UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended JuneSeptember 30, 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: 001-40492


Femasys Inc.


(Exact Name of Registrant as Specified in its Charter)
 
Delaware

11-3713499
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
 
 
3950 Johns Creek Court, Suite 100

 
Suwanee, GA  30024
(770) 500-3910
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)

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 ☐☑ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer ☑Smaller reporting company ☑
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 ☑

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

 Title of each class
Trading symbol
Name of each exchange on which
registered
 Common stock, $0.001 par value

FEMY

The Nasdaq Capital Market

The Registrant had 11,813,610 shares of common stock, $0.001 par value, outstanding as of AugustNovember 5,8, 2022.
 
TABLE OF CONENTS

  Page
  
Part I. Financial Information
Item 1
Financial Statements
4
 
Balance Sheets as of JuneSeptember 30, 2022 and December 31, 2021 (unaudited) 
4
 
Statements of Comprehensive Loss for the Three Months and SixNine Months Ended JuneSeptember 30, 2022 and 2021 (unaudited)
6
 
Statements of Stockholders’ Equity for the Three Months and SixNine Months Ended JuneSeptember 30, 2022 (unaudited)
7
 
Statements of Stockholders’ Equity (Deficit) for the Three Months and SixNine Months Ended JuneSeptember 30, 2021 (unaudited)
8
 
Statements of Cash Flows for the SixNine Months Ended JuneSeptember 30, 2022 and 2021 (unaudited)
9
 
Notes to Financial Statements (unaudited)
10
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
16
Item 3
Quantitative and Qualitative Disclosures About Market Risk
20
Item 4
Controls and Procedures
20
 
Part II. Other Information
Item 1
Legal Proceedings
2021
Item 1A
Risk Factors
2021
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
2021
Item 3
Defaults Upon Senior Securities
21
Item 4
Mine Safety Disclosures
21
Item 5
Other Information
21
Item 6
Exhibits
2122
SIGNATURES
2223

2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”“potential,” “hope” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements include, but are not limited to, statements concerning:

our ability to develop and advance our current product candidates and programs into, and successfully initiate and complete, clinical trials;
the ability of our clinical trials to demonstrate safety and effectiveness of our product candidates and other positive results;
estimates regarding the total addressable market for our product candidates;
our ability to enroll subjects in the clinical trials for our product candidates in order to advance the development thereof on a timely basis;
our ability to obtain additional financing to fund the clinical development of our products and fund operations;
competitive companies and technologies in our industry;
our ability to obtain U.S Food and Drug Administration (FDA) approval for our permanent birth control system, ability to gain FDA grant of a de novo classification request for our intrauterine insemination system, expand sales of our women-specific medical products and develop and commercialize additional products;
our ability to commercialize or obtain regulatory approvals, grants of de novo classification requests or 510(k) clearance for our product candidates, or the effect of delays in commercializing or obtaining regulatory authorizations;
our business model and strategic plans for our products, technologies and business, including our implementation thereof;
commercial success and market acceptance of our product candidates;
our ability to achieve and maintain adequate levels of coverage or reimbursement for our FemBloc system or any future products we may seek to commercialize;
our ability to manufacture our products and product candidates in compliance with applicable laws, regulations and requirements and to oversee third-party suppliers, service providers and vendors in the performance of any contracted activities in accordance with applicable laws, regulations and requirements;
the impact of the COVID-19 pandemic on our business, financial condition, results of operations, and prospects;
our ability to accurately forecast customer demand for our product candidates, and manage our inventory;
our ability to build, manage and maintain our direct sales and marketing organization, and to market and sell our permanent birth control system, artificial insemination system and women-specific medical products in markets in and outside of the United States (U.S.);
our ability to hire and retain our senior management and other highly qualified personnel;
FDA or other U.S. or foreign regulatory actions affecting us or the healthcare industry generally, including healthcare reform measures in the U.S. and international markets;
the timing or likelihood of regulatory filings and approvals or clearances;
our ability to establish and maintain intellectual property protection for our product candidates and our ability to avoid claims of infringement;
the volatility of the trading price of our common stock; and
our expectations about market trends.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under the sections in this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission as exhibits hereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. The forward-looking statements contained in this Quarterly Report on 10-Q are excluded from the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended.

3
Table of Contents

PART I. FINANCIAL INFORMATION

ITEM I. 
Financial Statements

FEMASYS INC.
Balance Sheets
(unaudited)

Assets 
June 30,
2022
  
December 31,
2021
  
September 30,
2022
  
December 31,
2021
 
Current assets:            
Cash and cash equivalents $19,116,419   24,783,029  $16,005,650   24,783,029 
Accounts receivable, net  113,960   84,258   183,130   84,258 
Inventory, net  244,181   208,270   343,136   208,270 
Other current assets  854,962   555,853   760,573   555,853 
Total current assets  20,329,522   25,631,410   17,292,489   25,631,410 
Property and equipment, at cost:                
Leasehold improvements  1,195,637   1,155,332   1,195,637   1,155,332 
Office equipment  99,344   99,344   99,344   99,344 
Furniture and fixtures  424,947   424,947   424,947   424,947 
Machinery and equipment  2,434,524   2,261,793   2,434,524   2,261,793 
Construction in progress  461,735   379,713   503,312   379,713 
  4,616,187   4,321,129   4,657,764   4,321,129 
Less accumulated depreciation  (2,985,367)  (2,722,117)  (3,115,551)  (2,722,117)
Net property and equipment  1,630,820   1,599,012   1,542,213   1,599,012 
Long-term assets:                
Lease right-of-use assets, net  486,926   665,747   402,063   665,747 
Intangible assets, net of accumulated amortization  10,601   25,093   5,759   25,093 
Other long-term assets  663,083   655,418   789,616   655,418 
Total long-term assets  1,160,610   1,346,258   1,197,438   1,346,258 

                
Total assets $23,120,952   28,576,680  $20,032,140   28,576,680 

(continued)

4
Table of Contents
FEMASYS INC.
Balance Sheets
(unaudited)

Liabilities and Stockholders’ Equity 
June 30,
2022
  
December 31,
2021
  
September 30,
2022
  
December 31,
2021
 
Current liabilities:            
Accounts payable $428,325   445,522  $419,110   445,522 
Accrued expenses  551,828   603,787   649,615   603,787 
Clinical holdback – current portion  36,238   18,947 
Note payable – current portion  417,841   181,123 
Clinical holdback - current portion  36,238   18,947 
Note payable
  280,577   181,123 
Lease liabilities – current portion  394,518   406,674   386,139   406,674 
Other – current  36,037   36,037 
Other
  36,037   36,037 
Total current liabilities  1,864,787   1,692,090   1,807,716   1,692,090 
Long-term liabilities:                
Clinical holdback – long-term portion  109,139   149,791 
Clinical holdback - long-term portion  101,804   149,791 
Lease liabilities – long-term portion  209,098   402,417   115,773   402,417 
Total long-term liabilities  318,237   552,208   217,577   552,208 
Total liabilities  2,183,024   2,244,298   2,025,293   2,244,298 
Commitments and contingencies            
Stockholders’ equity:                
Common stock, $0.001 par, 200,000,000 authorized, 11,930,833 shares issued and
11,813,610 outstanding as of June 30,2022; and 11,921,388 shares issued
11,804,165 outstanding as of December 31, 2021
  11,931   11,921 
Common stock, $0.001 par, 200,000,000 authorized, 11,930,833 shares issued and
11,813,610 outstanding as of September 30,2022; and 11,921,388 shares issued
11,804,165 outstanding as of December 31, 2021
  11,931   11,921 
Treasury stock, 117,223 shares
  (60,000)  (60,000)  (60,000)  (60,000)
Warrants  567,972   702,492   567,972   702,492 
Additional paid-in-capital  108,675,491   108,418,304   108,727,253   108,418,304 
Accumulated deficit  (88,257,466)  (82,740,335)  (91,240,309)  (82,740,335)
Total stockholders’ equity  20,937,928   26,332,382  18,006,847   26,332,382 
                
Total liabilities and stockholders’ equity $23,120,952   28,576,680  $20,032,140   28,576,680 
 
The accompanying notes are an integral part of these unaudited financial statements.

5
Table of Contents
FEMASYS INC.
Statements of Comprehensive Loss
(unaudited)

 Three Months Ended June 30,  Six Months Ended June 30,  Three Months Ended September 30,  Nine Months Ended September 30, 
 2022
  2021
  2022
  2021
  2022
  2021
  2022
  2021
 
Sales $303,113   326,006   624,518   655,781  $347,456   269,581   971,974   925,362 
Cost of sales  102,353   107,627   225,028   200,669   131,451   105,403   356,479   306,072 
Gross margin  200,760   218,379   399,490   455,112   216,005   164,178   615,495   619,290 
Operating expenses:                                
Research and development  1,472,924   894,868   2,893,987   1,889,890   1,648,160   1,140,577   4,542,147   3,030,467 
Sales and marketing  63,177   21,828   132,040   44,647   90,374   43,284   222,414   87,931 
General and administrative  1,181,938   1,051,399   2,629,293   1,943,386   1,395,063   1,087,363   4,024,356   3,030,749 
Depreciation and amortization  142,684   151,359   286,883   304,812   139,597   144,399   426,480   449,211 
Total operating expenses  2,860,723   2,119,454   5,942,203   4,182,735   3,273,194   2,415,623   9,215,397   6,598,358 
Loss from operations  (2,659,963)  (1,901,075)  (5,542,713)  (3,727,623)  (3,057,189)  (2,251,445)  (8,599,902)  (5,979,068)
Other income (expense):                                
Interest income, net  26,745   144   29,199   308   80,373   1,649   109,572   1,957 
Other income  0   821,515   0   821,515   —   —   —   821,515 
Interest expense  (883)  (3,643)  (3,617)  (7,491)  (6,005)  (7,055)  (9,622)  (14,546)
Other income, net  25,862   818,016   25,582   814,332 
Other expense
  (22)  (2,850)  (22)  (2,850)
Other income (expense), net  74,346   (8,256)  99,928   806,076 
                                
Net loss $(2,634,101)  (1,083,059)  (5,517,131)  (2,913,291) $(2,982,843)  (2,259,701)  (8,499,974)  (5,172,992)
                                
Net loss attributable to common stockholders, basic and diluted $(2,634,101)  (1,083,059)  (5,517,131)  (2,913,291) $(2,982,843)  (2,259,701)  (8,499,974)  (5,172,992)
                                
Net loss per share attributable to common stockholders, basic and diluted $(0.22)  (0.52)  (0.47)  (1.89) $(0.25)  (0.19)  (0.72)  (1.04)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted  11,812,988   2,076,516   11,808,601   1,538,780   11,813,610   11,799,720   11,810,289   4,996,680 

The accompanying notes are an integral part of these unaudited financial statements.

6
Table of Contents
FEMASYS INC.
Statements of Stockholders’ Equity
(unaudited)

                
  
  Total                 
  
  Total 
 Common stock  Treasury stock    Additional  Accumulated  stockholders’  Common stock  Treasury stock    Additional  Accumulated  stockholders’ 
 Shares
  Amount  Shares  Amount  Warrants  paid-in capital  deficit  Equity  Shares
  Amount  Shares  Amount  Warrants  paid-in capital  deficit  Equity 
THREE MONTHS ENDED JUNE 30, 2022                        
THREE MONTHS ENDED SEPTEMBER 30, 2022                        
                                                                
Balance at March 31, 2022  11,921,388  $11,921   117,223  $(60,000) $702,492  $108,462,663  $(85,623,365) $23,493,711 
Balance at June 30, 2022  11,930,833  $11,931   117,223  $(60,000) $567,972  $108,675,491  $(88,257,466) $20,937,928 
                                                                
Expiration of warrant                  (134,520)  134,520       0 
Issuance of common stock for cash upon exercise of options  9,445   10   0   0   0   16,141   0   16,151 
Share-based compensation expense  —   0   —   0   0   62,167   0   62,167   —   —   —   —   —   51,762   —   51,762 
Net loss  —   0   —   0   0   0   (2,634,101)  (2,634,101)  —   —   —   —   —   —   (2,982,843)  (2,982,843)
                                                                
Balance at June 30, 2022
  11,930,833  $11,931   117,223  $(60,000) $567,972  $108,675,491  $(88,257,466) $20,937,928 
Balance at September 30, 2022
  11,930,833  $11,931   117,223  $(60,000) $567,972  $108,727,253  $(91,240,309) $18,006,847 
                                                                
SIX MONTHS ENDED JUNE 30, 2022
                                
NINE MONTHS ENDED SEPTEMBER 30, 2022
                                
                                                                
Balance at December 31, 2021
  11,921,388  $11,921   117,223  $(60,000) $702,492  $108,418,304  $(82,740,335) $26,332,382   11,921,388  $11,921   117,223  $(60,000) $702,492  $108,418,304  $(82,740,335) $26,332,382 
                                                                
Expiration of warrant
                  (134,520)  134,520       0   —   —   —   —   (134,520)  134,520   —   — 
Issuance of common stock for cash upon exercise of options  9,445   10   0   0   0   16,141   0   16,151   9,445   10   —   —   —   16,141   —   16,151 
Share-based compensation expense  —   0   —   0   0   106,526   0   106,526   —   —   —   —   —   158,288   —   158,288 
Net loss  —   0   —   0   0   0   (5,517,131)  (5,517,131)  —   —   —   —   —   —   (8,499,974)  (8,499,974)
                                                                
Balance at June 30, 2022
  11,930,833  $11,931   117,223  $(60,000) $567,972  $108,675,491  $(88,257,466) $20,937,928 
Balance at September 30, 2022
  11,930,833  $11,931   117,223  $(60,000) $567,972  $108,727,253  $(91,240,309) $18,006,847 

The accompanying notes are an integral part of these unaudited financial statements.

7
Table of Contents
FEMASYS INC.
Statements of Stockholders’ Equity (Deficit)
(unaudited)
 
 
Series B and Series C
Redeemable Convertible
                    
     Total  
Series B and Series C
Redeemable Convertible
                    
     Total 
 Preferred stock  Common stock  Treasury stock  Preferred stock    Additional  Accumulated  stockholders’  Preferred stock  Common stock  Treasury stock  Preferred stock    Additional  Accumulated  stockholders’ 
 Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Warrants  paid-in capital  deficit  Equity (Deficit)
  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Warrants  paid-in capital  deficit  Equity (Deficit)
 
THREE MONTHS ENDED JUNE 30, 2021
                                    
THREE MONTHS ENDED SEPTEMBER 30, 2021
                                    

                                                                        
Balance at March 31, 2021
  55,835,833  $55,343,686   1,112,431  $1,112   117,223  $(60,000)  17,210,609  $17,211  $702,492  $22,808,487  $(77,032,722) $(53,563,420)
Balance at June 30, 2021
  —  $—   11,916,943  $11,916   117,223  $(60,000)  —  $—  $702,492  $108,341,078  $(78,115,781) $30,879,705
                                                                                                
Issuance of common stock for cash upon exercise of options  —   —   38,169   38   0   0   0   0   0   102,057   0   102,095 
Issuance of common stock in connection with IPO, net
  —   —   2,650,000   2,650   0   0   0   0   0   30,019,707   0   30,022,357 
Automatic conversion of preferred stock in connection with IPO
  (55,835,833)  (55,343,686)  8,116,343   8,116   0   0   (17,210,609)  (17,211)  0   55,352,781   0   55,343,686 
Share-based compensation expense  —   0
   —   0   —   0   —   0   0   58,046   0   58,046   —   —
   —   —   —   —   —   —   —   33,388   —   33,388 
Net loss  —   0   —   0   —   0   —   0   0   0   (1,083,059)  (1,083,059)  —   —   —   —   —   —   —   —   —   —   (2,259,701)  (2,259,701)
                                                                                                
Balance at June 30, 2021
  0  $0   11,916,943  $11,916   117,223  $(60,000)  0  $0  $702,492  $108,341,078  $(78,115,781) $30,879,705 
Balance at September 30, 2021
  —  $—   11,916,943  $11,916   117,223  $(60,000)  —  $—  $702,492  $108,374,466  $(80,375,482) $28,653,392 
                                                                                                
SIX MONTHS ENDED JUNE 30, 2021
                                                
NINE MONTHS ENDED SEPTEMBER 30, 2021
                                                
                                                                                                
Balance at December 31, 2020
  55,835,833  $55,343,686   1,110,347  $1,110   117,223  $(60,000)  17,210,609  $17,211  $702,492  $22,725,949  $(75,202,490) $(51,815,728)  55,835,833  $55,343,686   1,110,347  $1,110   117,223  $(60,000)  17,210,609  $17,211  $702,492  $22,725,949  $(75,202,490) $(51,815,728)
                                                                                                
Issuance of common stock for cash upon exercise of options  —   —   40,253   40   0   0   0   0   0   112,105   0   112,145   —   —   40,253   40   —   —   —   —   —   112,105   —   112,145 
Issuance of common stock in connection with IPO, net
  —   —   2,650,000   2,650   0   0   0   0   0   30,019,707   0   30,022,357   —   —   2,650,000   2,650   —   —   —   —   —   30,019,707   —   30,022,357 
Automatic conversion of preferred stock in connection with IPO
  (55,835,833)  (55,343,686)  8,116,343   8,116   0   0   (17,210,609)  (17,211)  0   55,352,781   0   55,343,686   (55,835,833)  (55,343,686)  8,116,343   8,116   —   —   (17,210,609)  (17,211)  —   55,352,781   —   55,343,686 
Share-based compensation expense  —   0
   —   0   —   0   —   0   0   130,536   0   130,536   —   —
   —   —   —   —   —   —   —   163,924   —   163,924 
Net loss  —   0   —   0   —   0   —   0   0   0   (2,913,291)  (2,913,291)  —   —   —   —   —   —   —   —   —   —   (5,172,992)  (5,172,992)
                                                                                                
Balance at June 30, 2021
  0  $0   11,916,943  $11,916   117,223  $(60,000)  0  $0  $702,492  $108,341,078  $(78,115,781) $30,879,705 
Balance at September 30, 2021
  —  $—   11,916,943  $11,916   117,223  $(60,000)  —  $—  $702,492  $108,374,466  $(80,375,482) $28,653,392 

The accompanying notes are an integral part of these unaudited financial statements.

8
Table of Contents
FEMASYS INC.
Statements of Cash Flows
(unaudited)

  Six Months Ended June 30, 
  2022
  2021
 
Cash flows from operating activities:      
Net loss 
$
(5,517,131
)
  
(2,913,291
)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation  
272,391
   
281,928
 
Amortization  
14,492
   
22,884
 
Amortization of right-of-use assets  
169,680
   
193,290
 
Share-based compensation expense  
106,526
   
130,536
 
Loan and accrued interest forgiveness on note payable  0   (821,515)
Inventory reserve  2,900   0 
Changes in operating assets and liabilities:        
Accounts receivable  
(29,702
)
  
(33,047
)
Inventory  
(38,811
)
  
(15,501
)
Other assets  
255,271
   
329,461
 
Accounts payable  
(74,957
)
  
165,789
 
Accrued expenses and other  
(76,959
)
  
(1,017,803
)
Lease liabilites  
(194,235
)
  
(210,045
)
Other liabilities  
(23,361
)
  
5,933
 
         
Net cash used in operating activities  
(5,133,896
)
  
(3,881,381
)
Cash flows from investing activities:        
Purchases of property and equipment  
(295,058
)
  
(12,512
)
         
Net cash used in investing activities
  
(295,058
)
  
(12,512
)
Cash flows from financing activities:        
Proceeds from issuance of common stock  16,151   31,725,645 
Payments of deferred offering costs  
(13,905
)
  
(1,243,960
)
Repayment of note payable  
(228,662
)
  
(40,980
)
Payments under lease obligations  
(11,240
)
  
(10,170
)
         
Net cash (used in) provided by in financing activities  
(237,656
)
  
30,430,535
 
         
Net change in cash and cash equivalents  
(5,666,610
)
  
26,536,642
 
Cash and cash equivalents:        
Beginning of period
  
24,783,029
   
3,322,226
 
         
End of period
 
$
19,116,419
   
29,858,868
 
         
Supplemental cash flow information        
Cash paid for:        
Interest 
$
3,617
   
4,130
 
Income taxes 
$
800
   
800
 
Non-cash financing activities:        
Prepaid insurance financed with promissory notes $417,841   470,556 
Deferred offering costs included in accounts payable and accrued expenses 
$
82,760
   
334,683
 
 Conversion of convertible preferred stock to common stock $
0   55,360,897 
  Nine Months Ended September 30, 
  2022
  2021
 
Cash flows from operating activities:      
Net loss 
$
(8,499,974
)
  
(5,172,992
)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation  
407,146
   
417,188
 
Amortization  
19,334
   
32,023
 
Amortization of right-of-use assets  
249,972
   
284,519
 
Share-based compensation expense  
158,288
   
163,924
 
Loan and accrued interest forgiveness on note payable  —   (821,515)
Inventory reserve  3,800   — 
Loss on disposal of fixed asset
  —   2,850 
Changes in operating assets and liabilities:        
Accounts receivable  
(98,872
)
  
(17,669
)
Inventory  
(138,666
)
  
(18,958
)
Other assets  
359,307
   
498,878
 
Accounts payable  
(49,449
)
  
(237,443
)
Accrued expenses  
45,828
   
(510,730
)
Lease liabilites  
(290,104
)
  
(312,893
)
Other liabilities  
(30,696
)
  
9,935
 
         
Net cash used in operating activities  
(7,864,086
)
  
(5,682,883
)
Cash flows from investing activities:        
Purchases of property and equipment  
(313,598
)
  
(188,245
)
         
Net cash used in investing activities
  
(313,598
)
  
(188,245
)
Cash flows from financing activities:        
Proceeds from issuance of common stock  16,151   31,725,645 
Payments of deferred offering costs  
(232,845
)
  
(1,578,643
)
Repayment of note payable  
(365,926
)
  
(302,343
)
Payments under lease obligations  
(17,075
)
  
(15,448
)
         
Net cash (used in) provided by in financing activities  
(599,695
)
  
29,829,211
 
         
Net change in cash and cash equivalents  
(8,777,379
)
  
23,958,083
 
Cash and cash equivalents:        
Beginning of period
  
24,783,029
   
3,322,226
 
         
End of period
 
$
16,005,650
   
27,280,309
 
         
Supplemental cash flow information        
Cash paid for:        
Interest $9,622   11,155 
Income taxes $5,050   800 
Non-cash investing and financing activities:        
Property and equipment costs included in accounts payable $23,037   — 
Prepaid insurance financed with promissory notes $280,577   320,866 
Conversion of convertible preferred stock to common stock $—   55,360,897 

The accompanying notes are an integral part of these unaudited financial statements.

9
Table of Contents
FEMASYS INC.
Notes to Financial Statements
(unaudited)
(1)Organization, Nature of Business, and Liquidity
 
Organization and Nature of Business
 
Femasys Inc. (the Company or Femasys) was incorporated in Delaware on February 19, 2004 and is headquartered in Suwanee, Georgia. The Company is a biomedical company focused on transforming women’s healthcare by developing novel solutions and next-generation advancements providing significant clinical impact to address severely underserved areas. Our mission is to provide women worldwide with superior minimally-invasive, non-surgical product technologies, accessible in the office, improving patient care and overall health economics. The Company currently operates as 1one segment and is primarily focused on servicing the reproductive health needs for those seeking permanent birth control or solutions for infertility issues.
 
Femasys has an expansive intellectual property portfolio which covers both design and utility patents in the U.S. and significant ex-U.S. markets for each product initiative. Femasys has taken concepts internally conceived and protected through development, including domestic and foreign regulatory approvals, and production, through in-house manufacturing. FemBloc® (FemBloc), the Company’s solution for permanent birth control, is based on the Company’s non-surgical platform technology and is presently completing a validation study under an approved Investigational Device Exemption (IDE) from the U.S. Food and Drug Administration (FDA). FemaSeed® (FemaSeed), a solution which enables directed intrauterine insemination to improve on traditional intrauterine insemination (IUI) and provides a lower cost option to in vitro fertilization methods, received approval in April 2021 from the FDA on its original IDE and the clinical study was initiated in July 2021. An updated study design received approval in October 2022 from the FDA. FemVue® (FemVue), a solution that enables fallopian tube assessment with ultrasound as an alternative to the radiologic approach (hysterosalpingogram) for the diagnosis of infertility, is approved for sale in the U.S., Europe, Japan, and Canada. FemChec® (FemChec), allows for fallopian tube evaluation after a FemBloc procedure to confirm occlusion (or procedure success) and is part of the FemBloc validation study. FemCerv® (FemCerv) is a solution for complete tissue sampling with minimal contamination of the endocervical canal as an alternative to the single biopsy method, and is approved for sale in the U.S. and Europe.U.S..    FemCath™ (FemCath), allows for selective evaluation of an individual fallopian tube as an alternative to the traditional intrauterine catheter that is undirected, is approved for sale in the U.S.

Basis of Presentation
 

The Company has prepared the accompanying financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been condensed or omitted pursuant to these rules and regulations. These financial statements should be read in conjunction with the Company’s audited financial statements and footnotes related thereto for the year ended December 31, 2021 included in our Annual Report on Form 10K filed with the SEC on March 24, 2022 (the Annual Report). Except as noted below, thereThere have been no material changes to the Company’s significant accounting policies described in Note 2 to the financial statements included in the Annual Report.

 

In the opinion of management, the unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position and the results of its operations and cash flows at the dates for periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year.

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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting periods. The most significant estimates used in these financial statements include the valuation of stock options, warrants, useful lives of property and equipment, intangible assets, and the pre-initial public offering (IPO) valuation of our common stock and preferred stock. Estimates for these and other items are subject to change and are reassessed by management in accordance with U.S. GAAP. Actual results could differ from those estimates.


Liquidity
 
As of JuneSeptember 30, 2022, the Company has cash and cash equivalents of $19,116,419.$16,005,650. The Company plans to finance its operations and development needs with its existing cash and cash equivalents, additional equity and/or debt financing arrangements, and revenue largely from the sale of FemVue to support the Company’s research and development activities, largely in connection with FemBloc and FemaSeed. There can be no assurance that the Company will be able to obtain additional financing on terms acceptable to the Company, on a timely basis, or at all. If the Company is not able to obtain sufficient funds on acceptable terms when needed, the Company’s business, results of operations, and financial condition could be materially adversely impacted.

For the sixnine months ended JuneSeptember 30, 2022, the Company generated a net loss of $5,517,131.$8,499,974. The Company expects such losses to increase over the next few years as the Company advances FemBloc and FemaSeed through clinical development until FDA approval is received and the products are available to be marketed.
 
The Company believes that its cash and cash equivalents as of JuneSeptember 30, 2022 will be sufficient to fund our ongoing operations at least 12 months from the date of filing these financial statements.

10
Table of Contents
FEMASYS INC.
Notes to Financial Statements
(unaudited)
Recently Issued Accounting Pronouncements – Recently Adopted
 
On January 1, 2021, the Company adopted Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which the Financial Accounting Standards Board (FASB) issued in December 2019. This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance was effective for annual periods after December 15, 2020, including interim periods within those annual periods. The Company’s adoption of this new guidance did not have a material impact on the Company’s financial statements and footnote disclosures (unaudited).

Recently Issued Accounting Pronouncements – Not Yet Adopted
 
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard changes the accounting for credit losses for financial assets and certain other instruments, including trade receivables and contract assets, that are not measured at fair value through net income. Under legacy standards, we recognize an impairment of receivables when it was probable that a loss had been incurred. Under the new standard, we are required to recognize estimated credit losses expected to occur over the estimated life or remaining contractual life of an asset (which includes losses that may be incurred in future periods) using a broader range of information including reasonable and supportable forecasts about future economic conditions. The guidance is effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years with early adoption permitted. We do not expect the adoption of the standard to have a significant impact on our results of operations, financial position, or cash flows as credit losses are not expected to be significant based on historical collection trends, the financial condition of payment partners, and external market factors.
 
No other new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company’s financial statements.
 
(2)Cash and Cash Equivalents
 
As of JuneSeptember 30, 2022 and December 31, 2021, money market funds included in cash and cash equivalents on the balance sheets were $18,733,783$15,750,933 and $24,388,443, respectively, which represent level 1 within the fair value hierarchy where there are quoted prices in active markets for identical assets.

(3)Inventories
 
Inventory stated at cost, net of reserve, consisted of the following:

 September 30, December 31, 
 
June 30,
2022
 
December 31,
2021
  2022
 2021
 
Materials $137,490 111,531  $196,508 111,531 
Work in progress 98,403 12,795  78,777 12,795 
Finished goods  8,288  83,944   67,851  83,944 
Inventory, net $244,181  208,270  $343,136  208,270 

The FemVue reserve for slow moving, obsolete, or unusable inventories was $1,2921,803 and $850 as of JuneSeptember 30, 2022 and December 31, 2021, respectively.
 
(4)Accrued Expenses
 
Accrued expenses consisted of the following:

 September 30, December 31, 
 
June 30,
2022
 
December 31,
2021
  2022
 2021
 
Clinical trial costs $315,027 301,730  $401,967 301,730 
Compensation costs 
132,888
 98,272  
143,470
 98,272 
Franchise taxes
 0 103,020  — 103,020 
Other  
103,913
  100,765   
104,178
  100,765 
Accrued expenses $551,828  603,787  $649,615  603,787 

11
Table of Contents
FEMASYS INC.
Notes to Financial Statements
(unaudited)
(5)Clinical Holdback
 
The following table shows the activity within the clinical holdback liability accounts for the sixnine months ended JuneSeptember 30, 2022:
 
Balance at December 31, 2021
 $168,738  $168,738 
Clinical holdback retained  
10,660
   
17,634
 
Clinical holdback paid  
(34,021
)
  
(48,330
)
Balance at June 30, 2022
 $145,377 
Balance at September 30, 2022
 $138,042 
Less: clinical holdback - current portion  
(36,238
)
  
(36,238
)
Clinical holdback - long-term portion 
$
109,139
  
$
101,804
 

(6)Revenue Recognition
 
Revenue is recognized upon shipment of our goods based upon contractually stated pricing at standard payment terms ranging from 30 to 60 days. All revenue is recognized point in time and no revenue is recognized over time. For the three and sixnine months ended JuneSeptember 30, 2022 and 2021, there was 0no revenue recognized from performance obligations satisfied or partially satisfied in prior periods, nor were there any unsatisfied performance obligations as of JuneSeptember 30, 2022 or 2021.
 
The majority of products sold directly to U.S customers are shipped via common carrier, and the customer pays for shipping and handling and assumes control Free on Board (FOB) shipping point. Products shipped to our international distributors are in accordance with their respective agreements; however, the shipping terms are generally EX-Works, reflecting that control is assumed by the distributor at the shipping point. Returns are only accepted with prior authorization from the Company. Items to be returned must be in original unopened cartons and are subject to a 30% restocking fee. Throughout the periods presented, the Company has not had a history of significant returns.
 
The following table summarizes our FemVue sales by geographic region as follows:

 Three Months Ended June 30, Six Months Ended June 30, 
 2022
  2021
  2022
  2021
  Three Months Ended September 30, Nine Months Ended September 30, 
Primary geographical markets             2022
  2021
  2022
  2021
 
U.S. $303,113 268,019 566,473 539,749  $289,642 211,536 856,115 751,285 
International  0  57,987  58,045  116,032   57,814  58,045  115,859  174,077 
Total $303,113  326,006  624,518  655,781  $347,456  269,581  971,974  925,362 

(7)Commitments and Contingencies

Legal Claims
 
Occasionally, the Company may be a party to legal claims or proceedings of which the outcomes are subject to significant uncertainty. In accordance with Accounting Standards Codification (ASC) 450, Contingencies, the Company will assess the likelihood of an adverse judgment for any outstanding claim as well as ranges of probable losses. When it has been determined that a loss is probable and the amount can be reasonably estimated, the Company will record a liability. For both periods presented, there were no material legal contingencies requiring accrual or disclosure.

The Company, as permitted under Delaware law and in accordance with its bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The Company entered into employment agreements with its officers, which provides for indemnification protection in the executive’s capacity as an officer for actions taken within the scope of employment. The maximum amount of potential future indemnification is unlimited; however, the Company has obtained director and officer insurance that limits its exposure. The Company believes the fair value for these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of JuneSeptember 30, 2022 and December 31, 2021.

(8)
Notes Payable

AFCO Credit Corporation (AFCO)
 
In June 2022, the Company executed a promissory note with AFCO to finance certain insurance premiums totaling $465,380, requiring the Company to pay $47,539 in a down payment and make monthly installment payments. The annual interest rate is 5.71% and the monthly installment is $47,539, which represents principal and interest.

As of JuneSeptember 30, 2022 and December 31, 2021, the principal balance on the AFCO notes was $417,841$280,577 and $181,123, respectively and is included in Notes payable – current portion in the accompanying balance sheets. Interest expense in connection with the AFCO promissory notes was $86$5,352 and $946$5,846 for the three months ended JuneSeptember 30, 2022 and 2021, respectively; and interest expense was $1,882$7,235 and $1,324$7,170 for the sixnine months ended JuneSeptember 30, 2022 and 20212021.

12
Table of Contents
FEMASYS INC.
Notes to Financial Statements
(unaudited)
(9)Redeemable Convertible Preferred Stock and Stockholders’ Equity
 
In June 2021, the Company issued 2,650,000 shares of common stock in connection with the Company’s IPO of its common stock at $13.00 per share. Net proceeds to the Company, after deducting underwriting discounts, commissions, and legal expenses, was $31,613,500. Offering costs incurred by the company were $2,016,143, which include legal expenses incurred and paid by our underwriters of $425,000. Immediately prior to the closing of the IPO, all our shares of our convertible Series A preferred stock and our redeemable convertible Series B and Series C preferred stock automatically converted into 8,116,343 shares of common stock.

The Company filed an eleventh amended and restated certificate of incorporation (the Amended and Restated Certificate) with the Secretary of State of the State of Delaware in connection with the completion of the IPO on June 22, 2021. The Amended and Restated Certificate amends and restates the Company’s existing certificate of incorporation in its entirety to, among other things: (i) authorize 200,000,000 shares of common stock; (ii) eliminate all references to the previously-existing series of preferred stock (Series A, B and C); and (iii) authorize 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Board in one or more series.
 
As of June 30,In July 2022, the Company had 11,813,610entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co. (“Piper Sandler” or the “Sales Agent”) and filed a related prospectus (the “Prospectus”) establishing an “at-the-market” facility, pursuant to which the Company may offer and sell shares of common stock outstanding, and 0having an aggregate offering price of up to $8,800,000 from time to time through the Sales Agent pursuant to the Prospectus. As of September 30, 2022, no shares had been sold under the Equity Distribution Agreement.

As of September 30, 2022, no dividends have been declared or paid.paid since inception.

(10)Equity Incentive Plans

Stock-Based Awards


(a)Stock Option Plans

In June 2021, in connection with the IPO, our 2021 Equity Incentive Plan (2021 Plan) became effective, which was adopted by our Board of Directors in February 2021 and our stockholders approved the 2021 Plan in March 2021. The 2021 Plan is administered by our compensation committee. Upon the effectiveness of the 2021 Plan, 0no new grants will be awarded under our 2015 Stock-Based Incentive Compensation Plan.

As of JuneSeptember 30, 2022, the total number of shares of common stock reserved for future awards under the 2021 Plan is 1,313,137.1,292,170.
 
Activity under the stock option plans was as follows:

       Weighted    
       average    
    Weighted  remaining    
    average  contracted  Aggregate 
 Number of  exercise  term in  intrinsic 
 
Number of
options
  
Weighted
average
exercise price
 
Weighted
average
remaining
contracted
term in
years
 
Aggregate
intrinsic
value
  options  price  years  value 
Outstanding at December 31, 2021  689,995  $3.58     $683,531   689,995  $3.58     $683,531 
Granted  270,170   6.71          270,170   6.71        
Expired  (3,334)  27.00          (3,334)  27.00        
Forfeited
  (834)  6.12          (834)  6.12        
Outstanding at March 31, 2022  955,997  $4.38   6.47  $125,279   955,997  $4.38   6.47  $125,279 
Granted
  51,000   1.50           51,000   1.50         
Exercised
  (9,445)  1.71           (9,445)  1.71         
Expired
  (278)  27.00           (278)  27.00         
Forfeited
  (46,668)  3.27           (46,668)  3.27         
Outstanding at June 30, 2022
  950,606  $4.30   6.55  $181,745   950,606  $4.30   6.55  $181,745 
Granted  34,300   1.68         
Forfeited  (13,333)  5.14         
Outstanding at September 30, 2022  971,573  $4.19   6.42  $
— 
                                
Vested and exercisable at June 30, 2022
  476,941  $3.71   5.08  $57,557 
Vested and exercisable at September 30, 2022
  481,385  $3.73   4.84  $— 

Options granted under our 2021 Plan for the sixnine months ended June September 30, 2022 to employees and nonemployees were 253,170287,470 and 68,000, respectively, and the weighted average exercise prices were $6.96$6.33 and $1.88, respectively. Included in awards granted to employees are 140,000 of performance basedperformance-based options that vest on achieving certain clinical related milestones. The weighted-average fair values of the options granted to employees and nonemployees were $2.34$2.23 and $1.55, respectively and were estimated using the following weighted-average assumptions:

 Employee  Nonemployee  Employee  Nonemployee 
Expected term (in years)  6.47   5.63   6.44   5.63 
Risk‑free interest rate  1.74%  2.67%  1.93%  2.67%
Dividend yield  0%  0%  —%  —%
Expected volatility  107.23%  109.67%  107.52%  109.67%
 
13
Table of Contents
FEMASYS INC.
Notes to Financial Statements
(unaudited)

The intrinsic value of options exercised during the sixnine months ended June September 30, 2022 was $3,306. The intrinsic value represents the dollar value of the exercised stock options whereby the fair market value of the underlying common stock exceeded the exercise price of the stock option as of the exercise date.


(b)Inducement Grant

On February 28, 2022, the Company awarded, outside the 2021 Plan, our Chief Financial Officer a stock option grant for the right to purchase 100,000 shares of common stock at an exercise price of $2.97 per share (inducement grant), which was approved by the Compensation Committee. The inducement grant will vest in equal installments over four years provided the employee remains employed by the Company on the vesting date. The fair value of the inducement grant was $2.46 and was estimated using the following assumptions:

  Inducement 
Expected term (in years)  6.25 
Risk‑free interest rate  1.76%
Dividend yield  0—%
Expected volatility  106.76%

As of June September 30, 2022, 100,000 shares are outstanding, and 0nenone are exercisable.


(c)Share-Based Compensation Expense

The following table shows the share-based compensation expense related to vested stock option grants to employees and nonemployees by financial statement line item on the accompanying statement of comprehensive loss:
 
 Three Months Ended June 30,
 Six Months Ended June 30,  Three Months Ended September 30,
 Nine Months Ended September 30, 
 
2022
  
2021
 2022
 2021
  
2022
  
2021
 2022
 2021
 
Research and development $33,436   29,205 62,575 64,702  $10,820   21,889 73,395 86,591 
Sales and marketing  1,216   936 2,342 1,861   1,515   952 3,857 2,813 
General and administrative  27,515   27,905  41,609  63,973   39,427   10,547  81,036  74,520 
Total share-based compensation expense $62,167   58,046  106,526  130,536  $51,762   33,388  158,288  163,924 

As June September 30, 2022, the remaining share-based compensation expense that is expected to be recognized in future periods for employees and nonemployees is $1,123,502,$1,079,749, which includes $463,311 of compensation expense to be recognized upon achieving certain performance conditions. For service basedservice-based awards, the $660,191$616,438 of unrecognized expense is expected to be recognized over a weighted average period of 3.0 years.
 

(d)Employee Stock Purchase Plan
 
In June 2021, in connection with the IPO, our Employee Stock Purchase Plan (ESPP) became effective which was adopted by our Board of Directors in February 2021 and our stockholders approved the 2021 ESPP Plan in March 2021. The ESPP is administered by our compensation committee.
 
As of June September 30, 2022, the total number of shares of common stock reserved for future awards under the ESPP Plan is 284,707, and 0no shares of our common stock have been purchased under the ESPP.

(11)Net Loss per Share Attributable to Common Stockholders
 
The following table sets forth the computation of the basic and diluted net loss per share:

 Three Months Ended June 30,  Six Months Ended June 30,  Three Months Ended September 30,  Nine Months Ended September 30, 
 2022
  2021
  2022
  2021
  2022
  2021
  2022
  2021
 

                        
Net loss attributable to common stockholders, basic & diluted
 $(2,634,101)  (1,083,059)  (5,517,131)  (2,913,291) $(2,982,843)  (2,259,701)  (8,499,974)  (5,172,992)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted  11,812,988
   2,076,516   11,808,601   1,538,780 
                
Weighted average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted  11,813,610
   11,799,720   11,810,289   4,996,680 
Net loss per share attributable to common stockholders, basic and diluted $(0.22)  (0.52)  (0.47)  (1.89) $(0.25)  (0.19)  (0.72)  (1.04)

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FEMASYS INC.
Notes to Financial Statements
(unaudited)
The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding because they would be anti-dilutive:
 
  Three Months Ended June 30,  Six Months Ended June 30, 

 2022
  2021
  2022
  2021
 
Options to purchase common stock  1,050,606   699,636   1,050,606   699,636 
Warrants to purchase to common stock  233,460   244,572   233,460   244,572 
Total potential shares  1,284,066   944,208   1,284,066   944,208 



(12)Subsequent Events



On July 1, 2022, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co. (“Piper Sandler” or the “Sales Agent”) establishing an “at-the-market” facility, pursuant to which the Company may offer and sell shares of common stock having an aggregate offering price of up to $8,800,000 from time to time through the Sales Agent.



As of August 10, 2022, 0 shares had been sold under the Equity Distribution Agreement.
  Three Months Ended September 30,  Nine Months Ended September 30, 

 2022
  2021
  2022
  2021
 
Options to purchase common stock  1,071,573   696,163   1,071,573   696,163 
Warrants to purchase to common stock  233,460   244,572   233,460   244,572 
Total potential shares  1,305,033   940,735   1,305,033   940,735 

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, or the SEC, on March 24, 2022. This Quarterly Report on Form 10-Q 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, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential”“potential,” “hope” and similar expressions intended to identify forward-looking statements and reflect our beliefs and opinions on the relevant subject. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

Overview
 
We are a biomedical company focused on transforming women’s healthcare by developing novel solutions and next-generation advancements providing significant clinical impact to address severely underserved areas. Our mission is to provide women worldwide with superior minimally-invasive, non-surgical product technologies, accessible in the office, improving patient care and overall health economics. We are a woman-founded and led company with an expansive, internally created intellectual property portfolio with over 150 patents globally, in-house chemistry, manufacturing, and controls (CMC) and device manufacturing capabilities and proven ability to develop and commercialize products. Our suite of products and product candidates address what we believe are multi-billion dollar global market segments in which there has been little advancement for many years, helping women avoid pharmaceutical solutions, implants and surgery that can be expensive and expose women to harm. With an initial focus in the area of reproductive health, our two lead product candidates offer solutions for two ends of the spectrum: FemBloc for permanent birth control and FemaSeed as an artificial insemination infertility treatment.
 
Clinical Update
On October 20, 2022, we announced an updated study design for our FemaSeed pivotal trial, which will now focus on couples experiencing male factor infertility. This update reflects a revised strategy to address this underserved population experiencing infertility with a goal of facilitating accelerated enrollment. The FemaSeed LOCAL de novo clinical trial is a prospective multi-center, unblinded study (NCT04968847) requiring evaluation of up to 214 women undergoing 214 FemaSeed cycles due to male factor infertility. The primary endpoints of the study are to determine the effectiveness (pregnancy rate) and safety over a period of seven weeks post-FemaSeed procedure. Study enrollment is expected to be completed in 2023. FemaSeed features intrauterine directional delivery that deposits sperm locally and directly to the fallopian tube where conception occurs. As the first and only approach, presenting significant advantages over existing artificial insemination solutions, it is intended to become a first-line treatment for infertility.
About Male Factor Infertility
Of all infertility cases, approximately 40–50% is reportedly due to male factor infertility, which represents a dramatic increase in prevalence over the past 40 years. Sperm counts worldwide have declined by over 50% between 1973 and 2011, with an increasing proportion of men having sperm counts below the threshold to be deemed sub-fertile or infertile. Assisted forms of reproductive treatment such as in-vitro fertilization (“IVF”) or intracytoplasmic sperm injection (“ICSI”) are both effective first-line treatments but are associated with significant costs (approximately $30,000), are often not covered by health insurance and may pose clinical risks.
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Results of Operations
 
Comparison of the Three Months Ended JuneSeptember 30, 2022 and 2021
 
The following table shows our results of operations for the three months ended JuneSeptember 30, 2022 and 2021:

  Three Months Ended September 30,       
  2022  2021  Change  % Change 
Sales $347,456   269,581   77,875   28.9%
Cost of sales  131,451   105,403   26,048   24.7%
Gross margin  216,005   164,178   51,827   31.6%
Operating expenses:                
Research and development  1,648,160   1,140,577   507,583   44.5%
Sales and marketing  90,374   43,284   47,090   108.8%
General and administrative  1,395,063   1,087,363   307,700   28.3%
Depreciation and amortization  139,597   144,399   (4,802)  -3.3%
Total operating expenses  3,273,194   2,415,623   857,571   35.5%
Loss from operations  (3,057,189)  (2,251,445)  (805,744)  35.8%
Other income (expense):                
Interest income  80,373   1,649   78,724   4774.0%
Interest expense  (6,005)  (7,055)  1,050   -14.9%
Other expense  (22)  (2,850)  2,828   -99.2%
Other income (expense), net  74,346   (8,256)  82,602   -1000.5%
Net loss $(2,982,843)  (2,259,701)  (723,142)  32.0%
  Three Months Ended June 30,       
  2022  2021  Change  % Change 
Sales $303,113   326,006   (22,893)  -7.0%
Cost of sales  102,353   107,627   (5,274)  -4.9%
Gross margin  200,760   218,379   (17,619)  -8.1%
Operating expenses:                
Research and development  1,472,924   894,868   578,056   64.6%
Sales and marketing  63,177   21,828   41,349   189.4%
General and administrative  1,181,938   1,051,399   130,539   12.4%
Depreciation and amortization  142,684   151,359   (8,675)  -5.7%
Total operating expenses  2,860,723   2,119,454   741,269   35.0%
Loss from operations  (2,659,963)  (1,901,075)  (758,888)  39.9%
Other income (expense):                
Interest income  26,745   144   26,601   18472.9%
Other income  —   821,515   (821,515)  -100.0%
Interest expense  (883)  (3,643)  2,760   -75.8%
Other income, net  25,862   818,016   (792,154)  -96.8%
Net loss $(2,634,101)  (1,083,059)  (1,551,042)  143.2%

Sales
 
Sales decreasedincreased by $22,893,$77,875, or 7.0%28.9%, to $303,113$347,456 for the three months ended JuneSeptember 30, 2022 from $326,006compared to $269,581 for the three months ended JuneSeptember 30, 2021.2021 due to strong U.S. sales of FemVue. U.S. sales increased by $35,094,$78,106, or 13.1%36.9%, for the three months ended JuneSeptember 30, 2022 as compared to the same period last year; however, there were no international salesyear, and U.S. units of FemVue sold increased by 38.9% for the three months ended JuneSeptember 30, 2022 as compared to $57,987 reported for the same period last year resulting in a net decrease of $22,893 in sales.  U.S. units sold increased by 12.6% for the three months ended June 30, 2022 as compared to the same period last year. International sales largely remained the same and were $57,814 and $58,045 for the three months ended September 30, 2022 and 2021, respectively.
 
Cost of sales and gross margin percentage
 
Cost of sales decreasedincreased by $5,274,$26,048, or 4.9%24.7%, to $102,353$131,451 for the three months ended JuneSeptember 30, 2022 from $107,627compared to $105,403 for the three months ended JuneSeptember 30, 2021. The decrease in cost of sales2021 which was largely due to our sales mix as ourincrease in U.S. sales have a higher gross margin as compared to our internationalFemVue sales. Gross margin percentage was 66.2%62.2% for the three months ended JuneSeptember 30, 2022 as compared to 67.0%60.9% for the three months ended JuneSeptember 30, 2021. We expect to see improvement2021, representing a 1.3% change in our gross margin due to certain improvements we have started implementing in the future as we are investing in equipment and tooling which will enable usorder to reduce labor in certainimprove our manufacturing processes and reduce material costs as well.processes.
 
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Research and development

The following table summarizes our R&D expenses incurred during the periods presented:
 
 Three Months Ended June 30,  Three Months Ended September 30, 
 2022  2021  2022    2021*
Compensation and related personnel costs $790,292   648,148  $771,979   643,007 
Clinical-related costs  377,058   143,385   628,046   279,285 
Material and development costs  175,527   87,272   145,692   148,435 
Professional and outside consultant costs  116,692   —   87,012   57,595 
Other costs  13,355   16,063   15,431   12,255 
Total research and development expenses $1,472,924   894,868  $1,648,160   1,140,577 
 
* Prior period amounts have been reclassified to confirm with current year presentation.

R&D expenses increased by $578,056,$507,583, or 64.6%44.5%, to $1,472,924$1,648,160 for the three months ended JuneSeptember 30, 2022 from $894,868compared to $1,140,577 for the three months ended JuneSeptember 30, 2021. The net increase of $578,056 largely$507,583 consists of an increase of $142,144$128,972 in compensation and related personnel costs primarily due to an increase in headcount, an increase of $233,673$348,761 in clinical-related costs, anand a net increase of $88,255$29,850 in material and development costs, and an increase of $116,692 in professional and outside consultantall other costs, all to mainly support our clinical trials.
 
Sales and marketing
 
Sales and marketing expenses increased by $41,349,$47,090, or 189.4%108.8%, to $63,177$90,374 for the three months ended JuneSeptember 30, 2022 from $21,828compared to $43,284 for the three months ended JuneSeptember 30, 20212021. This increase was largely due to an increase in compensation and related personnel costs due to an increase in headcount and additional marketing costs.headcount.
 
General and administrative
 
General and administrative expenses increased by $130,539,$307,700, or 12.4%28.3%, to $1,181,938$1,395,063 for the three months ended JuneSeptember 30, 2022 from $1,051,399compared to $1,087,363 for the three months ended JuneSeptember 30, 2021. The net increase was largely due to an increase in salaries and related personnel costs, due to an increase in headcount, an increase in facility and other allocated overhead costs, mainly for additional directors & officers insurance and offset by a decreasean increase in professional costs for legal and accounting.
 
Depreciation and amortization
 
Depreciation and amortization expenses decreased by $8,675,$4,802, or 5.7%3.3%, to $142,684$139,597 for the three months ended JuneSeptember 30, 2022 from $151,359compared to $144,399 for the three months ended JuneSeptember 30, 2021 mainly due to reduction of depreciation expense associated with the Company’s fixed assets and amortization expense associated with the Company’s intangible assets.
 
Other income (expense)
 
Other income, net decreasedincreased by $792,154,$82,602, or 96.8%1,000.5%, to $25,862$74,346 for the three months ended JuneSeptember 30, 2022 from $818,016compared to $(8,256) for the three months ended JuneSeptember 30, 2021 mainly due to the Small Business Administration approvalinterest income earned on our money market accounts.
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Table of our Paychex Protection Program loan forgiveness in June 2021.Contents
Results of Operations
 
Comparison of the SixNine Months Ended JuneSeptember 30, 2022 and 2021
 
The following table shows our results of operations for the sixnine months ended JuneSeptember 30, 2022 and 2021:
  Six Months Ended June 30,  
  
 
  2022  2021  Change  % Change 
Sales $624,518   655,781   (31,263)  -4.8%
Cost of sales  225,028   200,669   24,359   12.1%
Gross margin  399,490   455,112   (55,622)  -12.2%
Operating expenses:                
Research and development  2,893,987   1,889,890   1,004,097   53.1%
Sales and marketing  132,040   44,647   87,393   195.7%
General and administrative  2,629,293   1,943,386   685,907   35.3%
Depreciation and amortization  286,883   304,812   (17,929)  -5.9%
Total operating expenses  5,942,203   4,182,735   1,759,468   42.1%
Loss from operations  (5,542,713)  (3,727,623)  (1,815,090)  48.7%
Other income (expense):                
Interest income  29,199   308   28,891   9380.2%
Other income  —   821,515   (821,515)  -100.0%
Interest expense  (3,617)  (7,491)  3,874   -51.7%
Other income, net  25,582   814,332   (788,750)  -96.9%
Net loss $(5,517,131)  (2,913,291)  (2,603,840)  89.4%
  Nine Months Ended September 30,       
  2022  2021  Change  % Change 
Sales $971,974   925,362   46,612   5.0%
Cost of sales  356,479   306,072   50,407   16.5%
Gross margin  615,495   619,290   (3,795)  -0.6%
Operating expenses:                
Research and development  4,542,147   3,030,467   1,511,680   49.9%
Sales and marketing  222,414   87,931   134,483   152.9%
General and administrative  4,024,356   3,030,749   993,607   32.8%
Depreciation and amortization  426,480   449,211   (22,731)  -5.1%
Total operating expenses  9,215,397   6,598,358   2,617,039   39.7%
Loss from operations  (8,599,902)  (5,979,068)  (2,620,834)  43.8%
Other income (expense):                
Interest income  109,572   1,957   107,615   5499.0%
Other income  —   821,515   (821,515)  -100.0%
Interest expense  (9,622)  (14,546)  4,924   -33.9%
Other expense  (22)  (2,850)  2,828   -99.2%
Other income, net  99,928   806,076   (706,148)  -87.6%
Net loss $(8,499,974)  (5,172,992)  (3,326,982)  64.3%

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Sales
 
Sales decreasedincreased by $31,263,$46,612, or 4.8%5.0%, to $624,518$971,974 for the sixnine months ended JuneSeptember 30, 2022 from $655,781compared to $925,362 for the sixnine months ended JuneSeptember 30, 2021. The $31,263$46,612 net decreaseincrease was largely attributable to the increase in U.S. FemVue sales of $26,724$104,830 for the sixnine months ended JuneSeptember 30, 2022 as compared to the same period last year, which wereyear. This amount was offset by the decrease of $57,987$58,218 in international sales for the sixnine months ended JuneSeptember 30, 2022 as compared to the same period last year.  U.S. units of FemVue sold increased by 4.1%13.8% for the sixnine months ended JuneSeptember 30, 2022 as compared to the same period last year. International sales decreased by 33.4% and were $58,045$115,859 and $116,032$174,077 for both the sixnine months ended JuneSeptember 30, 2022 and 2021, respectively.
 
Cost of sales and gross margin percentage
 
Cost of sales increased by $24,359,$50,407, or 12.1%16.5%, to $225,028$356,479 for the sixnine months ended JuneSeptember 30, 2022 from $200,669compared to $306,072 for the sixnine months ended JuneSeptember 30, 2021. The increase in cost of sales was mainly due to net increase in sales and increased production personnel labor and overhead costs applied to our cost of sales for the sixnine months ended JuneSeptember 30, 2022 as compared to the same period last year. Gross margin percentage was 64.0%63.3% for the sixnine months ended JuneSeptember 30, 2022 as compared to 69.4%66.9% for the sixnine months ended JuneSeptember 30, 2021. We expect to see improvement in our gross margin in the future as we are investing in equipment and tooling which will enable us to reduce labor in certain manufacturing processes and reduce material costs as well.
 
Research and development

The following table summarizes our R&D expenses incurred during the periods presented:
 
 Six Months Ended June 30,  Nine Months Ended September 30, 
 2022  2021  2022    2021*
Compensation and related personnel costs $1,555,084   1,324,694  $2,327,063 1,967,702 
Clinical-related costs  821,028   316,859  1,449,074 596,143 
Material and development costs  306,977   201,390  452,669 349,825 
Professional and outside consultant costs  185,356   6,826  272,368 88,479 
Other costs  25,542   40,121   40,973  28,318 
Total research and development expenses $2,893,987   1,889,890  $4,542,147  3,030,467 

* Prior period amounts have been reclassified to confirm with current year presentation.

R&D expenses increased by $1,004,097,$1,511,680, or 53.1%49.9%, to $2,893,987$4,542,147 for the sixnine months ended JuneSeptember 30, 2022 from $1,889,890compared to $3,030,467 for the sixnine months ended JuneSeptember 30, 2021. The net increase of $1,004,097$1,511,680 largely consists of an increase of $230,390$359,361 in compensation and related personnel costs primarily due to an increase in headcount, an increase of $504,169$852,931 in clinical-related costs, an increase of $105,587$102,844 in material and development costs and an increase of $178,530$183,889 in professional and outside consultant costs, all to mainly to support our clinical trials.
 
Sales and marketing
 
Sales and marketing expenses increased by $87,393,$134,483, or 195.7%152.9%, to $132,040$222,414 for the sixnine months ended JuneSeptember 30, 2022 from $44,647compared to $87,931 for the sixnine months ended JuneSeptember 30, 20212021. This increase was largely due to an increase in compensation and related personnel costs due to an increase in headcount and additional marketing costs mainly associated with our FemVue social media campaign earlier this year.
 
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General and administrative
 
General and administrative expenses increased by $685,907,$993,607, or 35.3%32.8%, to $2,629,293$4,024,356 for the sixnine months ended JuneSeptember 30, 2022 from $1,943,386compared to $3,030,749 for the sixnine months ended JuneSeptember 30, 2021. The increase was largely due to various additional costs associated with being a public company including an increase in salaries and related personnel costs due to an increase in headcount and an increase in facility and other allocated overhead costs mainly for additional directors &and officers insurance.
 
Depreciation and amortization
 
Depreciation and amortization expenses decreased by $17,929,$22,731, or 5.9%5.1%, to $286,883$426,480 for the sixnine months ended JuneSeptember 30, 2022 from $304,812compared to $449,211 for the sixnine months ended JuneSeptember 30, 2021 due to reduction of depreciation expense associated with the Company’s fixed assets and amortization expense associated with the Company’s intangible assets.
 
Other income (expense)
 
Other income, net decreased by $788,750,$706,148, or 96.9%87.6%, to $25,582$99,928 for the sixnine months ended JuneSeptember 30, 2022 from $814,332compared to $806,076 for the sixnine months ended JuneSeptember 30, 2021 mainly due to the Small Business Administration approval of our Paychex Protection Program loan forgiveness in JuneSeptember 2021.
 
Liquidity and Capital Resources
 
Sources of liquidity
 
Since our inception through JuneSeptember 30, 2022, our operations have been financed primarily by net proceeds from the sale of our common stock and convertible preferred stock, indebtedness and, to a lesser extent, product revenue. As of JuneSeptember 30, 2022, we had $19,116,419$16,005,650 of cash and cash equivalents and an accumulated deficit of $88,257,466.$91,240,309.
 
On June 22, 2021, we closed on our IPO in which we issued and sold 2,650,000 shares of our authorized common stock. Net proceeds received, after deducting underwriting discounts, commissions, and legal expenses, were $31,613,500.
 
On July 1, 2022, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co. (“Piper Sandler” or the “Sales Agent”) and filed a related Prospectus establishing an “at-the-market” facility, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $8,800,000 from time to time through the Sales Agent.Agent pursuant to the Prospectus. As of August 10,September 30, 2022, no shares had been sold under the Equity Distribution Agreement.

Funding requirements
 
Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations at least 12 months from the date of filing these financial statements. Our estimate as to how long we expect the net proceeds from this offering, together with our existing cash and cash equivalents, to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

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Our cash and cash equivalents as of JuneSeptember 30, 2022 will not be sufficient to fund all of our product candidates through regulatory approval, and we anticipate needing to raise additional capital to complete the development and commercialization of our product candidates.  However, we can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds will be available to us, that such additional financing will be sufficient to meet our needs or be on terms acceptable to us. This risk may increase if economic and market conditions deteriorate. If we are unable to obtain additional financing when needed, we may need to terminate, significantly modify, or delay the development of our product candidates, or we may need to obtain funds through collaborations or otherwise on terms that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently. If we are unable to raise adequate additional capital as and when required in the future, we could be forced to cease development activities and terminate our operations, and you could experience a complete loss of your investment
investment.

Cash Flows
 
Comparison of the SixNine Months Ended JuneSeptember 30, 2022 and 2021
The following table summarizes our cash flows for the sixnine months ended JuneSeptember 30, 2022 and 2021:
 
 Six Months Ended June 30,  Nine Months Ended September 30, 
 2022  2021  2022  2021 
Net cash used in operating activities $(5,133,896)  (3,881,381) $(7,864,086)  (5,682,883)
Net cash used in investing activities  (295,058)  (12,512)  (313,598)  (188,245)
Net cash (used in) provided by financing activities  (237,656)  30,430,535   (599,695)  29,829,211 
Net change in cash and cash equivalents $(5,666,610)  26,536,642  $(8,777,379)  23,958,083 

Operating activities
 
For the sixnine months ended JuneSeptember 30, 2022, cash used in operating activities was $5,133,896,$7,864,086, attributable to a net loss of $5,517,131,$8,499,974, a net change in our net operating assets and liabilities of $182,754$202,652 and offset partially by non-cash charges of $565,989.$838,540. Non-cash charges largely consisted of $286,883$426,480 in depreciation and amortization, $169,680$249,972 in right-of-use amortization, and $106,526$158,288 in stock-based compensation. The change in our net operating assets and liabilities was primarily due to an increase in accounts receivables of $98,872, an increase in inventory of $138,666 and a decrease of $151,916 in accounts payable and accrued expenses, a decrease of $194,235$290,104 in lease liabilities, which were offset partially offset by a decrease in other assets of $255,271.$359,307.
 
For the sixnine months ending JuneSeptember 30, 2021, cash used in operating activities was $3,881,381,$5,682,883, attributable to a net loss of $2,913,291,$5,172,992, a net change in our net operating assets and liabilities of $775,213,$588,880, and non-cash charges of $192,877.$78,989. Net non-cash charges largely consisted of $821,515 in PPP loan forgiveness offset by $130,536$163,924 in stock-based compensation, $304,812$449,211 in depreciation and amortization, and $193,290$284,519 in right-of-use amortization. The change in our net operating assets and liabilities was primarily due to a net decrease in accounts payable and accrued expenses of $852,014,$748,173, a decrease of $210,045$312,893 in lease liabilities, and offset by a decrease in other assets of $329,461.$498,878.
 
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Investing activities
 
For the sixnine months ended JuneSeptember 30, 2022, cash used in investing activities for the purchase of property and equipment was $295,058.$313,598 largely for machinery and equipment.
 
For the sixnine months ended JuneSeptember 30, 2021, cash used in investing activities for the purchase of property and equipment was $12,512.$188,245.
 
Financing activities
 
For the sixnine months ended JuneSeptember 30, 2022, cash used in financing activities was $237,656,$599,695, attributable to repayments on notes payable of $228,662,$365,926, payments under lease obligations of $11,240,$17,075, a deferred offering cost paymentpayments of $13,905,$232,845, and offset by proceeds from the exercise of a stock option of $16,151.
 
For the sixnine months ended JuneSeptember 30, 2021, cash provided by financing activities was $30,430,535,$29,829,211, attributable to net proceeds from our IPO of $30,369,540,$30,034,857, exercise of stock options totaling $112,145, and offset by repayments on notes payable of $40,980$302,343 and payments under lease obligations of $10,170.$15,448.
 
Government Regulation
 
De Novo Classification
 
Medical device types that the FDA has not previously classified as Class I, II or III are automatically classified into Class III regardless of the level of risk they pose. The Food and Drug Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the de novo classification procedure. This procedure allows a manufacturer whose novel device is automatically classified into Class III to request de novo classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, and that general controls alone, or general and special controls, provide reasonable assurance of safety and effectiveness for the intended use and that the probable benefits of the device outweigh the probable risks.
 
FDA has issued several guidance documents addressing the de novo classification process and the contents of de novo classification requests and, on October 5, 2021, the FDA published a final rule to establish regulations for the de novo classification process. The regulation defines the requirements for the de novo classification process, including requirements related to the format and content of de novo requests, as well as processes and criteria for accepting, granting, declining and withdrawing de novo requests.
 
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Under the Food and Drug Administration Safety and Innovation Act (FDASIA) and the final rule, the FDA is required to issue an order classifying the device within 120 days following receipt of the de novo request or receipt of additional information that results in the de novo request being accepted, but in practice the time for FDA review of de novo classification requests has historically been significantly longer. Under the Food and Drug Administration Reauthorization Act (FDARA), Congress implemented user fees for de novo classification requests and FDA committed to performance goals for their review.
 
If the manufacturer seeks de novo classification into Class II, the manufacturer must include, among other information, a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. In addition, the FDA may decline the de novo classification request if it identifies a legally marketed predicate device or otherwise determines the device has already been classified, or determines that general controls or general and special controls are insufficient to provide reasonable assurance of safety and effectiveness of the device, among other reasons for declining a de novo request listed in the final rule. Devices that are classified into class I or class II in response to a de novo classification request may be marketed and used as predicates for future premarket notification 510(k) submissions.
 
Item 3.Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our management has concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of JuneSeptember  30, 2022 due to the material weakness as disclosed in our Annual Report on Form 10-K, under Part II, Item 9A. Controls and Procedures, filed with the SEC on March 24, 2022.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three and sixnine months ended JuneSeptember 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer (Principal Financial and Accounting Officer), does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within a company are detected. The inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

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PART II OTHER INFORMATION


Item 1.Legal Proceedings

From time to time we may be involved in legal proceedings arising in connection with our business. Based on information currently available, we believe that the amount, or range, of reasonably possible losses in connection with any pending actions against us in excess of established reserves, in the aggregate, is not material to our consolidated financial condition or cash flows. However, losses may be material to our operating results for any particular future period, depending on the level of income for such period.

Item 1A.Risk Factors

You should carefully review and consider the information regarding certain risks and uncertainties facing us that could have a material adverse effect on our business prospects, financial condition, results of operations, liquidity and available capital resources set forth in Part I, Item 1A. Risk Factors, of the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2022.

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

None.

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Item 3.Defaults Upon Senior Securities

Not applicable.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

Not applicable.

Item 6.Exhibits

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   Incorporated by Reference
Exhibit   File  
Number
 Description of DocumentSchedule/FormNumberExhibitFiling Date

      
31.1*
 Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    
       
31.2*
 Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    
       
32.1*
 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    
       
32.2*
 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    
       
101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)    
       
101.SCH Inline XBRL Taxonomy Extension Schema Document    
       
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document    
       
101.DEF Inline XBRL Taxonomy Definition Linkbase Document    
       
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document    
       
101.PRE Inline XBRl Taxonomy Extension Presentation Linkbase Document    
       
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)    


*Filed herewith

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SIGNATURES
SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Suwanee, State of Georgia, on this 10th day of AugustNovember 2022.

FEMASYS INC.

Dated: AugustNovember 10, 2022
By: /s/ Kathy Lee-Sepsick
 
 
Kathy Lee-Sepsick
 
 
Chief Executive Officer and President
 
   
 
By: /s/ Dov Elefant
 
 
Dov Elefant
 
 
Chief Financial Officer
 
 
(Principal financial and accounting officer)
 

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