Annual report pursuant to Section 13 and 15(d)

Note 1 - Background and Organization and Going Concern

v3.19.1
Note 1 - Background and Organization and Going Concern
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]
1.
Background, Organization and Going Concern
 
Soliton, Inc. (the “Company”) was organized under the laws of the State of Delaware on
March 27, 2012.
The Company is a pre-revenue stage medical device company with a novel and proprietary platform technology licensed from The University of Texas M.D. Anderson Cancer Center ("MD Anderson"). The Company is based in Houston, Texas. Upon completion of the development of its products and regulatory clearances to market such products, the Company anticipates revenue will be driven by the sale of its rapid acoustic pulse (“RAP”) console to dermatologists, plastic surgeons and other physician offices, as well as medi-spas under the supervision of a doctor.
 
Initial Public Offering
 
On
February 19, 2019,
the Company consummated its initial public offering (“IPO”). In the IPO, the Company sold a total of
2,172,591
shares of common stock at a purchase price of
$5.00
per share for gross proceeds of
$10,862,955
and net proceeds of approximately
$9,700,000.
In connection with the closing of the IPO, the Company's convertible notes (and related accrued interest) of
$11,784,987
were converted into
6,825,391
shares of the Company's common stock, accrued dividends of
$4,773,480
were converted into
954,696
shares of the Company's common stock, and preferred stock, both Series A and Series B, were converted into
2,534,766
shares of the Company's common stock. In addition,
127,500
shares of unvested restricted grants were immediately vested upon the completion of the IPO. Total shares of common stock outstanding at the closing of the IPO amounted to
14,613,000.
Upon the closing of the IPO, certain notes were to be automatically converted according to their terms into the Company’s common stock to the extent and provided that certain holders of these notes are
not
permitted to convert such notes to the extent that the holders or any of its affiliates would beneficially own in excess of
4.99%
of the Company’s common stock after such conversion. Due to this
4.99%
limitation, principal representing
$47,781
of these notes remained outstanding and will be converted into
273,034
shares of our common stock at such time when the conversion will
not
result in the holders and any of its affiliates to own more than
4.99%
of our outstanding common shares. The maturity date of these notes is automatically extended until such date the notes are fully converted and these notes cease to accrue interest and are
not
repayable in cash.
 
Going Concern
 
The Company is an early stage and emerging growth company and has
not
generated any revenues to date. As such, the Company is subject to all of the risks associated with early stage and emerging growth companies. Since inception, the Company has incurred losses and negative cash flows from operating activities. The Company does
not
expect to generate positive cash flows from operating activities in the near future.
 
For the years ended
December 31, 2018
and
2017,
the Company incurred net losses of
$10,594,936
 and
$8,760,624,
respectively, and had net cash flows used in operating activities of
$4,599,677
 and
$6,095,548,
respectively. At
December 31, 2018,
the Company had an accumulated deficit of
$42,131,275,
negative working capital of
$20,940,654
 and cash of
$133,435.
The Company does
not
expect to experience positive cash flows from operating activities in the near future, if at all. The Company anticipates incurring operating losses for the next several years as it completes the development of its products and seeks requested regulatory clearances to market such products. These factors raise substantial doubt about the Company's ability to continue as a going concern within
one
year after the date the financial statements are issued. The accompanying financial statements have been prepared on a going concern basis and do
not
include any adjustments that might be necessary if the Company is unable to continue as a going concern. 
 
The Company’s cash on hand of
$5,885,411
as of
March 22, 2019
is sufficient to fund its operations into but
not
beyond
February 
2020.
The Company also believes it will need to raise additional capital in order to continue to execute its business plan, including obtaining regulatory clearance for its products currently under development and commercializing and generating revenues from products under development. There is
no
assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company. A failure to raise sufficient capital will adversely impact the Company’s ability to meet its financial obligations as they become due and payable and to achieve its intended business objectives. If the Company is unable to raise sufficient additional funds, it will have to scale back its operations.