over their lifetime. According to the National Institute of Health, treatment of diabetic foot ulcers cost an estimated $9-$13 billion annually in the U.S. alone. An aging population and the still increasing prevalence of diabetes suggests a continued increase in the patient population at risk of developing chronic, non-healing wounds.

The Aurix System produces a platelet rich plasma (“PRP”) gel at the point of care using the patient’s own platelets and plasma sourced from a small draw of peripheral blood. Aurix comprises a natural, endogenous complement of protein and non-protein signal molecules that contribute to effective healing. During treatment, the patient’s platelets are activated and release hundreds of growth factor proteins and other signaling molecules that form a biologically active hematogel. Aurix delivers concentrations of the natural complement of cytokines, growth factors and chemokines that are known to regulate angiogenesis (i.e., the development of new blood vessels), cell growth, and the formation of new tissue. Once applied to the prepared wound bed, the biologically active Aurix hematogel can restore the balance in the wound environment to transform a non-healing wound to a wound that heals naturally.

In 2012, a Medicare National Coverage Determination (“NCD”) from CMS reversed a twenty-year non-coverage decision for autologous blood derived products used in wound care. This NCD allowed for Medicare coverage under the Coverage with Evidence Development (“CED”) program. CED programs have been employed for a selected variety of other therapies. Under a CED program, CMS provides reimbursement for items or services on the condition that they be used in approved clinical protocols or in the collection of additional clinical data. Under the CED program applicable to the Aurix System, a facility treating a patient with Aurix would be reimbursed by Medicare when health outcomes data were collected to inform future coverage decisions. The intent of the CED program was to evaluate the outcomes of Aurix therapy for the broader Medicare population when used in a “real world” continuum of care.

In May 2019, we transmitted a letter memorandum to CMS’ Coverage and Analysis Group (“CAG”) in support of our formal request for reconsideration of the then existing NCD based on clinical data collected and published under the CED program.

On April 13, 2021, CMS issued a final coverage decision memo indicating that Medicare would nationally cover autologous PRP for the treatment of chronic non-healing diabetic wounds for a duration of 20 weeks under Section 1862(a)(1)(A) of the Social Security Act. This coverage applies when using devices whose FDA-cleared indications include the management of exuding cutaneous wounds, such as diabetic ulcers. Coverage of autologous PRP beyond 20 weeks for diabetic foot ulcers and for the treatment of all other chronic, non-diabetic, non-healing wounds would be determined by local Medicare Administrative Contractors ("MACs").

For 2024, the Medicare national average reimbursement rate for the Aurix System is $1,739 per treatment under the Hospital Outpatient Prospective Payment System ("OPPS') final rules. the national average reimbursement rate will increase to $1,822 per treatment effective January 1, 2025. We market the Aurix System at an approximate cost of $800 per treatment to wound care providers in the hospital outpatient setting.

Under the 2021 NCD, while coverage for Aurix was mandated in the physician office setting, the payment rate was subject to determination by the local MACs with payment rates received ranging from approximately $120 to $800 per treatment. Based upon our perception of inconsistent, inadequate, and heterogeneous payment rates from the MACs, we submitted a formal comment request that CMS establish a national payment rate to reduce access barriers to the Aurix product.

On November 1, 2024, CMS issued final rules for the OPPS as well as the Medicare Physician Fee Schedule (“MPFS”) which will both become effective January 1, 2025. Under the OPPS, the national average reimbursement rate for 2025 will increase to $1,829 per treatment, an increase of approximately 5%. Under the MPFS, which outlines the Medicare payment rates to clinicians in the physician office setting, CMS established a national payment rate of approximately $900. We believe that potential adoption in the physician office setting in multiple geographies could be favorably impacted by the establishment of the MPFS national payment rate.

### Our Strategy

Our current commercial focus is establishing engagement with providers treating chronic non-healing wounds to demonstrate the clinical benefits we believe result from the use of Aurix in the treatment of complex wounds. Increasing physician awareness of the differentiating attributes of Aurix will be key to establishing a base of product revenues upon which to grow. We anticipate developing these relationships with clinical providers and treatment facilities primarily by establishing a variety of distributor arrangements throughout the United States. Our commercial team consists of three senior employees who are leveraging their current and historical relationships to establish distributor arrangements. As of September 30, 2024, we had established contractual relationships with more than 200 individual distributor representatives including. a multi-state agreement with Pacific Medical, Inc. covering multiple large markets in the western United States. While we anticipate the number of distributor representatives will continue to expand modestly, our current focus is establishing commercial customer relationships with wound care providers in hospital outpatient wound care clinics during the remainder of 2024 and preparing for the implementation of the MPFS national payment rate in the physician office setting beginning in January 2025. We also continue to be focused on ensuring that reimbursement mechanisms are properly administered by the local MACs under the April 2021 NCD and the MPFS final rule for 2025.

### The Science Underlying Aurix/Platelet Rich Plasma

### Normal Wound Healing

The science underlying wound healing is well-established. An immediate early event critical for wound healing is the influx of platelets to the wound site. Platelets bind to elements within damaged tissue such as collagen fragments and endogenous thrombin molecules and are activated to release a diversity of growth factors and other biomolecules from their alpha and dense granules (Reed 2000, Nieswandt, 2003). These biomolecules provide signals essential for biological responses regulating hemostasis and effective tissue regeneration.

### Chronic Wounds

Dysregulation of numerous cellular and biological responses contribute to the chronic wound phenotype. Chronic wounds have reduced levels of growth factors and concomitant decreases in cellular proliferation (Mast 1996). There is increased cellular senescence (Telgenhoff 2005), and there generally is a lack of perfusion that can inhibit the delivery of nutrients and cells required for regeneration (Guo 2010). As the body attempts to stave off infection, elevated concentrations of free radicals accumulate in the chronic wound and further damage surrounding tissue (Moseley 2004, James 2003).

### Aurix Therapy

Aurix has been cleared by FDA as safe and effective with an indication for chronic wounds such as leg ulcers, pressure ulcers, and diabetic ulcers and other exuding wounds such as mechanically or surgically debrided wounds. The Aurix therapeutic is formed by mixing a sample of a patient’s platelets and plasma with pharmaceutical grade thrombin and ascorbic acid. The thrombin activates platelets while ascorbic acid drives the synthesis of high tensile strength collagen, clears damaging free radicals and controls gel consistency. The topical dermal application of Aurix gel bypasses the lack of local perfusion to provide immediate signals for new tissue formation and ultimately healing.

### The Efficacy of Aurix Relates to Biological Activity Released by Platelets

### Regenerative Capacity

More than 300 proteins are released by human platelets in response to thrombin activation (Coppinger 2004). Important examples include vascular endothelial cell growth factor (“VEGF”), platelet derived growth factor (“PDGF”), epidermal growth factor (“EGF”), fibroblast growth factor (“FGF”) and transforming growth factor-beta (“TGF-B”) (Eppley 2004, Everts 2006). These proteins are critical for organized wound healing, regulating responses such as vascularization, cell proliferation, cell differentiation, and deposition of new extracellular matrix (Goldman 2004). Platelets also release chemokines such as Interleukin-8 (“IL-8”), stromal cell derived factor-1 (“SDF-1”), and platelet factor-4 (“PF-4”) (Chatterjee 2011, Gear 2003) that control the mobilization and migration of stem cells and fibroblasts (Werner 2003 and Gillitzer 2001), which contribute to tissue regeneration.

### Anti-infective Activity

Populations of bioburden in chronic wounds vary over time and wounds invariably retain or become re-infected with some level of bacteria that is detrimental to healing (Howell-Jones 2005). In addition to regenerative capacity, platelets release anti-microbial peptides effective against a broad range of pathogens including Methicillin Resistant Staphylococcus Aureus (“MRSA”) (Moojen 2007, Jia 2010, Tang 2002, Bielecki 2007).

### Clinical Efficacy

Multiple efficacy and effectiveness studies have been published in peer reviewed journals documenting the impact of using Aurix to treat chronic wounds. Key data include:

- In the published study of the clinical data collected during the CED program for diabetic foot ulcers, Aurix demonstrated a significant time to heal advantage compared to wounds treated with usual and customary care (including any available advanced therapy). A higher percentage of healing was observed across all wound severities (Wagner Grade 1-4) and in a patient population with significant comorbidities. (Gude W, Hagan D, Abood F, Clausen P: Aurix Gel is an Effective Intervention for Chronic Diabetic Foot Ulcers: A Pragmatic Randomized Controlled Trial. *Advances in Skin and Wound Care, 2019; 32(9): 416-426.)*
- In a double blinded randomized controlled trial, 81% of the most common-sized diabetic foot ulcers healed with Aurix compared with 42% of control wounds. Mean time to healing was six weeks. (Driver V, Hanft J, Fylling, C et al.: A Prospective, Randomized, Controlled Trial of Autologous Platelet-Rich Plasma Gel for the Treatment of Diabetic Foot Ulcers. *Ostomy Wound Management*, 2006; 52(6): 68-87.)
- In 285 chronic wounds in 200 patients, 96.5% of the wounds had a positive response within an average of 2.2 weeks with an average of 2.8 Aurix treatments (de Leon J, Driver VR, Fylling CP, Carter MJ, Anderson C, Wilson J, et al.: The Clinical Relevance of Treating Chronic Wounds with an Enhanced Near-physiological Concentration of Platelet-Rich Plasma (PRP) Gel. *Advances in Skin and Wound Care*, 2011; 24(8), 357-368.)
- In a retrospective, longitudinal study of 40 Wagner grade II through IV diabetic foot ulcers, most with critical limb ischemia, wounds increased in size in the approximate 100 days prior to the initiation of comprehensive wound care treatment. Upon treatment with debridement, revascularization, antibiotics and off-loading, the wounds continued to increase in size over a subsequent 75-day period. Once they were then treated with Aurix, the wounds immediately changed healing trajectory and 83% of the wounds healed with an average of 6.1 Aurix treatments per wound (Sakata, J., Sasaki, S., Handa, K., et al. A Retrospective, Longitudinal Study to Evaluate Healing Lower Extremity Wounds in Patients with Diabetes Mellitus and Ischemia Using Standard Protocols of Care and Platelet-Rich Plasma Gel in a Japanese Wound Care Program. *Ostomy Wound Management*, 2012; 58(4):36-49.)

### Results of Operations

### Comparison of Three Months Ended September 30, 2024 and 2023

The amounts presented in this comparison section are rounded to the nearest thousand.

#### Revenue and Gross Profit

Product revenues for the three months ended September 30, 2024 totaled approximately $371,000 in comparison to product revenues of approximately $232,000 in the three months ended September 30, 2023. Associated gross profit was approximately $270,000 in the three months ended September 30, 2024 in comparison to approximately $178,000 of gross profit in the three months ended September 30, 2023. The increase in revenues and gross profit was due to an expanding customer base over the past year as hospital wound care facilities and providers become incrementally aware of the Aurix product and the 2021 Medicare NCD. Gross profit for both the three months ended September 30, 2024 and 2023 were negatively impacted by provisions for inventory obsolescence of $30,000 and approximately $16,000, respectively.

#### Operating Expenses

Total operating expenses decreased approximately $120,000 to approximately $848,000 comparing the three months ended September 30, 2024 to the three months ended September 30, 2023. The decrease from the prior year was due primarily to a decrease in (i) provision for credit losses of $100,000, (ii) compensation and benefits expense of approximately $71,000 which was partially offset by an increase in (i) external consulting and professional fees of approximately $40,000 and (ii) sales infrastructure costs including distributor commissions of approximately $31,000.

#### Other Income (Expense)

Other expense, net for the three months ended September 30, 2024 and 2023 represents interest expense associated with the financing of insurance premiums in excess of interest income earned on excess available cash balances.

### Comparison of Nine Months Ended September 30, 2024 and 2023

The amounts presented in this comparison section are rounded to the nearest thousand.

#### Revenue and Gross Profit

Product revenues for the nine months ended September 30, 2024 totaled approximately $970,000 in comparison to product revenues of approximately $412,000 in the nine months ended September 30, 2023. Associated gross profit was approximately $754,000 in the nine months ended September 30, 2024 in comparison to approximately $327,000 of gross profit in the nine months ended September 30, 2023. In line with the three-month comparison above, the increase in revenues and gross profit was due to an expanding customer base as hospital wound care facilities and providers become incrementally aware of the Aurix product and the 2021 Medicare NCD. Gross profit for both the nine months ended September 30, 2024 and 2023 were negatively impacted by provisions for inventory obsolescence of $30,000 and approximately $16,000, respectively.

#### Operating Expenses

Total operating expenses decreased approximately $260,000 to approximately $2,582,000 comparing the nine months ended September 30, 2024 to the nine months ended September 30, 2023. The decrease from the prior year was due primarily to decreases in (i) compensation and benefits expense of approximately $261,000 (ii) provision for credit losses of approximately $83,000, and (iii) operating lease costs of approximately $26,000 which was partially offset by an increase in sales infrastructure costs including distributor commissions of approximately $124,000.

#### Other Income (Expense)

Other income, net for the nine months ended September 30, 2024 represents interest income on available cash balances in excess of interest expense associated with the financing of insurance premiums and by a nominal other income gain. Other expense, net for the nine months ending September 30, 2023 primarily represents the same interest expense type charges in excess of nominal interest income.

### Liquidity and Capital Resources

### Overview

As of September 30, 2024, we had cash, cash equivalents, and restricted cash of approximately $0.7 million, total current assets of approximately $1.3 million and total current liabilities of approximately $0.7 million. As an operational business, we have a history of losses and are not currently profitable. For the years ended December 31, 2023, and 2022, we incurred net losses of approximately $3.2 million in each year. As of September 30, 2024, our accumulated deficit was approximately $31.8 million and our stockholders’ equity was approximately $0.9 million.

During the nine months ended September 30, 2024, we sold 2,000,000 shares of common stock to certain accredited investors pursuant to Securities Purchase Agreements in two private placements which closed in May and September 2024 for total proceeds of $1,500,000. Additionally, during the nine months ended September 30, 2024, we received proceeds of $151,200 from the exercise of warrants by Pacific Med.

In 2023, we sold 2,442,500 shares of common stock to certain accredited investors pursuant to Securities Purchase Agreements in two private placements which closed in August and December 2023 for total proceeds of $1,997,500.

Our continuing losses and limited cash resources raise substantial doubt about our ability to continue as a going concern, and we need to raise substantial additional funds to continue to conduct our business. If we are unable to secure sufficient capital to fund our operating activities, we may be forced to delay further the completion of, or significantly reduce the scope of, our current business plan. It is uncertain whether we will be able to obtain such financing on satisfactory terms or at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We may not be able to obtain additional capital as required to finance our efforts, through equity or debt financing or any combination thereof, on satisfactory terms or at all. Additionally, any such financing, if at all obtained, may not be adequate to meet our capital needs and to support our operations.

We maintain our cash deposits primarily in financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”). We have not experienced any losses related to amounts in excess of FDIC limits.

### Cash Flows

Net cash provided by (used in) operating, investing, and financing activities for the periods presented were as follows:

|  | Nine months ended September 30, 2024 | Nine months ended September 30, 2023 |
| --- | ---: | ---: |
| Cash flows used in operating activities | $(1,741,083) | $(2,496,375) |
| Cash flows used in investing activities | $(154,962) | $(7,244) |
| Cash flow provided by financing activities | $1,651,200 | $1,035,000 |

#### Operating Activities

Cash used in operating activities for the nine months ended September 30, 2024 of approximately $1.7 million primarily reflects our net loss of approximately $1.8 million adjusted by (i) approximately $57,000 net change in operating assets and liabilities, (ii) approximately $95,000 total depreciation and amortization expense and stock-based compensation expense and (iii) provisions for inventory obsolescence and credit losses totaling $47,500.

Cash used in operating activities for the nine months ended September 30, 2023 of approximately $2.5 million primarily reflects our net loss of approximately $2.5 million adjusted by (i) approximately $0.2 million net change in operating assets and liabilities and (ii) approximately $97,000 total depreciation and amortization expense and stock-based compensation expense and (iii) a combined provision for credit losses and inventory obsolescence of approximately $116,000.

#### Investing Activities

Cash used in investing activities for the nine months ended September 30, 2024 of approximately $155,000 primarily represents our initial purchase of centrifuges since our restart of commercial operations in the amount of approximately $151,000. We had limited investing activities for the nine months ended September 30, 2023.

#### Financing Activities

Cash flows from financing activities for the nine months ended September 30, 2024 reflects proceeds of (i) $1,500,000 from the sale of 2,000,000 shares of common stock in two private placements that closed in May and September 2024 and (ii) $151,200 from the exercise of 270,000 warrants in June 2024.

Cash flows from financing activities for the nine months ended September 30, 2023 reflects $1,035,000 of proceeds raised from the sale of 517,500 shares of common stock in a private placement closed in August 2023.

### Inflation

The Company believes that the rates of inflation in recent years have not had a significant impact on its operations.

### Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

### Critical Accounting Policies

Our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report are prepared in conformity with U.S. GAAP, which require us to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and accompanying notes. We base these estimates on our experience and assumptions regarding future events we believe to be reasonable under the circumstances. Actual results could differ from those estimates and such differences may be material to the unaudited consolidated financial statements. We have described our most critical accounting policies in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our critical accounting policies or estimates since December 31, 2023.

## Controls and procedures

As filed, 4,737 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (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 include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management has carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2024. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective due to the un-remediated material weakness previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”) as described below under “Material Weaknesses” and “Remediation Plan.” In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

#### Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the preparation of the Annual Report and the consolidated financial statements and related disclosures therein, management identified the following material weaknesses.

Beginning in mid-2019, we ceased ongoing operational activities and terminated all our financial accounting and reporting resources as we worked to reach a favorable outcome to Medicare reimbursement coverage for the Aurix System. When we re-started commercial operations in 2022 and as disclosed since our Annual Report for the year ended December 31, 2021, the Company had not hired and did not maintain a sufficient complement of accounting and financial reporting resources. The lack of sufficient accounting and financial reporting resources also prevented the Company from maintaining appropriately designed, and monitoring the effectiveness of internal control over financial reporting.

#### Remediation Plan

Beginning in 2022, the Company engaged outside consultants to assist with various accounting and financial reporting matters and will continue assessing the need for hiring additional internal accounting and third-party financial reporting resources. As additional financial resources are obtained and we increase our operating activity, management, under the oversight of the Audit Committee of the Board of Directors, will continue to implement measures designed to improve our internal control over financial reporting to remediate the identified material weaknesses, namely, to identify and engage, through internal hiring and the use of external third parties, a sufficient complement of accounting and financial reporting resources and to periodically assess the design and operating effectiveness of our internal controls.

While we believe that these efforts will improve our internal control over financial reporting, the implementation of these measures is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. We cannot assure you that the measures we have taken to date, or that we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### PART II

### OTHER INFORMATION

## Risk factors

As filed, 160 characters.

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0001437749-24-034325. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.