10-Q: RetinalGenix Technologies Reports Q3 2024 Results Amidst Going Concern Uncertainty

RetinalGenix Technologies reports a net loss of $3.45 million for the nine months ended September 30, 2024, and expresses substantial doubt about its ability to continue as a going concern.

Summary

• RetinalGenix Technologies Inc. reported its financial results for the third quarter of 2024, showing a net loss of $644,291 for the three months ended September 30, 2024, and a net loss of $3,453,800 for the nine months ended September 30, 2024.
• The company has not generated any revenue since its inception and is focused on developing technologies to diagnose and treat ophthalmic disorders.
• Operating expenses for the nine months ended September 30, 2024, totaled $3,450,920, which included $941,821 in general and administrative expenses, $269,000 in research and development expenses, and $2,240,099 in stock-based compensation.
• The company's accumulated deficit reached approximately $14,563,000 as of September 30, 2024, and it had minimal cash of $79,089.
• RetinalGenix is dependent on related parties for financing and has expressed substantial doubt about its ability to continue as a going concern without raising additional capital.
• The company is actively pursuing additional funding and a potential up-listing to the NASDAQ exchange.
• The company issued 75,000 shares of common stock to settle $150,000 of accounts payable and also issued shares through the exercise of stock options.
• The company anticipates needing $12.2 million to complete product development and obtain regulatory approvals.

Sentiment

Score: 3

Explanation: The document expresses significant concerns about the company's financial health and ability to continue as a going concern. The lack of revenue, high losses, and material weakness in internal controls contribute to a negative sentiment.

Positives

• The company is actively pursuing additional funding and a potential up-listing to the NASDAQ exchange.
• The company is making progress in its planning to conduct pharmaceutical clinical studies for their medications.
• The company has engaged with Pearl IRB to conduct a study to personalize medical evaluations for patients receiving treatment for wet macular degeneration.
• The company has acquired DNA/GPS Inc., combining genetic mapping with retinal imaging capabilities.

Negatives

• The company has not generated any revenue since its inception.
• The company has incurred significant net losses and has an accumulated deficit of approximately $14.56 million.
• The company has minimal cash and is dependent on related parties for financing.
• The company has expressed substantial doubt about its ability to continue as a going concern.
• The company has a material weakness in its internal control over financial reporting due to a lack of segregation of duties.
• The company's operating expenses have increased significantly, particularly stock-based compensation.
• The company needs to raise $12.2 million to complete product development and obtain regulatory approvals.

Risks

• The company's ability to continue as a going concern is uncertain due to its financial condition and dependence on external funding.
• The company may not be able to raise additional capital when needed or on favorable terms.
• The company's failure to raise capital could force it to delay, limit, reduce, or terminate product development.
• The company's internal control over financial reporting is ineffective due to a material weakness.
• The company has not generated any revenue and may not achieve profitability.
• The company is subject to risks inherent in the establishment of a new business enterprise.
• The company's products may not be cleared for sale or successfully commercialized.

Future Outlook

The company anticipates needing $12.2 million in operating capital to complete product development and obtain regulatory approvals. The company expects to finance its cash needs through public or private equity offerings, debt financings, strategic partnerships, collaborations and licensing arrangements or other capital sources.

Management Comments

• Management has concluded that our disclosure controls and procedures were ineffective as of September 30, 2024.
• Management is actively engaged in the planning for, and implementation of, remediation efforts to address our material weakness and improve our internal control over financial reporting and disclosure controls and procedures.

Industry Context

The company operates in the ophthalmic research and development sector, focusing on technologies to diagnose and treat eye disorders. The company's focus on diabetic retinopathy and maculopathy aligns with the growing need for solutions in these areas. The company's approach of combining retinal imaging with genetic mapping is a novel approach in the industry.

Comparison to Industry Standards

• RetinalGenix is a pre-revenue company, which is common for early-stage biotech and medical device companies.
• The company's high operating expenses, particularly stock-based compensation, are typical for companies in the development phase.
• The company's reliance on related-party funding is not uncommon for early-stage companies, but it does highlight a potential risk.
• The company's need for $12.2 million in additional funding is significant and highlights the capital-intensive nature of the medical device industry.
• The company's material weakness in internal controls is a concern and needs to be addressed to meet industry standards for public companies.
• Compared to companies like Ocular Therapeutix (OCUL) or REGENXBIO (RGNX), which are also developing treatments for eye diseases, RetinalGenix is at a much earlier stage of development and has not yet generated revenue.

Related Party Transactions

• Sanovas has paid a significant portion of the Company's operating expenses through September 2024, and was owed approximately $509,000 as of September 30, 2024 by the Company.
• The Company issued 316,695 shares of its common stock to offset amounts due to Sanovas for payment of expenses on behalf of the Company of $950,086 during the nine months ended September 30, 2023.
• The Company also issued 75,000 shares of its common stock to offset $150,000 due to a vendor in the quarter ended March 31, 2024 to settle an account payable.
• From time to time, an officer of the Company, a shareholder of the Company and affiliates of Sanovas advanced funds or paid expenses on behalf of the Company. At September 30, 2024 and December 31, 2023, the Company had received an aggregate of $477,126 and $457,534 pursuant to such advances, respectively.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and going concern uncertainty.
• Employees may be impacted by potential delays or reductions in operations due to funding constraints.
• Customers may experience delays in the availability of the company's products.
• Suppliers and creditors face increased risk of non-payment due to the company's financial difficulties.

Next Steps

• The company needs to raise additional capital to fund its operations and product development.
• The company needs to complete product design and testing for RetinalGenixTM and RetinalCamTM.
• The company needs to submit RetinalGenixTM for FDA clearance.
• The company needs to complete the development and expansion of the software tools around the DNA/GPS genetic mapping technology.
• The company needs to build the infrastructure for its sustained growth.
• The company needs to remediate the material weakness in its internal control over financial reporting.

Key Dates

Keywords

RetinalGenix, Ophthalmic, Financial Results, Going Concern, Net Loss, Stock-based Compensation, Research and Development, Capital Raise, FDA Approval, Internal Control, RetinalCam, DNA/GPS, Macular Degeneration