soly-20201231

We make forward-looking statements under “Risk Factors," “Business," “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Form 10-K. In some cases, you can identify these statements by forward-looking words such as “may," “might," “should," “would," “could," “expect," “plan,” “anticipate," “intend," “believe," “estimate," “predict," “potential” or “continue” and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks and uncertainties described under “Risk Factors.”

You should not rely upon forward-looking statements as predictions of future events. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, you should not rely on any of the forward-looking statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

We are a medical device company with a novel and proprietary platform technology licensed from MD Anderson. Our Rapid Acoustic Pulse (“RAP”) device uses rapid pulses of designed acoustic shockwaves to disrupt cellular structures in the dermal and subdermal tissue. The uniqueness of our designed shockwave allows us to target the differential in stiffness between cellular structures and generate a shearing effect that we believe represents a platform technology potentially useful in tattoo removal, cellulite treatment, fibrotic scar treatment and other indications. We believe the high repetition rate, rapid rise and fall of the wave, and significant peak pressure delivered in a non-focused manner make our shockwave significantly different from other available shockwave technologies. Importantly, our technology allows the disruption of targeted structures within the skin with only minimal discomfort and without additional treatment-related downtime for tattoo removal or any downtime for cellulite treatment.

We received clearance for our RAP device for tattoo removal from the U.S. Food and Drug Administration ("FDA") in May 2019 allowing our device to be used as an accessory to a 1064 nm Q-switched laser for tattoo removal on patients with skin tones on the Fitzpatrick scale between I and III. When used in conjunction with existing lasers for tattoo removal, our technology allows a doctor to treat a patient multiple times in a single office visit and significantly reduces the number of office visits required to remove a tattoo, allowing a dramatic acceleration of the tattoo removal process. In January 2021, we received additional clearance from the FDA for temporary improvement in the appearance of cellulite. Used on a stand-alone basis, our technology generates, on average, an approximate 30% reduction in the cellulite severity score ("CSS") for subjects in a single treatment without breaking the skin. RAP cellulite treatments do not involve significant pain, do not require anesthesia and do not result in any significant treatment-related side effects or patient downtime.

We plan to launch our RAP device for tattoo removal and cellulite reduction in the first half of 2021 initiating shipments into approximately 25 select cosmetic dermatology and plastic surgery offices. We expect to generate revenue from both the initial sale of the device and from the recurring sales of disposable cartridges that are required by the device to deliver the various therapies. We refer to this as our "razor and blade" recurring revenue model. Cartridges are designed to be specific to the intended indication (for example, tattoo cartridges are different from cellulite cartridges) and each treatment session requires one or more cartridges. We expect that one tattoo cartridge will facilitate up to four standard laser treatment passes in a single office visit for the average-sized tattoo (about the size of a deck of playing cards). Therefore, a patient with an average-sized tattoo that requires three office visits will require the use of three cartridges. One cellulite cartridge will treat one leg and buttocks area in a single session for an average patient. As such, cellulite patients will require two cartridges for their initial treatment of both legs and buttocks. We anticipate that patients may benefit from a second maintenance treatment using a single cartridge across the full treatment area, but have not yet demonstrated this in clinical trials.

We also have ongoing clinical programs in several indications, which, if successful, will allow us to expand commercialization of our products into additional markets. As a stand-alone device, we believe RAP has the potential to reduce the effects of fibrosis and stimulate beneficial fibroblast behavior. This capability enables the targeting of fibrotic (keloid and hypertrophic) scars, as well as smoothing and tightening skin. Importantly, we are planning to initiate additional proof-of-concept clinical trials of our RAP device in the treatment of keloid and hypertrophic scars as well as the improvement of skin laxity in 2021. We also intend to pursue regulatory approval in international markets and we are currently developing a regulatory strategy for these additional markets. We recently announced results from a study in mice demonstrating the ability of RAP to significantly reduce liver fibrosis, further validating the scientific basis for RAP’s mechanism of action and potentially widening the range of indications for which RAP may be suitable.

Our RAP device is also in clinical development for treating certain fibrotic conditions. We have completed a proof-of-concept study for the treatment of keloid and hypertophic scars and early data suggests that our technology may be able to impact the overactive fibroblasts that generate these scars. This supports our belief that our technology can potentially have an impact on a much broader set of fibrotic conditions. Scientific publications suggest that fibroblasts become overactive when they are located in a stiffened environment and that disrupting the stiff environment may lead to fibroblast apoptosis, ultimately resulting in a resolution of the fibrosis. On this basis, we believe that our technology could have efficacy in a number of fibrotic diseases, including within the extracellular matrix, such as radiation induced fibrosis and capsular contracture, and in other systems of the body such as peripheral artery disease and even liver fibrosis. To date, we have initiated a proof-of-concept study for the treatment of keloid and hypertophic scars and we have completed some pre-clinical animal work in liver fibrosis. Further, we have entered into a collaborative agreement with the United States Navy to further study the impact of the RAP device on the treatment of keloid and hypertrophic scars. We plan to initiate this study in the first half of 2021.

This is a significant addressable market, but we believe currently available effective treatment options are limited. A 2015 review of a variety of studies into the effectiveness of different non-surgical techniques for treating cellulite indicated that either the procedures did not work or the research methodology was flawed. Most of these non-surgical techniques offer only a temporary reduction in the appearance of cellulite. The American Academy of Dermatology ("AAD") reviewed a number of surgical techniques that may be successful in reducing the appearance of cellulite by cutting the bands of connective tissue under the skin's surface. However, these techniques are often painful and expensive. Our technology has demonstrated the ability to sever the septae, much like these surgical procedures, without breaking the skin. Our technology is currently cleared by the FDA for short-term improvement in the appearance of cellulite. We intend to use data from a 52-week follow-up with patients in our pivotal study to support a 510(k) filing with the FDA seeking clearance of our device for long-term improvement in the appearance of cellulite. There is no assurance that we will receive such clearance.

The current standard of care for tattoo removal is to use a Q-switched (pulsed) laser to ablate the tattoo ink particles into pieces small enough for the body’s natural processes to remove them. Unfortunately, this current method is highly inefficient, requiring, on average, 10 or more office visits to achieve acceptable results with 6-8 weeks of healing time required between office visits. Our clinical trial has demonstrated that using our RAP device in conjunction with a Q-switched laser has the potential to achieve removal of an average-sized tattoo in just 2 to 3 office visits by allowing for multiple laser passes in a single office visit (the "Soliton Method"). We believe this Soliton Method can not only dramatically accelerate tattoo removal, but also has the potential to lower removal cost for patients, while increasing profitability to practitioners, and to reduce the potential for unwanted scarring and ghosting (a lingering silhouette image of the tattoo).

We plan to work with these practices throughout 2021 building advocacy and strong adoption that we believe will allow us to propel our national rollout in 2022. We have hired a Vice President of Sales, who will begin identifying the first hires for our U.S. sales team in 2021. Additionally, we have developed a robust training and marketing support strategy for the initial practices and will be actively supporting these doctors throughout the initial launch. We are diligently working with our sole manufacturer, Sanmina Corporation, to execute the build of the Generation 2.2 devices that will be used in our initial commercial market launch. We will submit a special 510(k) to the FDA outlining the changes made in our Generation 2.2 device, which must be cleared prior to our launch. We expect to file this document in March 2021 and expect the review of this filing to be within the 30 day FDA stated timeline for review. However, COVID-19 related workload within the FDA could extend this timeline.

The RAP device uses electrohydraulics to generate the designed acoustic shockwaves at a rate of up to 100 per second to effectively disrupt fibrous septa or disperse ink particles and superficial and dermal vacuoles. The RAP device for commercial launch is composed of three parts: a console, a hand piece and a disposable cartridge. The console houses a pulse power system used to provide high voltage power to a pair of electrodes housed within the cartridge. Additionally, the console contains a fluid management system that circulates saline through the cartridge. The cartridge is automatically loaded into and ejected from the hand piece for easy replacement and forms the basis for our planned “razor and blade” recurring revenue model.

Our RAP device generates high-energy designed acoustic shockwaves when electricity is applied to the electrodes immersed in the circulating saline contained in the cartridge enclosure. An electrical arc with a very short duration of 100 to 200 nanoseconds is formed within the saline between the electrodes. When this arc is formed, a small amount of water is vaporized between the electrodes creating a nearly instantaneous expansion and collapse of a plasma bubble. This creates a shockwave that propagates outward through the saline, most of which is reflected off a curved surface surrounding the electrodes designed to form a shockwave front that passes through the cartridge’s acoustically transparent window. This window is placed against the patient’s skin above the area to be treated allowing the high pressure acoustic energy to target depths from 1 to 10 mm, which corresponds with the typical depth of tattoo pigment or fibrotic septa, respectively. These shockwaves are generated at a rate of up to 100 times per second.

The high repetition rate of Soliton shockwaves is a key component of our patent-pending technology. Specifically, a single shockwave from our RAP device is delivering .25 to 12 MPa (Megapascals) of acoustic pressure. Although this is a significant level of pressure, a single shockwave will pass through a typical skin cell with relatively little disruption. This is because the general elasticity of the cell is capable of deforming slightly to absorb that single impact and then returning to its original shape. The rate at which the cell returns to its normal shape is referred to as its “relaxation rate,” and this rate is well understood in the field of biomechanics. By increasing the repetition rate of Soliton shockwaves above approximately 25 times per second, we begin to exceed the relaxation rate of skin cells, which triggers their natural “viscoelastic” property and causes them to stiffen. In that stiffened state, the cells are quite vulnerable and shear waves created by the interaction of subsequent shockwaves are now enough to rupture the cell membranes and disperse the particles or disrupt fibrotic tissue. Producing shockwaves at a repetition rate above the skin's relaxation rate forms a key element of our intellectual property.

The shockwaves generated by our RAP device are designed and proprietary, comprised of high acoustic energy delivered with a very short rise time (less than 5 nanoseconds). Very high electrical energy (approximately 3000 volts at 2500 amps, or 7.5 megawatts) is discharged in the treatment head with nanosecond precision to minimize unwanted acoustic frequencies (which helps minimize pain and collateral tissue damage and extend electrode life). A proprietary custom-shaped reflector designed through finite element computer simulation technology directs the bulk of the acoustic energy to the patient’s skin in uniform waves that are nearly planar (perpendicular) to the surface of the skin but slightly diverging in order to deliver maximum acoustic pressure to the depth of a typical tattoo or fibrotic septa, but then rapidly dissipate beyond that distance. The pressure mapping diagram in Figure 4 for our tattoo removal cartridge provides an example of how our reflector design controls energy density at varying treatment depths. The brighter yellow colors indicate maximum pressure at tattoo ink depth (top layer) and the darker red colors indicate lower pressures deeper in the skin (lower levels). Our cellulite cartridge mapping would indicate peak pressure occurring deeper into the skin where the septa are located.

Given the high level of energy (up to 7.5 megawatts) involved with each electrical discharge and the high repetition rate (up to 100 times per second), the tungsten electrodes in the treatment head have a limited life, hence the need for a replaceable cartridge. The cartridge (Figure 5) is capable of delivering as many as 120,000 shockwaves before replacement, which we believe is enough to treat one side of the body for cellulite or an average sized tattoo throughout one office visit. This length of service life is only possible through the use of a proprietary drive mechanism for feeding electrode material into the electrical arc without changing the focal point established by the cartridge’s reflector, as well as proprietary circuitry and software control mechanisms that remove the unwanted acoustic and arc discharge elements that would otherwise be present in uncontrolled electrohydraulic shockwaves. These proprietary design features also contribute significantly to patient comfort and the avoidance of unintended collateral tissue damage.

Cellulite is a condition that primarily affects women, usually occurring in the buttock and thigh area, where the skin has a dimpled or lumpy appearance. Between 80 and 90 percent of women will probably experience cellulite sometime in their lives. There is a very large global market for cellulite treatment. In the U.S. alone, women spend roughly one billion dollars a year on cellulite therapy, with approximately 80-90% of U.S. women reporting concerns about cellulite. Based on third-party market research, the global market for cellulite treatment was estimated to be approximately $2.4 billion in 2018 and is expected to grow to approximately $4 billion by 2025. There are numerous treatments available, but the effect is mostly temporary. A 2015 review of a variety of studies into the effectiveness of different techniques indicated that either the procedures did not work, or the research methodology was flawed. The AAD reviewed a number of surgical techniques that may be successful in reducing the appearance of cellulite by breaking up the bands of connective tissue under the skin's surface. As a non-invasive technique, if a version of our device is capable of reducing the appearance of cellulite with results that approach those of the surgical techniques, we believe this could become an important new indication for our technology.

We believe it may be possible to improve the appearance of cellulite and skin laxity by both severing sclerotic septa and strengthening the ECM. Existing methods for treating cellulite include physically cutting septa through invasive methods, however, we believe it may be possible to do this non-invasively with high-energy acoustic pulses. In addition, existing independent research suggests that weakened ECM can be strengthened by inducing the fibroblasts in the skin to produce more collagen. One approach to inducing collagen production is to apply an external force to pre-stress fibroblasts by applying external pulsed acoustic shockwaves at high repetition rates. Given the viscoelastic nature of fibroblasts, we believe external acoustic waves applied at repetition rates faster than the relaxation rate of the fibroblasts will cause the cells to stiffen and become “pre-stressed.” In this pre-stressed state, fibroblasts become more susceptible to external forces and if the external forces are great enough, we believe the fibroblast will then produce collagen.

Our RAP device produces designed acoustic shockwaves at pulse rates between 50 and 100 Hz. We believe our device at this high pulse rate may be capable of “pre-stressing” fibroblasts so that they are sensitized to the external forces from the acoustic shockwaves. As an initial proof-of-concept we have demonstrated in a pig model that a version of our device is capable of consistently forming new collagen within the ECM of the dermis. As seen in Figure 6, the histological image on the right demonstrates the stimulation of new collagen growth in pig skin after a single 2-minute application of our device (i.e., increase in blue staining) in comparison to the histological image on the left from non-treated skin.

The RAP device is being commercialized to be used in conjunction with the 1064 nm Q-switched laser to enable effective multiple pass laser treatments in a single office session to accelerate removal of tattoos on the arms, legs and torso in Fitzpatrick Skin Type I-III individuals. Our animal testing suggests that the RAP device is as effective on other tattoo ink colors using alternate wavelength lasers and analytical modeling supports the expectation that RAP should also work well with Pico-switched lasers. Use of the device on other colors and with a Pico-switched laser would be considered an off-label use until further FDA clearance is achieved. The RAP device uses repeated, rapidly rising acoustic waves to both disrupt pigment laden cells and provide dermal clearing of both superficial and dermal vacuoles generated during the laser process. The clearing of these vacuoles allows for multiple laser treatments within one office visit and animal testing data suggests that remaining agglomerations of ink particles will be dispersed providing greater access for subsequent laser passes.

"Complete” (defined as 75% or greater fading of tattoo ink) laser tattoo removal usually involves numerous treatment sessions typically spaced at least six to eight weeks apart. Treating more quickly than six weeks increases the risk of adverse effects and does not necessarily increase the rate of tattoo fading. At each session, some, but not all, of the tattoo pigment particles are fragmented, and the body removes the smallest fragments over the course of several weeks. The result is that the tattoo is lightened over time. As tattoos fade, clinicians may recommend that patients wait many months between treatments to facilitate fragmented ink particle absorption and minimize unwanted side effects.

We believe the amount of time or the number of treatments required to “completely” remove a tattoo is a critical hurdle to tattoo owner adoption of the current laser tattoo removal procedure. The Wall Street Journal reported a research study conducted at a laser surgery center in Milan, Italy, from 1995 through 2010. There were 352 people in the study, of which 201 were men, with a median age of 30 years old. Overall, the study found about 47% of people had their tattoos successfully removed after 10 laser treatments and it took 15 treatments to remove tattoos from 75% of patients. The researchers also found that the amount of time between Q-switched laser treatment sessions was important to the technique's success. Treatment intervals of eight weeks or less were found to be less effective for tattoo removal. Patient frustration and dissatisfaction with removal success and with the time to achieve success results in a significant number of patients discontinuing treatments, or “dropping out.”

With traditional laser treatment tattoo removal, efficacy is limited by particle shielding resulting from the natural clustering or agglomeration of pigment particles and the formation of laser-induced dermal vacuoles, both of which block access of laser energy to the particles being targeted (see Particle Shielding and Vacuole Shielding above). Importantly, the dermal vacuoles inhibit any additional passes of the laser from effectively reaching the remaining tattoo pigment agglomerations due to optical scattering. The shape, frequency and repetition rate of the RAP device’s acoustic shockwave pulses are designed to increase dispersion of ink particles and to diffuse and disperse both superficial and dermal vacuoles, while minimizing damage to adjacent non-pigmented tissue as well as pain perceived by the patient. With RAP dermal clearing, loss of laser efficacy due to optical scattering is thereby minimized. In addition, we believe more ink is exposed to each successive laser pass due to increased particle dispersion. As a result, effective, fast, multi-pass laser treatment of tattoo sites in a single office session may be realized.

Laser tattoo removal is an elective, private-pay procedure performed on an outpatient basis. The procedure is primarily performed at laser centers and dermatology clinics with laser centers performing 60.9% of the procedures in 2016. Because the cost of tattoo removal is many times the cost of tattoo application, the procedure only attracts those who can pay. Laser tattoo removal practitioners charge a premium for their time. Each treatment is generally priced from $100 to $500, and most patients require 10 or more treatments, depending on the size and complexity of the tattoo, to achieve comprehensive removal. Because tattoo removal is a painful, time-consuming and expensive process, patients need to be very motivated for removal.

We commissioned our own survey of individuals with one or more tattoos in an effort to better understand their interest in, motivations for and concerns about tattoo removal. This survey was designed to be representative of the U.S. population with 95% confidence (+/- 3%) and indicated that 63% of individuals with tattoos were interested in some form of removal. Importantly, a majority of these individuals didn’t regret having tattoos, they simply wanted to make a change. From this observation we conclude that the total available market in the U.S. alone could be calculated as 63% of the estimated 70 million U.S. adults with one or more tattoos (29% of the 2016 U.S. population), or 44 million potential customers.

In the second part of the HCT-1 study, six patients were selected for a single treatment session to demonstrate tattoo fading. For each patient, a single black tattoo was selected and divided into three adjacent areas. Two of the areas were treated (i.e. test areas) and the third area remained untreated as a control for comparison to the test areas. One test area was treated with a single laser treatment ("Laser Only"). The other test area was treated with multiple laser passes, with each laser pass followed by a treatment with the RAP device ("Laser+RAP"). After each laser pass, the laser was adjusted to increase the laser fluence. The Laser+RAP treated test area demonstrated accelerated tattoo fading at 24 hours post-treatment when compared to the non-treated tattoo test site and to tattoos treated with Laser Only.

In developing the planned clinical activity to fully capitalize on our technology and to expand on our pipeline, we are focused on three key areas which we believe have the potential to deliver optimal value. The first area of focus, and highest priority, is enhancing the commercial adoption of the RAP device by investing in clinical activities to improve the efficacy, shorten treatment time, and ensure safety of our RAP device for the cellulite and tattoo removal indications. Secondly, we plan to further investigate adjacent aesthetic indications that will enable us to leverage the sales infrastructure built for our initial indications and provide incremental treatment capabilities and value to our aesthetic customers. Lastly, we intend to explore indications with large therapeutic markets through early research in areas where the RAP device may provide an improvement to the current standard of care. While this third area will reach outside aesthetics, we will focus on significant market opportunities where the early research investment has a meaningful upside potential.

Liver fibrosis occurs when repetitive or long-lasting injury or inflammation causes excessive amounts of scar tissue to build up in the organ. Most types of chronic liver disease can eventually cause fibrosis. Scar tissue from fibrosis can also block or limit the flow of blood within the liver. This can starve and eventually kill healthy liver cells, creating more scar tissue in the process. Treatment tends to involve clearing infections, making lifestyle changes, and taking certain medications. This can often reverse the damage of mild to moderate liver fibrosis. If inflammation continues, possibly because a person has not received treatment, liver fibrosis can develop into more serious liver conditions.

To establish and protect our proprietary technologies and products, we rely on a combination of patent, copyright, trademark, and trade-secret laws, as well as confidentiality provisions in our contracts. We have implemented a patent strategy designed to protect our technology and facilitate commercialization of our current and future products. In total, we have nine patent families pending relating to the technologies that make our RAP device and certain variations possible, as well as various applications of our technology, with still more potential patent applications underway. As of December 31, 2020, our patent portfolio was comprised of two granted and 11 pending U.S. patent applications, 29 granted and 69 pending foreign counterpart patent applications, and one pending PCT patent application, each of which we either own directly or of which we are the exclusive licensee. Our intellectual property portfolio for our core RAP technology was built through the combination of licensing patents from third parties and the issuance or filing of new patent applications by us as the result of our ongoing development activities. Our pending patents were exclusively licensed from MD Anderson and generally relate to early variations of our core technology relating to our acoustic shockwave platform. In general, patents have a term of 20 years from the application filing date or earliest claimed priority date.

We also rely on trade secrets, technical know-how, contractual arrangements, and continuing innovation to protect our intellectual property and maintain our competitive position. We have a policy to enter into confidentiality agreements with third parties, employees, and consultants. We also have a policy that our employees and consultants sign agreements requiring that they assign to us their interests in intellectual property such as patents and copyrights arising from their work for us. It is our policy that all employees sign an agreement not to compete unfairly with us during their employment and upon termination of their employment through the misuse of confidential information, soliciting employees, and soliciting customers.

On April 5, 2012, we entered into a Patent and Technology License Agreement with MD Anderson. Pursuant to the agreement, we obtained a royalty-bearing, worldwide, exclusive license to intellectual property including patent rights related to the patents and technology we use. Under the agreement, we agreed to pay a nonrefundable license documentation fee in the high-five digits 30 days after the effective date of the agreement. Additionally, we agreed to pay a nonrefundable annual maintenance fee starting on the third anniversary of the effective date of the agreement, which escalates each anniversary and is currently in the high-five digits. Additionally, we agreed to a running royalty percentage of net sales in the mid-single digits. We also agreed to make certain milestone payments in the low to mid-six digits and sublicensing payments, including a $0.25 million milestone payment made in June 2019 after we received FDA clearance for our RAP device for tattoo removal. The specific patents initially subject to the agreement expire between 2031 and 2032.

MD Anderson has the right to terminate the agreement upon advanced notice in the event of a default by Soliton. The agreement will expire upon the expiration of the licensed intellectual property. The rights obtained by us pursuant to the agreement are made subject to the rights of the U.S. government to the extent that the technology covered by the licensed intellectual property was developed under a funding agreement between MD Anderson and the U.S. government. To the extent that is the case, our license agreement with, and the intellectual property rights we have licensed from, MD Anderson are subject to such a funding agreement and any superior rights that the U.S. government may have with respect to the licensed intellectual property. Therefore, there is a risk that the intellectual property rights we have licensed from MD Anderson may be non-exclusive or void if a funding agreement related to the licensed technology between MD Anderson and the U.S. government does exist and depending on the terms of such an agreement. Notwithstanding the foregoing, we do not believe our RAP technology received any federal funding. All out-of-pocket expenses incurred by MD Anderson in filing, prosecuting and maintaining the licensed patents have been and shall continue to be assumed by the Company.

The aesthetic medical device industry is subject to intense competition. Many of these competitors have significantly greater financial and human resources than we do and have established reputations as well as worldwide distribution channels that are more effective than ours. Additional competitors may enter the market, and we are likely to compete with new companies in the future. We expect to encounter potential customers that, due to existing relationships with our competitors, are committed to or prefer the products offered by these competitors. We expect that competitive pressures may result in price reductions, reduced margins and loss of market share. There can be no assurance that competitors, many of which have made substantial investments in competing technologies, will not prevent, limit or interfere with our ability to make, use or sell our products either in the United States or in international markets.

Our tattoo removal product will compete against stand-alone laser treatments offered by Cynosure, Cutera, Lumenis, and Candela, as well as several smaller aesthetic-based companies. We intend to compete primarily on the basis of improved time to remove, reduced pain, reduced chance of scarring and reduced trips to the doctor. In addition, competition among providers of devices for the aesthetic market is characterized by extensive research efforts and rapid technological progress. To compete effectively, we must demonstrate that our products are attractive alternatives to other laser-only methods for tattoo removal. Additionally, there are many companies, both public and private, that are developing devices that use both laser-based and alternative technologies for the conditions treated by our products that may prove to be more effective, safer or less costly than our products.

Our product candidate and operations are subject to extensive and rigorous regulation by the FDA, under the Federal Food, Drug, and Cosmetic Act (“FDCA”), and it’s implementing regulations, guidance documentation, and standards. Our RAP device is regulated by the FDA as a medical device. The FDA regulates the design, development, research, testing, manufacturing, safety, labeling, storage, record keeping, promotion, distribution, sale and advertising of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses. The FDA also regulates the export of medical devices manufactured in the United States to international markets. Any violations of these laws and regulations could result in a material adverse effect on our business, financial condition and results of operations. In addition, if there is a change in law, regulation or judicial interpretation, we may be required to change our business practices, which could have a material adverse effect on our business, financial condition and results of operations.

A PMA must be submitted to the FDA if the device cannot be cleared through the 510(k) process. A PMA must be supported by extensive data, including but not limited to, technical, pre-clinical, clinical trials, manufacturing and labeling to demonstrate to the FDA's satisfaction the safety and effectiveness of the device for its intended use. During the review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel's recommendation. In addition, the FDA will generally conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance with the Quality System Regulations ("QSRs").

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 down-classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application. Prior to the enactment of the Food and Drug Administration Safety and Innovation Act of 2012 (the "FDASIA"), a medical device could only be eligible for de novo classification if the manufacturer first submitted a 510(k) premarket notification and received a determination from the FDA that the device was not substantially equivalent. The FDASIA streamlined the de novo classification pathway by permitting manufacturers to request de novo classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a not substantially equivalent determination. Under the FDASIA, the FDA is required to classify the device within 120 days following receipt of the de novo application. If the manufacturer seeks reclassification into Class II, the manufacturer must include 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 reject the reclassification petition if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk or that general controls would be inadequate to control the risks and special controls cannot be developed.

Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) or de novo clearance. Such trials generally require an investigational device exemption ("IDE") application approved in advance by the FDA for a specified number of patients and study sites, unless the product is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of an IRB for the relevant clinical trial sites and must comply with FDA regulations, including but not limited to those relating to good clinical practices. To conduct a clinical trial,

we also are required to obtain the patients' informed consent in form and substance that complies with both FDA requirements and state and federal privacy and human subject protection regulations. We, the FDA or the IRB could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. Even if a trial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtain FDA approval to market the product in the U.S. Similarly, in Europe, the clinical study must be approved by a local ethics committee and in some cases, including studies with high-risk devices, by the ministry of health in the applicable country.

Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of other companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countries outside the U.S., which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutes promotion of an unapproved use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions.

Our Internet address is www.soliton.com. On this website, we post the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the U.S. Securities and Exchange Commission (“SEC”): our Annual Reports on Form 10-K; our Quarterly Reports on Form 10-Q; our Current Reports on Form 8-K; our proxy statements related to our annual stockholders’ meetings; and any amendments to those reports or statements. All such filings are available on our Web site free of charge. The charters of our audit, nominating and governance and compensation committees and our Code of Business Conduct and Ethics Policy are also available on our Web site and in print to any stockholder who requests them. The content on our Web site is not incorporated by reference into this Form 10-K.

We have used the proceeds from our IPO and subsequent financings to advance our initially approved RAP device through the FDA clearance process and commercial development in preparation for commercial launch with a Generation 2.2 device and to begin building the infrastructure necessary for a commercial entity. The Generation 2.2 device that we intend to offer in our initial commercial launch will have changes from the Generation 2.0 device we submitted under a special 510(k) to the FDA for review and clearance in 2020. The Generation 2.0 device was used for the cellulite trials and was included in our 510(k) filing for cellulite. The changes made to our Generation 2.2 device from Generation 2.0 will necessitate the filing of an additional special 510(k) before being launched. We cannot be certain that the changes we deem appropriate to make to future RAP devices prior to the launch of any of these devices will not require another 510(k) filing. Commercializing and launching medical device products can be expensive. While we believe our current available cash will be sufficient to complete the commercialization and initial launch of our product, we cannot be certain that we will not encounter significant unplanned expenditures. We will require substantial additional future capital in order to complete commercialization, launch and market the device nationwide, build out a sales force and manufacture the device for national rollout. We will continue to require substantial additional capital to continue commercialization activities.

Our financial statements have been prepared assuming that we will continue as a going concern. We have not generated any revenue from our main operations since inception and have accumulated losses. Our ability to continue our operations depends on our ability to complete equity or debt financings or generate profitable operations. Such financings may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that could result from the outcome of this uncertainty. If we are unable to raise sufficient capital when needed, our business, financial condition and results of operations will be materially and adversely affected, and we will need to significantly modify our operational plans to continue as a going concern. If we are unable to continue as a going concern, we might have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. The inclusion of a material uncertainty explanatory paragraph by our auditors, our lack of positive cash flows and our potential inability to continue as a going concern may materially adversely affect our share price and our ability to raise new capital or to enter into critical contractual relations with third parties.

As of December 31, 2020, we had total assets of $33.8 million, including cash, cash equivalents and restricted cash of $31.8 million. We have an accumulated deficit as of December 31, 2020, of $70.6 million. Our cash on hand of $29.1 million at February 12, 2021 is expected to fund our operations into the third quarter of 2022 but not beyond. We believe that we will require additional capital to mount a national sales and marketing effort and execute our business plan. We cannot give any assurance that we will be able to obtain all the necessary funding that we may need. We may pursue additional funding through various financing sources, including additional public offerings, the issuance of debt securities, fees associated with licensing some or all of our technology, joint ventures with capital partners and project type financing. There can be no assurance that funds will be available on commercially reasonable terms, if at all. If financing is not available on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations, in which case you may lose some or all of your investment. Alternatively, we may consider changes in our business plan that might enable us to achieve aspects of our business objectives and lead to some commercial success with a smaller amount of capital, but we cannot assure that changes in our business plan will result in revenues or maintain any value in your investment.

We formed our corporation in 2012 without a working RAP prototype. During the first five years of operations, we focused on research and development of a fully-integrated working prototype of the RAP device to remove tattoos. During the past three years, we have focused our efforts on developing a commercial device that would receive FDA clearance to sell and the additional clearance of our product to treat cellulite. We received FDA clearance in May 2019 for tattoo removal and for our 501(k) application for cellulite in January 2021; after such applications our efforts have been focused on refining our commercial device to improve ease of use features necessary for adoption in dermatological and plastic surgery settings. Developing the commercial device for our market launch is expected to be completed in the first half of 2021 in time for our initial launch. Further refinement to the device to develop the Generation 2.3 device, which we plan to roll out nationally in 2022, is anticipated to cost at least an additional $2.5 million and take another year of additional work. Additionally, a high percentage of our expenses will be associated with pre-launch marketing activities as well as fixed costs. We have not yet sold any products, and we may never achieve commercial success with RAP technology. We have limited historical financial data upon which we may base our projected revenue and operating expenses. Our limited operating history makes it difficult for potential investors to evaluate our technology or prospective operations and business prospects. As a pre-commercial stage company, we are subject to all the risks inherent in business development, financing, unexpected expenditures, and complications and delays that often occur in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.

All of our intended indications may not be cleared by the FDA or become commercially viable or accepted for use. We have incurred significant losses since our inception and expect to experience operating losses and negative cash flow for the foreseeable future. We expect to expend significant resources on hiring of personnel, continued scientific and product research and development, product testing and pre-clinical and clinical investigation, intellectual property development and prosecution, marketing and promotion, capital expenditures, working capital, general and administrative expenses, and fees and expenses associated with our capital raising efforts. We expect to incur costs and expenses related to consulting costs, hiring of scientists, engineers, science and other operational personnel, and the continued development of relationships with strategic partners.

Our RAP device uses rapid pulses of designed acoustic shockwaves to dramatically accelerate the removal of tattoos when used in conjunction with existing lasers. Specifically, our technology allows a doctor to treat a patient multiple times in a single office visit and significantly reduce the overall time it takes to remove a tattoo. Recognized and published (see "Complications of Tattoos and Tattoo Removal: Stop and Think Before you ink;" Khunger, Molpariya, & Khunger, 2015) adverse events of Q-switched laser tattoo removal include: pain; blistering; crusting; pinpoint hemorrhage; urticarial reaction; hypopigmentation; hyperpigmentation; leukotrichia; local-papule; plaques; darkening of tattoos; photoallergic reactions; systemic reactions; residual pigmentation; ghost images; scarring; and textural changes. These adverse events may be increased when multiple laser passes are used to remove a tattoo in a single session.

We are a pre-revenue stage medical device company, and do not expect to generate any revenues until our commercial RAP device (Generation 2.0), cleared by the FDA, has been updated for use in the field as Generation 2.2, had those updates cleared by the FDA, and are sold. Our ability to continue as a going concern is dependent upon our generating cash flow from sales that are sufficient to fund operations or finding adequate financing to support our operations. To date, we have had no revenues and have relied onthe proceeds from our IPO and subsequent equity offerings. Our sales plan may not be successful in achieving a sustainable business and revenues. We have no arrangements in place for all the anticipated required financing to be able to fully implement our business plan through cash flow breakeven. If we are unable to continue as planned currently, we may have to curtail some or all of our business plan and operations. In such case, investors may lose some or all of their investment.

Conducting successful clinical studies will require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population, the nature of the trial protocol, the attractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigators, support staff, and proximity of patients to clinical sites and ability to comply with the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of our products or if they determine that the treatments received under the trial protocols are not attractive or involve unacceptable risks or discomforts.

Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required and we may not adequately develop such protocols to support clearance and approval. Further, the FDA may require us to submit data on a greater number of patients than we originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays in the approval and attempted commercialization of our products or result in the failure of the clinical trial. In addition, despite considerable time and expense invested in our clinical trials, the FDA may not consider our data adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect our business, operating results and prospects.

We do not have the ability to independently conduct our pre-clinical and clinical trials for our product candidates and future products and we must rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct such trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected. Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control.

Even though our first clinical trials are completed, we cannot be certain that their results will support our product candidate claims or that the FDA will agree with our conclusions regarding them. Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that our product candidates are safe and effective for the proposed indicated uses, which could cause us to abandon a product candidate and may delay development of others. Any delay or termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.

As demand for our products increases, our manufacturer will need to invest additional resources to purchase components, hire and train employees, and enhance their manufacturing processes. If they fail to increase production capacity efficiently, our sales may not increase in line with our expectations and our operating margins could fluctuate or decline. The RAP device has many parts that are specialized high-voltage components and many of these components are only produced by one supplier and the loss of any of these suppliers, or their inability to provide Sanmina with an adequate supply of materials, could harm our business. For our business strategy to be successful, Sanmina must be able to provide us with components in sufficient quantities, in compliance with regulatory requirements and quality control standards, in accordance with agreed-upon specifications, at acceptable costs and on a timely basis. Future increases in sales of the RAP device could strain the ability of Sanmina to deliver an increasingly large supply of components and RAP systems in a manner that meets these various requirements. We do not have a long-term agreement with Sanmina and contract with Sanmina on a project-to-project basis utilizing a separate purchase order for each engineering project. As such, there is no assurance that Sanmina will continue to provide us with engineering and manufacturing services in the future.

We do not yet have full sales, marketing, and distribution capabilities or arrangements. To be able to commercialize our potential products, we will need to develop all of the foregoing. We have limited experience in establishing these capabilities, and therefore, we may be unsuccessful in achieving commercialization and earning revenues. We believe that setting up the commercialization parts of the Company will take substantial capital and commitment of time and effort. We may seek development and marketing partners for RAP technology and license technology that is complementary, but not directly associated with RAP technology to others in order to avoid our having to provide the marketing, manufacturing and distribution capabilities within our organization. There can be no assurance that we will find any development and marketing partners or companies that are interested in licensing our technology. If we are unable to establish and maintain adequate sales, marketing, manufacturing and distribution capabilities, independently or with others, we will not be able to generate product revenue, and may not become profitable.

Our estimates of the annual total addressable markets for our products, including those under development, are based on a number of internal and third-party estimates. While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. If the actual number of people who would benefit from our products, the price at which we can sell our products, or the annual total addressable market for our products is smaller than we have estimated, it may impair our sales growth and have an adverse impact on our business.

A method for facilitating multiple laser passes in a single office visit by applying a PFD Patch to the skin was introduced to the market within the last several years. Although we believe, based on currently available published clinical data for the PFD Patch, that the Soliton method is more effective than the PFD Patch, the company that owns the PFD Patch, Merz Pharma, has substantially more resources than Soliton. Furthermore, we have made this assessment based on separate clinical trials with differing protocols, not on a direct head-to-head comparison between the PFD Patch and the Soliton method, so we cannot be certain that the Soliton method is more effective. Also, there are currently a number of laser companies such as Lumenis, Cynosure, Candela and Cutera that market their lasers for tattoo removal and all of these companies have substantially more resources than Soliton. Furthermore, our clinical trials have demonstrated clinically significant improvement in tattoo fading over laser alone. Since we are pursuing FDA clearance for the RAP device to treat tattoos in conjunction with lasers, some of these companies may view our product as a competitive threat. The cellulite removal market is highly competitive and has numerous device companies in the space. The technologies currently being used vary significantly in approach, efficacy and invasiveness to the patient. Endo Pharmaceuticals is launching Qwo®, a prescription injectible treatment for moderate to severe cellulite dimples in the buttocks. The drug is a collegenase formula that is used to dissolve collagen structures, such as septa. A technology called Cellfina, owned by Merz Pharma, is currently being marketed as a long-term solution for the dimples caused by cellulite. The treatment requires injected anesthesia be given to the patient prior to the portion of the skin to be treated being pulled upward utilizing a suctioning plate. A lance is inserted into the side of the treatment area which is used to slice through the septa that are causing the dimple(s). Cellulaze, a technology owned by Cynosure, delivers a therapy similar to Cellfina using laser energy. A very small cannula (or tube about the size of the tip of a pen) is inserted under the skin. The laser fiber delivers energy directly under the skin. This is intended to increase the thickness and quality of the patient's skin, while simultaneously releasing the septa. BTL Aesthetics owns a technology called Emtone™, which is intended to provide a temporary reduction in the appearance of cellulite. Emtone simultaneously emits both radiofrequency and targeted pressure energy. There are a number of other radiofrequency devices in the market intended to

We have in the past experienced, and we may in the future experience, delays in various phases of product development and commercial launch, including engineering, manufacturing, and clinical. Any delays in our anticipated product launches may significantly impede our ability to successfully compete in our markets. In particular, such delays could cause customers to delay or forego purchases of our products. Even if we are able to successfully develop the RAP device or future versions of the RAP device when anticipated, these products may not produce sales in excess of the costs of development, and they may be quickly rendered obsolete by the changing preferences of dermatologists and patients, or the introduction by our competitors of products embodying new technologies or features.

We are highly dependent upon the principal members of our management team, scientific advisory board and consultants. These persons have significant experience not only in development, regulatory, commercialization and business development activities, but also with the RAP system, acoustic energy and the biology of tattoos and cellulite. If we lose one or more of our executive officers or key employees or consultants, our ability to implement our business strategy successfully could be seriously harmed. Any of our executive officers or key employees or consultants may terminate their employment at any time. Replacing executive officers, key employees and consultants may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize products successfully. Competition to hire and retain employees and consultants from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key personnel and consultants. Our failure to retain key personnel or consultants could materially harm our business.

Because we have limited financial and managerial resources, we focus on specific products, indications and discovery programs. As a result, we may forgo or delay pursuit of other opportunities with others that could have had greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular potential product, we may relinquish valuable rights to that potential product through future collaborations, licenses and other similar arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such potential product.

Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. We rely on third-party manufacturers to produce our products. Our ability to obtain clinical supplies of our products could be disrupted if the operations of these suppliers were affected by a man-made or natural disaster or other business interruption. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.

In addition, the trading prices for our common stock and other medical device companies have been highly volatile as a result of the COVID-19 epidemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. The COVID-19 outbreak continues to rapidly evolve. The extent to which the outbreak may impact our business, pre-clinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and actions to contain the outbreak or treat its impact, such as social distancing and quarantines or lock-downs in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

We market and sell our systems to physicians. In the U.S. and certain international markets, subject to local regulations, physician customers can generally allow nurse practitioners, technicians and other non-physicians to perform aesthetic procedures using our systems under their direct supervision. Although we provide training on the use of our systems as well as the proper post-treatment care, we do not supervise the procedures performed with our systems, nor can we be certain that physicians are directly supervising procedures according to our recommendations. The potential misuse of our systems or failing to adhere to operating guidelines could potentially cause skin damage or underlying tissue damage, which could harm the reputation of our systems and expose us to costly product liability litigation. In addition, patients may not comply with post-treatment guidelines, which could also lead to adverse results and subject us to liability.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. Furthermore, the aesthetic industry in which we operate is particularly vulnerable to unfavorable economic trends. Treatments using our systems involve elective procedures, the cost of which must be borne by patients, and is not reimbursable through government or private health insurance. Economic uncertainty may reduce patient demand for the procedures performed using our systems; if there is not sufficient patient demand for the procedures for which our systems are used, practitioner demand for these systems could drop, further negatively impacting operating results. The decision to undergo a procedure using our systems is driven by consumer demand. In times of economic uncertainty or recession, individuals generally reduce the amount of money that they spend on discretionary items, including aesthetic procedures. If our customers’ patients face economic hardships, our business would be negatively impacted, and our financial performance would be materially harmed in the event that any of the above factors discourage patients from seeking the procedures for which our systems are used. A weak or declining economy could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay or stop making payments for our systems or services. As a result of the COVID-19 pandemic and the economic turmoil that has resulted, we expect that some of our customers may experience difficulty in making timely payments or payments at all. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the economic climate and financial market conditions, including the effect of the COVID-19 pandemic, could adversely impact our business. The impact of economic uncertainty on our industry may vary from region to region.

Tattoo removal and cellulite treatment procedures are performed primarily by physicians who practice dermatology or plastic surgery. Our success depends on the willingness of these physicians to adopt our technology and on the growth of tattoo removal and cellulite treatment procedures performed by these physicians within their practice. Our ability to increase the number of physicians willing to make a significant capital expenditure to purchase our systems and make them a significant part of their practices depends on the success of our sales and marketing programs. We must be able to demonstrate that the cost of our systems and the revenue that a physician can derive from performing procedures are compelling when compared to the costs and revenue associated with alternative aesthetic treatments the physician can offer and persuade physicians to purchase our systems instead of those of our competitors, many of whom already have existing relationships with our target physicians. In addition, we believe our marketing programs, including clinical and practice development support, will be critical to increasing utilization and awareness of our systems, but these programs require physician commitment and involvement to

We may offer credit terms of 30 to 60 days to qualified customers. In the event that there is a default by any of the customers to whom we have provided credit terms, we may recognize bad debt expenses in our general and administrative expenses. If this bad debt expense is material, it could negatively affect our future results of operations and cash flows. Additionally, in the event of deterioration of general business conditions, we may be subject to increased risk of non-payment of our accounts receivables. We may also be adversely affected by bankruptcies or other business failures of our customers, distributors, and potential customers. A significant delay in the collection of accounts receivables or a reduction of accounts receivables collected may impact our liquidity or result in bad debt expenses.

We are currently making, and expect to continue to make, substantial investments in our information technology systems and infrastructure, some of which are significant. Upgrades involve replacing existing systems with successor systems, outsourcing critical information technology to third parties, making changes to existing systems, including the migration of applications to the cloud, or cost-effectively acquiring new systems with new functionality. Implementing new systems carries significant potential risks, including failure to operate as designed, potential loss or corruption of data or information, changes in security processes, cost overruns, implementation delays, disruption of operations, and the potential inability to meet business and reporting requirements. We rely on strategic partners and other service providers to help us with certain significant information technology projects and services. Information technology projects or services frequently are long-term in nature and may take longer to complete and cost more than we expect and may not deliver the benefits we project once they are complete. Furthermore, pursuing multiple initiatives simultaneously could make implementation significantly more challenging. We are aware of inherent risks associated with replacing these systems and outsourcing critical information technology functions and there can be no assurance that we will not experience significant issues with our existing systems prior to implementation, that our technology initiatives will be successfully deployed as planned or that they will be timely implemented without significant disruption to our operations. Any system implementation and transition difficulty may result in operational challenges, reputational harm, and increased costs that could materially and adversely affect our business operations and results of operations.

In the ordinary course of our business and to the extent necessary, we will rely on software to control the ongoing use of our systems, collect and aggregate diagnostic data, and collect and store sensitive data, including intellectual property and proprietary business information, and certain personally identifiable information of customers, consultants and employees in our data centers and on our networks. The secure processing, maintenance, and transmission of this information is important to our operations and business strategy. We have established physical, electronic, and policy measures to secure our systems in an attempt to prevent a system breach and the theft of data we collect, and we rely on commercially available systems, software, tools, and monitoring in our effort to provide security for our information technology systems and the digital information we collect, process, transmit and store. The third-party providers of such information technology systems and related infrastructure may have or may obtain access to our systems and data within them.

Despite our security measures, our information technology systems and related infrastructure, and those of our current and any future collaborators, contractors and consultants and other third parties on which we rely, we may be vulnerable to attacks by computer viruses, malware, hackers or breaches due to malfeasance, employee or contractor error, telecommunication or electrical failures, terrorism or other created or natural disasters. The risk of a cyber-attack or cyber intrusion by computer hackers from around the world, including those from foreign governments and terrorists, has greatly increased in number, intensity and sophistication. In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual property. The costs to us to mitigate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service and other harm to our business and our competitive position. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our business. Moreover, if a computer security breach affects our systems or results in the unauthorized release of personally identifiable information, our reputation could be materially damaged. In addition, such a breach may require notification to governmental agencies, the media or individuals pursuant to various federal and state privacy and security laws, if applicable, including the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Clinical Health Act of 2009, or HITECH, and its implementing rules and regulations, as well as regulations promulgated by the Federal Trade Commission and state breach notification laws, or the laws of one or more foreign jurisdictions including the

Our products are subject to rigorous regulation by the FDA and numerous other federal, state and foreign governmental authorities. The FDA classifies medical devices into one of three classes on the basis of the intended use of the device, the risk associated with the use of the device for that indication, as determined by the FDA, and on the controls deemed by the FDA to be necessary to reasonably ensure their safety and effectiveness. Class I devices, which have the lowest level of risk associated with them, are subject to general controls. Class II devices are subject to general controls and special controls, including performance standards. Class III devices, which have the highest level of risk associated with them, are subject to general controls and PMA. Most Class I devices and some Class II devices are exempt from a requirement that the manufacturer submit a premarket notification, or 510(k), and receive clearance from the FDA which is otherwise a premarketing requirement for a Class II device. Class III devices may not be commercialized until a PMA application is submitted to and approved by the FDA.

The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time-consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all. The FDA will clear marketing of a lower risk medical device through the 510(k) process if the manufacturer demonstrates that the new product is substantially equivalent to other 510(k)-cleared products or through a de novo process if substantial equivalence is not available. High risk devices deemed to pose the greatest risk, such as life-sustaining, life-supporting, or implantable devices, or devices not deemed substantially equivalent to a previously cleared device, require the approval of a PMA. The PMA process is more costly, lengthy and uncertain than the 510(k) or de novo clearance processes. A PMA application must be supported by extensive data, including, but not limited to, technical, pre-clinical, clinical trial, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the device for its intended use. The FDA also allows the submission of a direct de novo petition. This procedure allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application. Prior to the enactment of the FDASIA, a medical device could only be eligible for de novo classification if the manufacturer first submitted a 510(k) premarket notification and received a determination from the FDA that the device was not substantially equivalent. The FDASIA streamlined the de novo classification pathway by permitting manufacturers to request de novo classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a not substantially equivalent determination.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of future products. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be. Any change in the laws or regulations that govern the clearance and approval processes relating to

Modifications to our products may require new regulatory approvals or clearances, including 510(k) clearances or PMA's, or require us to recall or cease marketing the modified devices until these clearances or approvals are obtained. The FDA requires device manufacturers to initially make and document a determination of whether or not a modification requires a new approval, supplement or clearance. A manufacturer may determine that a modification could not significantly affect safety or efficacy and does not represent a major change in its intended use, so that no new 510(k) clearance is necessary. However, the FDA can review a manufacturer's decision and may disagree. The FDA may also, on its own initiative, determine that a new 510(k) clearance, de novo submission or PMA approval is required. Once we have a commercialized product, we may make modifications in the future that we believe do not or will not require additional clearances or approvals. If the FDA disagrees and requires new clearances or approvals for these modifications, we may be required to recall and to stop marketing our products as modified, which could require us to redesign our products and harm our operating results. In these circumstances, we may be subject to significant enforcement actions.

We conducted our clinical trials for the acceleration of tattoo removal and cellulite reduction and received premarket clearance based on a device that is not optimized for commercial launch. We have made certain modifications to the cartridge for ease of loading and made improvements in user interface, improvements to extend the life and ease of replacement of the consumable treatment head cartridges to the device (Generation 2.2) intended for limited launch. The changes made to our device from Generation 2.0 to Generation 2.2 will necessitate the filing of an additional special 510(k) before being rolled out nationally. We cannot be certain that the changes we deem appropriate to make to the future RAP device prior to that product's launch will not require another 510(k) filing. While we believe these changes will not affect the therapy delivered by our RAP device, the FDA may require a full 510(k) submission rather than a special to clear these changes or may not clear these changes in a timely manner which could delay our commercial launch.

Any product for which we obtain clearance or approval, and the manufacturing processes, reporting requirements, post-approval clinical data and promotional activities for such product, will be subject to continued regulatory review, oversight and periodic inspections by the FDA and other domestic and foreign regulatory bodies. In particular, we and our suppliers are required to comply with the FDA’s QSR which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and shipping of any product for which we obtain clearance or approval. The FDA enforces the QSR and other regulations through periodic inspections. The failure by us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA, or the failure to timely and adequately respond to any adverse inspection observations or product safety issues, could result in, among other things, any of the following enforcement actions:

Even if regulatory clearance or approval of a product is granted, such clearance or approval may be subject to limitations on the intended uses for which the product may be marketed and reduce our potential to successfully commercialize the product and generate revenue from the product. If the FDA determines that our promotional materials, labeling, training or other marketing or educational activities constitute promotion of an unapproved use, it could request that we cease or modify our training or promotional materials or subject us to regulatory enforcement actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our training or other promotional materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.

In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of our products, and we must comply with medical device reporting requirements, including the reporting of adverse events and malfunctions related to our products. Later discovery of previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements such as QSR, may result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results and prospects.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious injury or death. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to the FDA within 10 working days after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted.

Under the FDA medical device reporting regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or one of our similar devices were to recur. If we fail to report these events to the FDA within the required time frames, or at all, the FDA could take enforcement action against us. Any such adverse event involving our products also could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.

We are a party to a royalty-bearing, worldwide, exclusive license agreement for certain intellectual property rights, including patent rights related to RAP technology, with MD Anderson. If we become insolvent, cannot meet commercial diligence requirements contained in the license agreement, fail to make annual maintenance fee payments, or otherwise materially default without curing the default, the license agreement could be terminated. Furthermore, if we are successful in commercializing and selling the RAP device, we will owe milestone and royalty payments pursuant to this license agreement. If we fail to make those payments in accordance with the license agreement, our license could be terminated. If our license agreement with MD Anderson is terminated, our business will be materially harmed.

We may from time to time seek to enforce our intellectual property rights against infringers when we determine that a successful outcome is probable and may lead to an increase in the value of the intellectual property. The validity of our patents and the patents we have licensed may be challenged in court and in administrative proceedings before the U.S. Patent and Trademark Office (“USPTO”) and other patent offices outside the United States. These lawsuits and proceedings are expensive and would consume time and resources and divert the attention of managerial and scientific personnel even if we were successful in stopping the infringement of such patents. In addition, there is a risk that the court will decide that such patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of such patents is upheld, the court will refuse to stop the other party on the grounds that such other party's activities do not infringe our intellectual property rights.

The strength of our patents involves complex legal and scientific questions and can be uncertain. We have nine families of patents. As of December 31, 2020, our patent portfolio was comprised of two granted and 11 pending U.S. patent applications, 29 granted and 69 pending foreign counterpart patent applications, and one pending PCT patent application, each of which we either own directly or of which we are the exclusive licensee. These patent applications may be challenged or fail to result in issued patents, or if issued, these patents and our existing patents may be too narrow to prevent third parties from developing or designing around our intellectual property and in that event, we may lose competitive advantage, which could result in harm to our business.

In addition to patented technology, we rely upon, among other things, unpatented proprietary technology, processes, trade secrets and know-how. Any involuntary disclosure to or misappropriation by third parties of our confidential or proprietary information could enable competitors to duplicate or surpass our technological achievements, potentially eroding our competitive position in our market. We seek to protect confidential or proprietary information in part by confidentiality agreements with our employees, consultants and third parties. While we require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information and technology to enter into confidentiality agreements, we cannot be certain that this know-how, information and technology will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. These agreements may be terminated or breached, and we may not have adequate remedies for any such termination or breach. Furthermore, these agreements may not provide meaningful protection for our trade secrets and know-how in the event of unauthorized use or disclosure.

Third parties may claim that our products infringe their patents and other intellectual property rights. Identifying third-party patent rights can be particularly difficult because, in general, patent applications can be maintained in secrecy for at least 18 months after their earliest priority date. Historically, there has been substantial litigation regarding patents and other intellectual property rights in the medical device and related industries. If a competitor were to challenge our patents, licenses or other intellectual property rights, or assert that our products infringe its patent or other intellectual property rights, we could incur substantial litigation costs, be forced to make expensive changes to our product design, pay royalties or other fees to license rights in order to continue manufacturing and selling our products, or pay substantial damages. Third-party infringement claims, regardless of their outcome, would not only consume our financial resources but also divert our management’s time and effort.

We currently have applied for a registered trademark for the use of our product brand name in association with our commercial products to be offered in the United States. Although we may take steps to monitor the possible infringement or misuse of our brand name or other trademarks once they are obtained, it is possible that third parties may infringe, dilute or otherwise violate our trademark rights. Any unauthorized use of our trademarks could harm our reputation or commercial interests. In addition, our enforcement against third-party infringers or violators may be unduly expensive and time-consuming, and any remedy obtained may constitute insufficient redress relative to the damages we may suffer. Our business may be materially adversely affected in the event we are unable to protect our trademarks.

As of December 31, 2020, we had a material number of outstanding options and warrants to purchase shares of common stock. To the extent any of these options or warrants are exercised and any additional options or warrants are granted and exercised, there will be further dilution to stockholders and investors. Until the options and warrants expire, these holders will have an opportunity to profit from any increase in the market price of our common stock without assuming the risks of ownership. Holders of options and warrants may convert or exercise these securities at a time when we could obtain additional capital on terms more favorable than those provided by the options or warrants. The exercise of the options and warrants will dilute the voting interest of the owners of presently outstanding shares by adding a substantial number of additional shares of our common stock.

Our largest shareholder, Remeditex Ventures, LLC (Remeditex), beneficially owns and will be able to vote in the aggregate a significant percentage of our outstanding common stock. As such, Remeditex, will continue to have the ability to exert significant influence over all corporate activities, including the election or removal of directors and the outcome of tender offers, mergers, proxy contests or other purchases of common stock that could give our stockholders the opportunity to realize a premium over the then-prevailing market price for their shares of common stock. This concentrated control will limit your ability to influence corporate matters and, as a result, we may take actions that shareholders do not view as beneficial. In addition, such concentrated control could discourage others from initiating changes of control. In such cases, the perception of our prospects in the market may be adversely affected and the market price of our common stock may decline.

We are required pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, to maintain internal control over financial reporting and to assess and report on the effectiveness of those controls. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our management concluded that our internal controls over financial reporting were, and continue to be, ineffective as of December 31, 2020. We identified material weaknesses in our internal controls due to the lack of segregation of duties, the limitations of our financial accounting system to properly segregate duties and the absence of internal staff with extensive knowledge of SEC financial and GAAP reporting. While management is working to remediate these material weaknesses, there is no assurance that such changes, when economically feasible and sustainable, will remediate the identified material weaknesses or that the controls will prevent or detect future material weaknesses. If we are not able to maintain effective internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could have a material adverse effect on our business.

Management did elect to perform an annual assessment as of December 31, 2020, of the effectiveness of our internal control over financial reporting for our first annual report. Our management concluded that our internal control over financial reporting was, and continues to be, ineffective as of December 31, 2020, due to material weaknesses in our internal controls resulting from a lack of segregation of duties, the limitations of our financial accounting system, and the absence of internal staff with extensive knowledge of SEC financial and GAAP reporting. This annual assessment was performed earlier than required. Section 404(a) of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we would expect to file with the SEC. However, for as long as we remain an emerging growth company ("EGC") as defined in the JOBS Act, we have and intend to consider to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. We may continue to take advantage of these reporting exemptions until we are no longer an EGC. If we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed and investors could lose confidence in our reported financial information.

From time to time and in the ordinary course of our business, we may become involved in various legal proceedings. All such legal proceedings are inherently unpredictable and, regardless of the merits of the claims, litigation may be expensive, time-consuming and disruptive to our operations and distracting to management. If resolved against us, such legal proceedings could result in excessive verdicts, injunctive relief or other equitable relief that may affect how we operate our business. Similarly, if we settle such legal proceedings, it may affect how we operate our business. Future court decisions, alternative dispute resolution awards, business expansion or legislative activity may increase our exposure to litigation and regulatory investigations. In some cases, substantial non-economic remedies or punitive damages may be sought. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular verdict, judgment or settlement that may be entered against us, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. If we incur liability that exceeds our insurance coverage or that is not within the scope of the coverage in legal proceedings brought against us, it could have a material adverse effect on our business, results of operations and financial condition.

While the global economy is improving since the initial impact of the novel strain of coronavirus, SARS-CoV-2, which causes COVID-19, there are still uncertainties surrounding the strength and duration of the recovery that may continue to drive stock market and interest rate volatility and adversely impact consumer confidence, product demand, and our ability to refinance our debt. Economic conditions, along with our operating performance, may also materially and adversely impact our ability to access the financial markets. Accordingly, our future business and financial results are subject to uncertainty. If economic conditions deteriorate in the future, our future revenues and financial results could be materially and adversely affected.

We are exposed to the risk that our employees and independent contractors, including consultants, manufacturers, distributors, commercial collaborators, service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing standards; U.S. federal and state healthcare fraud and abuse, data privacy laws and other similar non-U.S. laws; or laws that require the true, complete and accurate reporting of financial information or data. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, the creation of fraudulent data in our nonclinical studies or clinical trials, or illegal misappropriation of product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from

In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third-party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s best interests for the price of the stock to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a stock short. These short attacks have led to selling of shares in the market. Issuers such as Soliton, that have common stock with limited trading volumes and/or have been susceptible to relatively high volatility levels, can be particularly vulnerable to such short seller attacks. In May 2019, our common stock was the subject of a report by a short seller that contained incorrect and misleading information, which report led to a severe decline in our stock price. Although we timely responded to these false and misleading allegations, we cannot assure you that such similar false and misleading articles will not be published again in the future. The publication of any such articles regarding us in the future may bring about a temporary, or possibly long term, decline in the market price of our common stock. If we continue to be the subject of unfavorable allegations, we may have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could be distracting for our management team.

The Company may provide financial guidance about its business and future operating results. In developing this guidance, the Company’s management must make certain assumptions and judgments about its future operating performance, including but not limited to projected hiring of sales professionals, growth of revenue in the aesthetic device market, increase or decrease of its market share, costs of production of its recently introduced products, and stability of the macro-economic environment in the Company’s key markets. Furthermore, analysts and investors may develop and publish their own projections of the Company’s business, which may form a consensus about the Company’s future performance. The Company’s business results may vary significantly from such guidance or that consensus due to a number of factors, many of which are outside of the Company’s control, and which could adversely affect its operations and operating results. Furthermore, if the Company makes downward revisions of the Company’s previously announced guidance, or if the Company’s publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors or other interested parties, the price of the Company’s common stock could decline.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes appearing elsewhere in this Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties, including those set forth under “Cautionary Statement About Forward-Looking Statements.” Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in this Item and in Item 1A - “Risk Factors.” Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this Form 10-K.

Our business model anticipates generating revenue from the sale of our RAP console to dermatologists, plastic surgeons, and other physician offices, as well as medi-spas under the supervision of a doctor. Our model contemplates recurring revenues generated by the sale of disposable cartridges that are utilized with each patient visit and treatment. We believe additional revenues will result from maintenance services to our customers. Our system is comprised of a console with a hand piece and our consumable treatment cartridges, which are designed to allow a physician to perform a single tattoo removal treatment per office visit or one side of the body per cellulite reduction treatment. We expect this to translate into approximately one treatment cartridge per patient, per visit for tattoo and two cartridges per patient, per visit for cellulite, if approved.

The medical technology and aesthetic product markets are highly competitive and dynamic and are characterized by rapid and substantial technological development and product innovations. We will compete with many other technologies for consumer demand. Further, the aesthetic industry in which we will operate is particularly vulnerable to economic trends. The decision to undergo a procedure from our systems will be driven by consumer demand. Procedures performed using our systems will be elective procedures, the cost of which must be borne by the patient and are not reimbursable through government or private health insurance. In times of economic uncertainty or recession, individuals often reduce the amount of money that they spend on discretionary items, including aesthetic procedures. The general economic difficulties being experienced and the lack of availability of consumer credit for some of our customers' patients could adversely affect the markets in which we will operate.

We anticipate incurring operating losses for the next several years as we support the commercial launch of our products and continue research and development efforts to further expand our pipeline. These factors raise uncertainties about our ability to fund operations in future years. If we need to raise additional capital in order to continue to execute our business plan, including obtaining additional regulatory clearance for our 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 us. A failure to raise sufficient capital could adversely impact our ability to achieve our intended business objectives and meet our financial obligations as they become due and payable into the third quarter of 2022 but not beyond.

General and administrative ("G&A"). G&A expenses increased by $0.6 million compared to same period in 2019 primarily due to increases in expenses for salaries and related expenses of $0.3 million, driven by an increase in salaries and wages of $0.6 million which was offset by a decrease in the payout of bonuses and accrual of management incentives of $0.3 million. The increase in G&A expenses was also driven by increases in non-cash stock-based compensation of $0.3 million, insurance of $0.2 million, information technology of $0.1 million and Board related fees of $0.1 million. These increases were offset by decreases in expenses for travel and related costs of $0.2 million and investor relations of $0.2 million.

We estimate our current cash, cash equivalents and restricted cash resources of $31.8 million at December 31, 2020, is sufficient to fund our operations into the third quarter of 2022 but not beyond. We anticipate incurring operating losses for the next several years as we support the commercial launch of our products and continue to invest in research and development efforts to expand our product offering. These factors raise uncertainties about our ability to fund operations in future years. If we need to raise additional capital in order to continue to execute our business plan, including obtaining additional regulatory clearance for cleared products, 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 us. A failure to raise sufficient capital could adversely impact our ability to achieve our intended business objectives and meet our financial obligations as they become due and payable.

The Jumpstart Our Business Startups Act of 2012 ("the JOBS Act") exempts an EGC such as us from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an EGC, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an EGC nor an EGC which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Operating activities. Net cash used in operating activities was $11.5 million during the year ended December 31, 2020, and consisted of a net loss of $14.5 million and a net change in operating assets and liabilities of $0.7 million offset by non-cash items of $3.8 million. The change in operating assets mainly included an increase in inventory of $0.4 million and a net decrease in operating liabilities of $0.3 million, comprised of a decrease in accounts payable of $0.6 million offset by an increase in accrued liabilities of $0.3 million. The increase in inventory was largely driven by the increase in spare parts for our devices at December 31, 2020. The decrease in accounts payable included $0.3 million due to larger payables at December 31, 2019 to a few of our largest vendors and unpaid additions to property and equipment and accounts payable of $0.3 million. The amounts owed to vendors were not of the same magnitude at December 31, 2020. The increase in accrued liabilities was driven primarily by the addition of new headcount and the resulting need for accruals pertaining to employee incentives. Non-cash items consisted of stock-based compensation of $3.2 million, depreciation and amortization expense of $0.3 million, and the write-down of intangible assets and equipment of $0.3 million.

Net cash used in operating activities was $10.6 million during the year ended December 31, 2019, and consisted of a net loss of $13.8 million and a net change in operating assets and liabilities of $0.2 million offset by non-cash items of $3.4 million. The change in operating assets included an increase in prepaid expenses of $0.1 million and a net decrease in liabilities of $0.1 million, comprised of a decrease in accounts payable of $0.4 million offset by increases in accrued liabilities of $0.1 million and accrued interest - related party and non-related party of $0.2 million. The increase in prepaid expenses was largely driven by new insurance policies and reporting software for public companies. The decrease in accounts payable was largely due to payments to several vendors, previously on extended payment terms, as a result of our IPO closing and returning to consistent terms with vendors. The increase in accrued liabilities was driven primarily by an increase in accruals for clinical trial costs incurred but not yet billed. The increase in accrued interest-related party is due to the issuance of related party convertible notes and the calculation of interest thereon. Non-cash items consisted of stock-based compensation of $2.5 million, amortization of debt discount of $0.7 million and depreciation and amortization expense of $0.2 million.

MD Anderson has the right to terminate the agreement upon advanced notice in the event of a default by us. The agreement will expire upon the expiration of the licensed intellectual property. The rights obtained by us pursuant to the agreement are made subject to the rights of the U.S. government to the extent that the technology covered by the licensed intellectual property was developed under a funding agreement between MD Anderson and the U.S. government. To the extent that is the case, our license agreement with, and the intellectual property rights we have licensed from, MD Anderson are subject to such a funding agreement and any superior rights that the U.S. government may have with respect to the licensed intellectual property. Therefore, there is a risk that the intellectual property rights we have licensed from MD Anderson may be non-exclusive or void if a funding agreement related to the licensed technology between MD Anderson and the U.S. government does exist and depending on the terms of such an agreement. Notwithstanding the foregoing, we do not believe our RAP technology received any federal funding. All out-of-pocket expenses incurred by MD Anderson in filing, prosecuting and maintaining the licensed patents have been and shall continue to be assumed by us. For the years ended December 31, 2020 and 2019, the Company paid $0.1 million and $0.3 million, respectively, for expenses related to this agreement, including a $0.25 million milestone payment made in June 2019 after the Company received FDA clearance for our RAP device for tattoo removal.

During the term of the Addendum, we agreed to certain minimum annual expenditures. If we fail to spend such minimum annual amounts or if we terminate the Addendum without cause, we will be required to pay Emphysys a termination fee ranging in the low to mid-six digits. In the event that all or substantially all of the stock or assets of either party are sold, then, at the request of other party, the Addendum may be terminated (without the requirement to pay a termination fee) and the obligation of Emphysys to provide future services to us shall terminate. Pursuant to the Addendum, with certain exceptions, Emphysys covenanted that it will not perform or agree to perform services with any company other than Soliton in the area of arc-discharge driven acoustical shockwave generation for medical dermatological or aesthetic dermatological indications during the term of the Addendum or any extension thereof, and for a period of six months after the termination of the Addendum.

Either party may terminate the Agreement or an order under the Agreement for default, if the other party materially breaches the Agreement; provided, however, no termination shall occur until thirty days after the defaulting party is notified in writing of the material breach and has failed to cure or give adequate assurances of performance within the thirty day period after notice of material breach. In addition, we may terminate the Agreement for any reason upon thirty days’ prior written notice and may terminate any order under the Agreement for any reason upon 120 days’ (before scheduled shipment) prior written notice. Sanmina may terminate the Agreement for any reason upon ninety days’ notice. In the event the Agreement or an order under the Agreement is terminated for any reason other than a breach by Sanmina, we are required to pay Sanmina termination charges equal to (i) the contract price for all finished product existing at the time of termination; (ii) Sanmina’s cost (including labor, components and applicable mark-ups per the pricing model) for all work in process; and (iii) the cost of components ordered by Sanmina pursuant to the Agreement.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements, including the notes thereto. We consider critical accounting policies to be those that require more significant judgments and estimates in the preparation of our financial statements, including the following: research and development expenses, long-lived assets; intangible assets valuations, accrued liabilities, income tax valuations, warrants, and stock-based compensation. Management relies on historical experience and other assumptions believed to be reasonable in making its judgments and estimates. Actual results could differ materially from those estimates.

We record accrued expenses for estimated costs of our research and development activities conducted by third-party service providers, which include the conducting of pre-clinical studies, preparation for and conducting of clinical trials, contract engineering and design activities, and other development costs. We record the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and we include these costs in accrued liabilities in the balance sheets and within research and development expense in the statements of operations as they are incurred. These costs are a significant component of our research and development expenses. We record accrued expenses for these costs based on the estimated amount of work completed and in accordance with agreements established with these third parties.

We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from clinical research organizations, engineering firms and other third-party service providers. To date, there have been no material differences from our accrued expenses to actual expenses.

We expect our research and development expenses to increase in the future as we advance our product into and through clinical trials, pursue additional regulatory approvals of our product in the United States, and continue commercial development of our RAP device and replaceable cartridge. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our technology may be affected by a variety of factors including: the quality of our product, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability. We may not succeed in achieving all necessary regulatory approvals for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development process or when and to what extent, if any, we will generate revenue from the commercialization and sale of our device.

We issued warrants to purchase shares of common stock related to (i) bridge notes issued prior to our IPO, (ii) private investment public equity ("PIPE") deals, and (iii) as part of underwriter compensation in 2019 and 2018. We accounted for such warrants in accordance with Accounting Standards Codification ("ASC") Topic 480-10, Distinguishing Liabilities from Equity, which identifies three categories of freestanding financial instruments that are required to be accounted for as a liability. Based on this guidance, we determined, for each issuance, that warrants did not need to be accounted for as a liability. Accordingly, the warrants were classified as equity and are not subject to remeasurement at each balance sheet date. In addition, we account for issuance costs of warrants issued with debt instruments in accordance with ASC 470-20, Debt with Conversion and Other Options, which states proceeds from the sale of a debt instrument with stock purchase warrants (detachable call options) are allocated to elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion of the proceeds so allocated to the warrants are accounted for as paid-in capital. The remainder of the proceeds are allocated to the debt instrument, which may result in a discount or premium.

Stock-based compensation transactions are recognized as compensation expense in the statements of operations based on their fair values on the date of the grant, with the compensation expense recognized over the period in which a grantee is required to provide service in exchange for the award. The expense for equity awards vested during the reporting period is recognized over the applicable vesting period of the stock award using either the straight-line method or the accelerated method, depending on the vesting structure, and is included in general and administrative, research and development or sales and marketing expenses, depending upon the classification of the grantee. We estimate the fair value of options granted using the Black-Scholes option pricing model. This estimate uses assumptions regarding a number of inputs that require us to make significant estimates and judgments. Because we are a new publicly traded common stock, the expected volatility assumption was based on industry peer information. Forfeitures are recognized as they are incurred


(in thousands, except for share data)	As of
	December 31,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	31,557	$	11,876
Restricted cash	200		200
Total cash, cash equivalents and restricted cash	31,757		12,076
Inventory	353		—
Prepaid expenses and other current assets	141		96
Total current assets	32,251		12,172
Property and equipment, net of accumulated depreciation	1,413		848
Intangible assets, net of accumulated amortization	114		98
Other assets	23		23
Total assets	$	33,801	$	13,141
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,008	$	1,338
Accrued and other current liabilities	1,812		1,528
Total current liabilities	2,820		2,866
Commitments and contingencies (see Note 6)
Stockholders’ equity (deficit):
Common stock, $0.001 par value, 100,000,000 authorized, 21,189,943 shares issued and outstanding at December 31, 2020 and 16,932,184 shares issued and outstanding at December 31, 2019	21		17
Additional paid-in capital	101,544		66,301
Accumulated deficit	(70,584)		(56,043)
Total stockholders’ equity	30,981		10,275
Total liabilities and stockholders’ equity	$	33,801	$	13,141


(in thousands,except for share and per share data)	For the Year Ended December 31,
	2020		2019
Revenue	$	—	$	—

Operating expenses:
Research and development	4,631		4,679
Sales and marketing	1,023		189
Depreciation expense	292		217
General and administrative expenses	8,457		7,858
Write-down of intangible assets and equipment	291		—
Total operating expenses	14,694		12,943

Loss from operations	(14,694)		(12,943)

Other (expense) income:
Interest expense	—		(823)
Other income	153		14
Total other expense	153		(809)

Loss before income taxes	(14,541)		(13,752)
Income tax expense	—		—

Net loss	$	(14,541)	$	(13,752)

Accrued dividends to Series A and Series B preferred stockholders	—		(160)
Net loss attributable to common stockholders	$	(14,541)	$	(13,912)

Net loss per common share, basic and diluted	$	(0.77)	$	(1.00)

Weighted average number of common shares outstanding, basic and diluted	18,955,861		13,841,884


(in thousands)	Series A Preferred Stock			Series B Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total
	Shares	Par		Shares	Par		Shares	Par

Balance December 31, 2018	417	$	—	2,118	$	2	1,998	$	2	$	22,569	$	(42,131)	$	(19,558)

Stock-based compensation	—	—		—	—		—	—		2,488		—		2,488
Debt discount on convertible notes and notes payable – issuance of warrants	—	—		—	—		—	—		146		—		146
Payment of deferred direct issuance costs	—	—		—	—		—	—		(186)		—		(186)
Issuance of common shares for extinguishment of preferred shares	(417)	—		(2,118)	(2)		2,535	2		—		—		—
Issuance of common shares for extinguishment of convertible debt	—	—		—	—		7,098	7		11,826		—		11,833
Issuance of common shares for extinguishment of dividends payable	—	—		—	—		955	1		4,773		—		4,774
Issuance of common shares from IPO, net of costs	—	—		—	—		2,173	2		9,871		—		9,873
Issuance of common shares for accelerated vesting	—	—		—	—		128	—		—		—		—
Issuance of common shares for June PIPE offering, net of costs	—	—		—	—		675	1		8,643		—		8,644
Issuance of common shares for October PIPE offering, net of costs	—	—		—	—		485	1		5,738		—		5,739
Issuance of common shares	—	—		—	—		886	1		(1)		—		—
Accrued preferred dividends	—	—		—	—		—	—		—		(160)		(160)
Net loss	—	—		—	—		—	—		—		(13,752)		(13,752)
Debt forgiveness	—	—		—	—		—	—		434		—		434

Balance December 31, 2019	—	$	—	—	$	—	16,933	$	17	$	66,301	$	(56,043)	$	10,275

Stock-based compensation	—	—		—	—		—	—		3,201		—		3,201
Issuance of common shares	—	—		—	—		40	—		—		—		—
June 2020 common stock offering, net of costs	—	—		—	—		4,217	4		32,042		—		32,046
Net loss	—	—		—	—		—	—		—		(14,541)		(14,541)

Balance December 31, 2020	—	$	—	—	$	—	21,190	$	21	$	101,544	$	(70,584)	$	30,981


(in thousands)	For the Years Ended December 31,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(14,541)	$	(13,752)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	292		217
Stock-based compensation	3,201		2,488
Write-down of intangible assets and equipment	291		—
Amortization of debt discount	—		665
Changes in operating assets – (Increase)/Decrease:
Inventory	(353)		—
Prepaid expenses and other current assets	(45)		(86)
Changes in operating liabilities – Increase/(Decrease):
Accounts payable	(625)		(370)
Accrued liabilities	283		76
Accrued interest – non-related party	—		11
Accrued interest – related party	—		146

NET CASH USED IN OPERATING ACTIVITIES:	(11,497)		(10,605)

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for the purchase of property and equipment	(834)		(830)
Payments for acquisition of intangibles	(34)		(13)
NET CASH USED IN INVESTING ACTIVITIES:	(868)		(843)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of non-convertible notes payable and accrued interest - related party and non- related party	—		(1,005)
Proceeds from the issuance of non-convertible notes payable - non-related party	—		300
Proceeds from issuance of common shares, net of costs	32,046		24,096
NET CASH PROVIDED BY FINANCING ACTIVITIES:	32,046		23,391

Net increase in cash, cash equivalents and restricted cash	19,681		11,943
Cash, cash equivalents and restricted cash, beginning of period	12,076		133
Cash, cash equivalents and restricted cash, end of period	$	31,757	$	12,076

Supplemental cash flow disclosures:
Cash paid for interest	$	—	$	20


Non-cash investing and financing activities:
Accrued direct issuance costs – offering	$	—	$	(277)
Additions to property and equipment included in accounts payable	$	295	$	—
Capital contributions – debt forgiveness	$	—	$	434
Accrued preferred dividends	$	—	$	160
Debt discount on convertible notes and notes payable – issuance of warrants	$	—	$	146
Issuance of common stock for extinguishment of convertible note payable - related party and non-related party	$	—	$	11,833
Issuance of common stock for extinguishment of dividends payable	$	—	$	4,773
Issuance of common stock for extinguishment of preferred stock A and preferred stock B	$	—	$	3

These factors raise uncertainties about the Company's ability to fund operations in future years. If the Company needs additional capital or financing to continue to execute its business plan or a change to its business plan, including obtaining additional regulatory clearance for its products currently under development and commercializing and generating revenues from products under development, there is no assurance that additional capital or financing will be available when needed or that management will be able to raise capital or obtain financing on terms acceptable to the Company. A failure to raise sufficient capital or obtain financing could adversely impact the Company’s ability to achieve its intended business objectives and meet its financial obligations beyond the third quarter of 2022. The accompanying financial statements do not include any adjustments to reflect this uncertainty.

In connection with the closing of the IPO on February 19, 2019, convertible notes (and related accrued interest) of $11.8 million were converted into 6,825,391 shares of the Company's common stock. Certain notes automatically converted, according to their terms, into common stock. Certain holders were 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 limitation, principal representing $47.8 thousand of these notes remained and was later converted into 273,034 shares of the Company's common stock in August and September 2019 when the conversion did not result in the holders and any of its affiliates owning more than 4.99% of the Company's outstanding common shares. All remaining debt instruments were settled at the closing of the IPO.

Our management, including our Chief Executive Officer (“CEO”), who serves as our principal executive officer, and our Chief Financial Officer (“CFO”), who serves as our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Form 10-K. Based on this evaluation, our CEO and our CFO concluded that as a result of the material weaknesses in our internal control over financial reporting discussed below, our disclosure controls and procedures were not effective at ensuring that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including our CEO and CFO, or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure.

Our CEO and our CFO are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon such assessment and due to both the limited staffing of the Company at its early stage of development and the existence of the material weaknesses in our internal control over financial reporting described below, our CEO and CFO have concluded that, as of December 31, 2020, our disclosure controls and procedures were not effective.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard 1305), or combination of control deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As previously disclosed in our annual Report on Form 10-K for the year ended December 31, 2019, our management concluded that our internal control over financial reporting was, and continues to be ineffective, as of December 31, 2020 due to material weaknesses in our internal controls arising from a lack of segregation of duties, the limitations of our financial accounting system to properly segregate duties, and the absence of internal staff with extensive knowledge of SEC financial and GAAP reporting. It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to maintain effective segregation of duties on our assessment of our internal control over financial reporting and has concluded that the control deficiency represents a material weakness. In April 2019, an additional experienced staff was hired in the accounting and finance department and in August 2020, an experienced employee was hired in the accounting and finance department to focus on the further development of internal controls. Additionally, we hired one more experienced employee in the accounting and finance department in February of 2021 to further aid in the segregation of duties. In addition, we are retaining appropriate consultants to enhance our knowledge of SEC financial and GAAP reporting and upgrading our accounting system. Furthermore, management added additional mitigating controls with regards to cash disbursements; changes were made in our authorization processes to improve segregation of duties; and we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with GAAP. Accordingly, we believe that the

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, or our certificate of incorporation or the bylaws, and (iv) any action asserting a claim against us governed by the internal affairs doctrine. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or Securities Act.

On March 1, 2021, we adopted an executive severance plan (the “Severance Plan”) for each of our executives with the title of vice president or above that do not have an employment agreement that provides severance benefits. Under the Severance Plan, if we terminate an executive other than for cause or good reason, each as defined in the Severance Plan, the executive will receive certain severance benefits for 6 months. For purposes of the Severance Plan, “cause” generally means the executive (i) pleads “guilty” or “no contest” to, or is convicted of a felony under federal or state law; (ii) engages in conduct, in the performance of the executive’s duties, that constitutes gross negligence or willful misconduct; (iii) engages in substantiated fraud, misappropriation or embezzlement; or (iv) engages in any willful misconduct that causes material harm to our reputation. For purposes of the Severance Plan, “good reason” means (i) we require the executive to be based at any office located more than 50 miles from the executive’s home; (ii) there is a 20% or greater reduction of the executive’s then current base salary, other than a general reduction in base salary that affects all similarly situated employees in substantially the same proportions; or (iii) a material breach by us of any agreement we enter into with the executive. As a condition to receiving these severance benefits, the executive is required to execute a release of claims agreement in favor of us. Although we have the right to amend or terminate the Severance Plan, we may not do so in any manner that diminishes any benefits being paid to an executive at the time of such amendment or termination.


Exhibit Number						Description of Document
3.1						Amended and Restated Certificate of Incorporation dated February 19, 2019 (incorporated by reference to exhibit 3.1 of the Form 8-K filed February 22, 2019)

3.2						Amended and Restated Bylaws of Soliton, Inc. (incorporated by reference to exhibit 2.3 of the Form 1-A, file number 024-10854)

4.1						Form of Common Stock certificate (incorporated by reference to exhibit 4.1 of the Form 10-K filed March 29, 2019)

4.2						Form of Warrant issuable in October 2018 Offering (incorporated by reference to exhibit 6.10 of the Form 1-A, file number 024-10854)

4.3						Form of Warrant Agreement issued in June 2019 PIPE offering (incorporated by reference to exhibit 4.1 of the Company's Form 8-K filed June 18, 2019)

4.4						Form of Warrant Agreement issued in October 2019 offering (incorporated by reference to exhibit 4.1 of the Company's Form 8-K filed October 15, 2019)

4.5 *						Description of Securities of Soliton, Inc.

10.1						Patent and Technology License Agreement between Soliton, Inc. and The Board of Regents of The University of Texas System dated April 5, 2012 (incorporated by reference to exhibit 6.1 of the Form 1-A, file number 024-10854)

10.2 **						Soliton, Inc. 2012 Long Term Incentive Plan (incorporated by reference to exhibit 6.2 of the Form 1-A, file number 024-10854)

10.3 **						2018 Stock Plan of Soliton, Inc., as amended, and forms of award agreements thereunder (incorporated by reference to exhibit 99.1 of the Company's Form S-8, file number 333-232636)

10.4						Lease Agreement between Soliton, Inc. and Ashbrook Land, Ltd. dated July 16, 2015 (incorporated by reference to exhibit 6.6 of the Form 1-A, file number 024-10854)

10.5 **						Employment Agreement by and between Soliton, Inc. and Walter Klemp, effective February 25, 2019 (incorporated by reference to exhibit 10.1 of the Form 10-Q filed March 1, 2019)

10.6 **						Employment Agreement by and between Soliton, Inc. and Christopher Capelli, effective February 25, 2019 (incorporated by reference to exhibit 10.2 of the Form 10-Q filed March 1, 2019)

10.7 **						Employment Agreement by and between Soliton, Inc. and Joe Tanner, effective February 25, 2019 (incorporated by reference to exhibit 10.3 of the Form 10-Q filed March 1, 2019)

10.8 **						Employment Agreement by and between Soliton, Inc. and Lori Bisson, effective February 25, 2019 (incorporated by reference to exhibit 10.4 of the Form 10-Q filed March 1, 2019)

10.9						Form of Registration Rights Agreement dated June 16, 2019 by and among Soliton, Inc. and the investors in the June 2019 PIPE offering (incorporated by reference to exhibit 10.2 of the Company's Form 8-K filed June 18, 2019)

10.10						Form of Registration Rights Agreement dated October 10, 2019 by and among Soliton, Inc. and the investors in the October 2019 offering (incorporated by reference to exhibit 10.2 of the Company's Form 8-K filed June 18, 2019)

10.11 +						Cooperative Development Addendum to Engineering and Development Services Master Agreement between Soliton, Inc. and Emphysys, Inc. dated November 20, 2019 (incorporated by reference to exhibit 10.1 of the Company's Form 8-K filed November 22, 2019)

10.12 **						Employment Agreement by and between Soliton, Inc. and Brad Hauser, effective October 30, 2020 (incorporated by reference to exhibit 10.1 of the Form 10-Q filed November 2, 2020)

10.13 **						Amendment to Amended and Restated Employment Agreement by and between Soliton, Inc. and Christopher Capelli, effective October 30, 2020 (incorporated by reference to exhibit 10.2 of the Form 10-Q filed November 2, 2020)


Date: March 4, 2021	By:	/s/ BRAD HAUSER
		Brad Hauser Chief Executive Officer, President and Director (Principal Executive Officer)

Date: March 4, 2021		/s/ LORI BISSON
		Lori Bisson Chief Financial Officer (Principal Financial and Accounting Officer)

Date: March 4, 2021		/s/ CHRISTOPHER CAPELLI
		Christopher Capelli Chief Science Officer and Vice Chairman of the Board of Directors

Date: March 4, 2021		/s/ WALTER KLEMP
		Walter Klemp Executive Chairman of the Board of Directors

Date: March 4, 2021		/s/ JONATHAN FOSTER
		Jonathan Foster Director

Date: March 4, 2021		/s/ DANIKA HARRISON
		Danika Harrison Director

Date: March 4, 2021		/s/ NIQUETTE HUNT
		Niquette Hunt Director

Date: March 4, 2021		/s/ MICHAEL KAMINER, MD
		Michael Kaminer Director


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock, par value $0.001 per share	SOLY	The Nasdaq Stock Market


PART I

Item 1.	Business	5
Item 1A.	Risk Factors	28
Item 1B.	Unresolved Staff Comments	52
Item 2.	Properties	52
Item 3.	Legal Proceedings	52
Item 4.	Mine Safety Disclosures	53

PART II		53

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	54
Item 6.	Selected Financial Data	54
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	62
Item 8.	Financial Statements and Supplementary Data	63
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	84
Item 9A.	Controls and Procedures	84
Item 9B.	Other Information	85

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	86
Item 11.	Executive Compensation	86
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	86
Item 13.	Certain Relationships and Related Transactions and Director Independence	86
Item 14.	Principal Accounting Fees and Services	86

PART IV		86

Item 15.	Exhibits, Financial Statement Schedules	87
Item 16.	Form 10-K Summary	89


			Page
Report of Independent Registered Public Accounting Firm			64
Balance Sheets as of December 31, 2020 and 2019			65
Statements of Operations for the years ended December 31, 2020 and 2019			66
Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2020 and 2019			67
Statements of Cash Flows for the years ended December 31, 2020 and 2019			68
Notes to Financial Statements			69


/s/ Dixon Hughes Goodman LLP

We have served as the Company’s auditor since 2019.

Atlanta, Georgia
March 4, 2021


	December 31, 2020		December 31, 2019
Computer equipment and software	$	171	$	127
Construction in progress	710		—
Research and development equipment	248		245
Lab equipment	390		780
Tooling	366		—
Leasehold improvements	271		271
Furniture	20		20
Subtotal	2,176		1,443
Less: accumulated depreciation	(763)		(595)
Total property and equipment	$	1,413	$	848


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


	Year Ended December 31,
	2020		2019		Change $		Change %
Operating expenses:

Research and development	$	4,631	$	4,679	$	(48)	(1.03)	%
Sales and marketing	1,023		189		834		441.27	%
Depreciation and amortization	292		217		75		34.56	%
General and administrative	8,457		7,858		599		7.62	%
Write-down of intangible assets and equipment	291		—		291		—
Total operating expenses	14,694		12,943		1,751		13.53	%

Other (income) expense:

Interest expense	—		823		(823)		(100.00)	%
Other income	(153)		(14)		(139)		992.86	%
Total other (income) expenses	(153)		809		(962)		(118.91)	%
Net loss	$	14,541	$	13,752	$	789	5.74	%


	For the Year ended December 31,
	2020		2019
Net cash used in operating activities	$	(11,497)	$	(10,605)
Net cash used in investing activities	(868)		(843)
Net cash provided by financing activities	32,046		23,391
Net increase in cash and cash equivalents	$	19,681	$	11,943


	December 31, 2020		December 31, 2019
Prepaid insurance	$	49	$	94
Other prepaids and receivables	92		2
Total prepaid expenses and other current assets	$	141	$	96


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested at December 31, 2018	127,500	$	3.21
Granted	200,000	11.54
Vested	(169,164)	5.26
Unvested at December 31, 2019	158,336	$	11.54
Granted	200,000	7.16
Vested	(49,992)	11.54
Unvested at December 31, 2020	308,344	$	8.70


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Life (in Years)	Aggregate Intrinsic Value
Outstanding, December 31, 2018	2,235,000	$	1.74	9.44	$	23,100
Granted	648,550	6.03		—	—
Outstanding, December 31, 2019	2,883,550	2.70		8.62	$	23,861,981
Granted	1,036,000	9.38		—	—
Outstanding, December 31, 2020	3,919,550	$	4.47	8.11	$	13,095,054

Exercisable, December 31, 2020	1,627,425	$	2.47	7.59	$	8,696,368


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding, December 31, 2018	776,350	$	1.75	4.80	$	—
Granted	1,458,356	10.88		—	—
Exercised	(685,900)	2.12		—	6,073,855
Forfeited (cashless exercise)	(174,198)	3.99		—	—
Outstanding, December 31, 2019	1,374,608	$	10.97	4.43	$	13,591

Exercised	(40,891)	1.75		—	247,799
Forfeited (cashless exercise)	(9,109)	1.75		—	—
Outstanding December 31, 2020	1,324,608	$	11.32	3.44	$	—

Exercisable, December 31, 2020	1,324,608	$	11.32	3.44	$	—


	December 31, 2020				December 31, 2019
	Amount		%		Amount		%
Tax benefit at the U.S. federal statutory rate	$	(3,054)	(21.00)	%	$	(2,888)	(21.00)	%
Tax rate change	—		—		—		—	%
Permanent differences	5		0.03	%	25		0.18	%
Return to provision	(5)		(0.03)	%	(25)		(0.18)	%
Valuation allowance	3,054		21.00	%	2,888		21.00	%
Effective income tax rate	$	—	—	%	$	—	—	%


	December 31, 2020		December 31, 2019
Assets related to:
Accounts payable and accrued liabilities	$	592	$	588
Stock-based compensation	1,137		—
Net operating losses and start-up costs	11,785		9,891
Total deferred tax assets	13,514		10,479
Valuation allowance for deferred tax assets	(13,351)		(10,297)
Net deferred tax	163		182
Liabilities related to:
Accounts receivable and prepaid expenses	(30)		(20)
Depreciation and amortization	(133)		(162)
Net deferred tax liabilities	(163)		(182)

Net deferred tax assets	$	—	$	—



10.14***						Amendment to Amended and Restated Employment Agreement by and between Soliton, Inc. and Lori Bisson, effective March 1, 2021

10.15***						Amendment to Amended and Restated Employment Agreement by and between Soliton, Inc. and Joe Tanner, effective March 1, 2021

10.16***						Soliton, Inc. Executive Severance Plan and Summary Description effective March 1, 2021

23.1*						Consent of Dixon Hughes Goodman LLP

31.1*						Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended

31.2*						Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended

32.1*						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*						Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*						XBRL Instance Document

101.SCH*						XBRL Taxonomy Extension Schema Document

101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*						XBRL Taxonomy Extension Label Linkbase Document

101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document


Plan Name:			Soliton Inc. Executive Severance Plan
Plan Sponsor:			Soliton, Inc. 5304 Ashbrook Drive Houston, TX 77081
Plan Sponsor’s EIN:			36-4729076
Plan Number:			501
Type of Plan:			Welfare
Plan Year End:			December 31
Plan Administrator:			Soliton, Inc. 5304 Ashbrook Drive Houston, TX 77081 Telephone: 844-705-4866 Attention: Chief Financial Officer
Agent for Service of Legal Process:			Soliton, Inc. 5304 Ashbrook Drive Houston, TX 77081 Attention: Legal Department


	SOLITON, INC.

Date: March 4, 2021	By:	/s/ BRAD HAUSER
		Brad Hauser Chief Executive Officer, President and Director (Principal Executive Officer)


Date: March 4, 2021	By:	/s/ BRAD HAUSER
		Brad Hauser Chief Executive Officer and President


Date: March 4, 2021	By:	/s/ LORI BISSON
		Lori Bisson Chief Financial Officer

Cover - USD ($)	12 Months Ended
Cover - USD ($)	Dec. 31, 2020	Feb. 12, 2021	Jun. 30, 2020
Cover [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2020
Current Fiscal Year End Date	--12-31
Document Transition Report	false
Entity File Number	001-38815
Entity Registrant Name	SOLITON, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	36-4729076
Entity Address, Address Line One	5304 Ashbrook Drive
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77081
City Area Code	844
Local Phone Number	705-4866
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	SOLY
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
ICFR Auditor Attestation Flag	false
Entity Shell Company	false
Entity Public Float			$ 85,911,296
Entity Common Stock, Shares Outstanding		21,199,943
Entity Central Index Key	0001548187
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Amendment Flag	false

Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 31,557	$ 11,876
Restricted cash	200	200
Total cash, cash equivalents and restricted cash	31,757	12,076
Inventory	353	0
Prepaid expenses and other current assets	141	96
Total current assets	32,251	12,172
Property and equipment, net of accumulated depreciation	1,413	848
Intangible assets, net of accumulated amortization	114	98
Other assets	23	23
Total assets	33,801	13,141
Current liabilities:
Accounts payable	1,008	1,338
Accrued and other current liabilities	1,812	1,528
Total current liabilities	2,820	2,866
Commitments and contingencies (see Note 6)
Stockholders’ equity (deficit):
Common stock, $0.001 par value, 100,000,000 authorized, 21,189,943 shares issued and outstanding at December 31, 2020 and 16,932,184 shares issued and outstanding at December 31, 2019	21	17
Additional paid-in capital	101,544	66,301
Accumulated deficit	(70,584)	(56,043)
Total stockholders’ equity	30,981	10,275
Total liabilities and stockholders’ equity	$ 33,801	$ 13,141

Balance Sheets (Parentheticals) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	21,189,943	16,932,184
Common stock, shares outstanding (in shares)	21,189,943	16,932,184

Statements of Operations - USD ($)	12 Months Ended
Statements of Operations - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Income Statement [Abstract]
Revenue	$ 0	$ 0
Operating expenses:
Research and development	4,631,000	4,679,000
Sales and marketing	1,023,000	189,000
Depreciation expense	292,000	217,000
General and administrative expenses	8,457,000	7,858,000
Write-down of intangible assets and equipment	291,000	0
Total operating expenses	14,694,000	12,943,000
Loss from operations	(14,694,000)	(12,943,000)
Other (expense) income:
Interest expense	0	(823,000)
Other income	153,000	14,000
Total other expense	153,000	(809,000)
Loss before income taxes	(14,541,000)	(13,752,000)
Income tax expense	0	0
Net loss	14,541,000	13,752,000
Accrued dividends to Series A and Series B preferred stockholders	0	(160,000)
Net loss attributable to common stockholders	$ (14,541,000)	$ (13,912,000)
Net loss per common share, basic and diluted	$ (0.77)	$ (1.00)
Weighted average number of common shares outstanding, basic and diluted	18,955,861	13,841,884

Statements of Changes in Stockholders' Equity (Deficit) - USD ($) shares in Thousands, $ in Thousands	Total	June Private Investment in Public Equity Offering	October Private Investment in Public Equity Offering	Stock Issuance, Excluding PIPE Deal	June 2020 Offering	Preferred Stock Series A Preferred Stock	Preferred Stock Series B Preferred Stock	Common Stock	Common Stock June Private Investment in Public Equity Offering	Common Stock October Private Investment in Public Equity Offering	Common Stock Stock Issuance, Excluding PIPE Deal	Common Stock June 2020 Offering	Additional Paid-In Capital	Additional Paid-In Capital June Private Investment in Public Equity Offering	Additional Paid-In Capital October Private Investment in Public Equity Offering	Additional Paid-In Capital Stock Issuance, Excluding PIPE Deal	Additional Paid-In Capital June 2020 Offering	Accumulated Deficit
Balance (in shares) at Dec. 31, 2018						417	2,118	1,998
Balance at Dec. 31, 2018	$ (19,558)					$ 0	$ 2	$ 2					$ 22,569					$ (42,131)
Stock-based compensation	2,488												2,488
Debt discount on convertible notes and notes payable – issuance of warrants	146												146
Payment of deferred direct issuance costs	(186)												(186)
Issuance of common shares for extinguishment of preferred shares (in shares)						(417)	(2,118)
Issuance of common shares for extinguishment of preferred shares							$ (2)
Issuance of common shares for extinguishment of preferred shares (in shares)								2,535
Issuance of common shares for extinguishment of preferred shares								$ 2
Issuance of common shares for extinguishment of preferred shares	0
Issuance of common shares for extinguishment of convertible debt (in shares)								7,098
Issuance of common shares for extinguishment of convertible debt	11,833							$ 7					11,826
Issuance of common shares for extinguishment of dividends payable (in shares)								955
Issuance of common shares for extinguishment of dividends payable	4,774							$ 1					4,773
Issuance of common stock (in shares)								2,173	675	485	886
Issuance of common shares	9,873	$ 8,644	$ 5,739	$ 0				$ 2	$ 1	$ 1	$ 1		9,871	$ 8,643	$ 5,738	$ (1)
Issuance of common shares for accelerated vesting (in shares)								128
Issuance of common shares for accelerated vesting	0
Accrued preferred dividends	(160)																	(160)
Net loss	(13,752)																	(13,752)
Debt forgiveness	434												434
Balance (in shares) at Dec. 31, 2019						0	0	16,933
Balance at Dec. 31, 2019	10,275					$ 0	$ 0	$ 17					66,301					(56,043)
Stock-based compensation	3,201												3,201
Debt discount on convertible notes and notes payable – issuance of warrants	0
Issuance of common stock (in shares)											40	4,217
Issuance of common shares				$ 0	$ 32,046							$ 4					$ 32,042
Accrued preferred dividends	0
Net loss	(14,541)																	(14,541)
Debt forgiveness	0
Balance (in shares) at Dec. 31, 2020						0	0	21,190
Balance at Dec. 31, 2020	$ 30,981					$ 0	$ 0	$ 21					$ 101,544					$ (70,584)

Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
Statements of Cash Flows - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (14,541)	$ (13,752)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	292	217
Stock-based compensation	3,201	2,488
Write-down of intangible assets and equipment	291	0
Amortization of debt discount	0	665
Changes in operating assets – (Increase)/Decrease:
Inventory	(353)	0
Prepaid expenses and other current assets	(45)	(86)
Changes in operating liabilities – Increase/(Decrease):
Accounts payable	(625)	(370)
Accrued liabilities	283	76
Accrued interest – non-related party	0	11
Accrued interest – related party	0	146
NET CASH USED IN OPERATING ACTIVITIES:	(11,497)	(10,605)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for the purchase of property and equipment	(834)	(830)
Payments for acquisition of intangibles	(34)	(13)
NET CASH USED IN INVESTING ACTIVITIES:	(868)	(843)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of non-convertible notes payable and accrued interest - related party and non- related party	0	(1,005)
Proceeds from the issuance of non-convertible notes payable - non-related party	0	300
Proceeds from issuance of common shares, net of costs	32,046	24,096
NET CASH PROVIDED BY FINANCING ACTIVITIES:	32,046	23,391
Net increase in cash, cash equivalents and restricted cash	19,681	11,943
Cash, cash equivalents and restricted cash, beginning of period	12,076	133
Cash, cash equivalents and restricted cash, end of period	31,757	12,076
Supplemental cash flow disclosures:
Cash paid for interest	0	20
Non-cash investing and financing activities:
Accrued direct issuance costs – offering	0	(277)
Additions to property and equipment included in accounts payable	295	0
Capital contributions – debt forgiveness	0	434
Accrued preferred dividends	0	160
Debt discount on convertible notes and notes payable – issuance of warrants	0	146
Issuance of common stock for extinguishment of convertible note payable - related party and non-related party	0	11,833
Issuance of common stock for extinguishment of dividends payable	0	4,773
Issuance of common stock for extinguishment of preferred stock A and preferred stock B	$ 0	$ 3

Organization and Nature of Business	12 Months Ended
Organization and Nature of Business	Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Nature of Business	Organization and Nature of Business Soliton, Inc. (the “Company”) was organized under the laws of the State of Delaware on March 27, 2012. The Company operates in one segment as a medical device company organized to develop and commercialize products utilizing its proprietary Rapid Acoustic Pulse ("RAP") technology platform. The Company is a pre-revenue stage company with its first products being developed for the removal of tattoos and the reduction of cellulite. The Company received clearance from the U.S. Food & Drug Administration ("FDA") for its tattoo removal indication in June of 2019 and for temporary improvement in the appearance of cellulite in January 2021. 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 RAP console and disposable cartridges to dermatologists, plastic surgeons and other physician offices, as well as medi-spas under the supervision of a doctor. Material Uncertainties The Company is an early stage and emerging growth company ("EGC") 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. For the years ended December 31, 2020 and 2019, the Company incurred net losses of $14.5 million and $13.8 million, respectively, and had net cash flows used in operating activities of $11.5 million and $10.6 million, respectively. At December 31, 2020, the Company had an accumulated deficit of $70.6 million, positive working capital of $29.4 million and cash of $31.8 million. The Company does not expect to experience positive cash flows from operating activities in the near future and anticipates incurring operating losses for the next few years as it supports the commercial launch of its products and continues to invest in research and development for additional indications in the Company's pipeline. The Company expects its cash, cash equivalents and restricted cash on hand of $31.8 million as of December 31, 2020 will be sufficient to fund the Company's operations into the third quarter of 2022 but not beyond. These factors raise uncertainties about the Company's ability to fund operations in future years. If the Company needs additional capital or financing to continue to execute its business plan or a change to its business plan, including obtaining additional regulatory clearance for its products currently under development and commercializing and generating revenues from products under development, there is no assurance that additional capital or financing will be available when needed or that management will be able to raise capital or obtain financing on terms acceptable to the Company. A failure to raise sufficient capital or obtain financing could adversely impact the Company’s ability to achieve its intended business objectives and meet its financial obligations beyond the third quarter of 2022. The accompanying financial statements do not include any adjustments to reflect this uncertainty.

Notes Payable	12 Months Ended
Notes Payable	Dec. 31, 2020
Debt Disclosure [Abstract]
Notes Payable	Notes PayableIn connection with the closing of the IPO on February 19, 2019, convertible notes (and related accrued interest) of $11.8 million were converted into 6,825,391 shares of the Company's common stock. Certain notes automatically converted, according to their terms, into common stock. Certain holders were 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 limitation, principal representing $47.8 thousand of these notes remained and was later converted into 273,034 shares of the Company's common stock in August and September 2019 when the conversion did not result in the holders and any of its affiliates owning more than 4.99% of the Company's outstanding common shares. All remaining debt instruments were settled at the closing of the IPO.

Commitments and Contingencies	12 Months Ended
Commitments and Contingencies	Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies On April 5, 2012, the Company entered into a Patent and Technology License Agreement with MD Anderson. Pursuant to the agreement, the Company obtained a royalty-bearing, worldwide, exclusive license to intellectual property including patent rights related to the patents and technology the Company uses. Under the agreement, the Company agreed to pay a nonrefundable license documentation fee in the high-five digits 30 days after the effective date of the agreement. Additionally, the Company agreed to pay a nonrefundable annual maintenance fee starting on the third anniversary of the effective date of the agreement, which escalates each anniversary and is currently in the mid-five digits. Additionally, the Company agreed to a running royalty percentage of net sales in the mid-single digits. The Company also agreed to make certain milestone payments in the low to mid-six digits and sublicensing payments, including a $0.25 million milestone payment made in June 2019 after the Company received U.S. Food & Drug Administration ("FDA") clearance for our RAP device for tattoo removal. The specific patents initially subject to the agreement expire between 2031 and 2032. MD Anderson has the right to terminate the agreement upon advanced notice in the event of a default by the Company. The agreement will expire upon the expiration of the licensed intellectual property. The rights obtained by the Company pursuant to the agreement are made subject to the rights of the U.S. government to the extent that the technology covered by the licensed intellectual property was developed under a funding agreement between MD Anderson and the U.S. government. To the extent that is the case, the Company's license agreement with, and the intellectual property rights it has licensed from MD Anderson, are subject to such a funding agreement and any superior rights that the U.S. government may have with respect to the licensed intellectual property. Therefore, there is a risk that the intellectual property rights the Company has licensed from MD Anderson may be non-exclusive or void if a funding agreement related to the licensed technology between MD Anderson and the U.S. government does exist and depending on the terms of such an agreement. Notwithstanding the foregoing, the Company does not believe our RAP technology received any federal funding. All out-of-pocket expenses incurred by MD Anderson in filing, prosecuting and maintaining the licensed patents have been and shall continue to be assumed by the Company. For the years ended December 31, 2020 and 2019, the Company paid $0.1 million and $0.3 million, respectively, for expenses related to this agreement, including a $0.25 million milestone payment made in June 2019 after the Company received FDA clearance for its RAP device for tattoo removal. As the inventor of the intellectual property licensed from MD Anderson, Dr. Capelli, the Company's Chief Science Officer, is entitled to 50% of the license income (which is determined after MD Anderson recoups any costs associated therewith) that the Company is required to pay to MD Anderson pursuant to the Company's license agreement with MD Anderson. For the years ended December 31, 2020 and 2019, Dr. Capelli received $37.5 thousand and $0.2 million, respectively, from MD Anderson. In addition, Dr. Capelli is entitled to 50% of the proceeds (after the recoupment of any costs associated therewith) from the sale by MD Anderson of 175,000 shares issued to MD Anderson in connection with the license agreement. On November 20, 2019, the Company entered into a cooperative development addendum ("Addendum") to its engineering and development services master agreement with Emphysys, Inc. ("Emphysys”). The Addendum states that Emphysys will provide the Company with engineering and design services related to shockwave technology for use in dermatology and aesthetics fields for a 36 month period ending July 1, 2022. During the term of the Addendum, the Company agreed to certain minimum annual expenditures. If the Company fails to spend such minimum annual amounts or if the Company terminates the Addendum without cause, the Company will be required to pay Emphysys an early termination fee of no more than $0.4 million. In the event that all or substantially all of the stock or assets of either party are sold then, at the request of other party, the Addendum may be terminated (without the requirement to pay a termination fee) and the obligation of Emphysys to provide future services to the Company shall terminate. Pursuant to the Addendum, with certain exceptions, Emphysys covenanted that it will not perform or agree to perform services with any company other than Soliton in the area of arc-discharge driven acoustical shockwave generation for medical dermatological or aesthetic dermatological indications during the term of the Addendum or any extension thereof, and for a period of six months after the termination of the Addendum. On March 6, 2020, the Company entered into a manufacturing service agreement (the "Agreement") with Sanmina Corporation ("Sanmina"). The Agreement states that Sanmina will provide the Company with certain manufactured products for a one year period, with pricing adjusted for material variations of market prices for components, parts and raw material, including variations resulting from allocations, shortages or tariffs. In addition, pricing will be based on the forecasted volumes provided by the Company and the projected inventory turns as agreed by both parties. Either party may terminate the Agreement or an order under the Agreement for default, if the other party materially breaches the Agreement; provided, however, no termination shall occur until thirty days after the defaulting party is notified in writing of the material breach and has failed to cure or give adequate assurances of performance within the thirty day period after notice of material breach. In addition, the Company may terminate the Agreement for any reason upon thirty days’ prior written notice and may terminate any order under the Agreement for any reason upon 120 days’ (before scheduled shipment) prior written notice. Sanmina may terminate the Agreement for any reason upon ninety days’ notice. In the event the Agreement or an order under the Agreement is terminated for any reason other than a breach by Sanmina, the Company is required to pay Sanmina termination charges equal to (i) the contract price for all finished product existing at the time of termination; (ii) Sanmina’s cost (including labor, components and applicable mark-ups per the pricing model) for all work in process; and (iii) the cost of components ordered by Sanmina pursuant to the Agreement. Purchase Commitments As of December 31, 2020 the Company had purchase obligations of $2.6 million to Emphysys. This commitment is for services used in the ordinary course of business and does not represent excess commitments or loss contracts. The remaining minimum purchase obligations were $1.0 million and $1.6 million, respectively, for the 12 month periods ending June 30, 2021 and June 30, 2022. Lease Commitments The Company leases space for its corporate office, which provides for an original 63 month term beginning on February 1, 2016, with initial rent payments of $7.9 thousand per month that escalate annually to a maximum of $8.9 thousand per month through the expiration of the agreement. On September 15, 2020, the Company entered into a 12 month extension of its corporate office lease. Total rent expense under this office space lease arrangement for the years ended December 31, 2020 and 2019 was $0.1 million and $0.1 million, respectively. Future minimum lease payments under the operating leases as of December 31, 2020 were $0.1 million through the lease term ending in April 2022. Letters of Credit The Company has an irrevocable letter of credit which supports its obligations to pay or perform according to the requirements of an underlying agreement with a certain vendor. Such letter of credit has an initial term of one year, renews automatically for an additional year and can only be modified or canceled with the approval of the beneficiary. As of December 31, 2020, the letter of credit was not used. Legal Proceedings In the normal course of business, from time-to-time, the Company may be subject to claims in legal proceedings. However, the Company does not believe it is currently a party to any pending legal actions. Notwithstanding, legal proceedings are subject to inherent uncertainties, and an unfavorable outcome could include monetary damages and, in such event, could result in a material adverse impact on the Company's business, financial position, results of operations, or cash flows. Employment Agreements The Company has agreements with certain employees to provide certain benefits in the event of termination where the base salary and certain other benefits would aggregate $2.9 million using the rate of compensation in effect at December 31, 2020.

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2020
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events On January 21, 2021, the Company entered into a collaborative agreement with the United States Navy to further study the impact of the RAP device on the treatment of keloid and hypertrophic scars. The Company plans to initiate this study in the first half of 2021. Also on January 21, 2021, the Company's Board granted certain individuals options to purchase 38,750 shares of common stock with an exercise price of $9.74 per share, a contractual term of 10 years and a vesting period of 25% per year over 4 years. Additionally, the Company's Board granted certain individuals and members of management options to purchase 372,900 shares of common stock subject to shareholder approval of the increase in the shares subject to the 2018 Stock Plan with an exercise price of $9.74 per share, a contractual term of 10 years, and vesting periods of 25% per year over 4 years. The options issued and fully approved had an aggregated grant date fair value of $0.3 million that was calculated using the Black-Scholes option pricing model. The options subject to shareholder approval had an aggregated grant date fair value of $2.7 million that was calculated using the Black-Scholes option pricing model. Variables used in the Black-Scholes option pricing model include: (1) a discount rate of 0.19% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected life of 6.25 years based on the simplified method (vesting plus contractual term divided by two), (3) expected volatility of 88.90% based on the historical volatility of comparable companies' stock, (4) no expected dividends and (5) fair market value of the Company's stock of $9.74 per share. The options subject to shareholder approval will be valued using the Black-Scholes option pricing model upon shareholder approval. On January 29, 2021, the FDA provided a 510(k) clearance for the Company's RAP device for temporary improvement in the appearance of cellulite. On March 1, 2021, the Company entered into amendments to its amended and restated employment agreements dated February 25, 2019 with Lori Bisson, our chief financial officer, and Joe Tanner, our chief operating officer, pursuant to which the Company agreed to amend the severance period set forth in the employment agreements to 12 months from 9 months, and pursuant to which such officers agreed to extend the length of their non-solicitation and non-competition periods after termination from 9 months to 12 months. On March 1, 2021, the Company adopted an executive severance plan (the “Severance Plan”) for each of the Company's executives with the title of vice president or above that do not have an employment agreement that provides severance benefits. Under the Severance Plan, if the Company terminates an executive other than for cause or good reason, each as defined in the Severance Plan, the executive will receive certain severance benefits for 6 months. As a condition to receiving these severance benefits, the executive is required to execute a release of claims agreement in favor of the Company. Although the Company has the right to amend or terminate the Severance Plan, the Company may not do so in any manner that diminishes any benefits being paid to an executive at the time of such amendment or termination.

Organization and Nature of Business - Narrative (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($) segment	Dec. 31, 2019 USD ($)
Accounting Policies [Abstract]
Number of operating segments \| segment	1
Net loss	$ (14,541)	$ (13,752)
Net cash used in operating activities	(11,497)	(10,605)
Accumulated deficit	(70,584)	(56,043)
Working capital	29,400
Cash	$ 31,757	$ 12,076

Summary of Significant Accounting Policies - Narrative (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Research and development	$ 4,631,000	$ 4,679,000
Inventory	353,000	0
Write-off of intangible assets	291,000	0
Interest or penalties recognized	$ 0	0
Lab equipment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Property and equipment, useful life (in years)	5 years
Computer equipment and software
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Property and equipment, useful life (in years)	3 years
Furniture
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Property and equipment, useful life (in years)	3 years
Patents
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Research and development	$ 400,000
Trademarks
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Intangible assets, gross	100,000	$ 100,000
Write-off of intangible assets	$ 19,700
Employee Stock Option
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Antidilutive securities excluded from computation of EPS (in shares)	3,919,550	2,883,550
Restricted Stock
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Antidilutive securities excluded from computation of EPS (in shares)	308,344	158,336
Convertible Debt Securities
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Antidilutive securities excluded from computation of EPS (in shares)	1,324,608	1,374,608
Minimum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Property and equipment, useful life (in years)	3 years
Maximum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Property and equipment, useful life (in years)	5 years

Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Prepaid Expense and Other Assets, Current [Abstract]
Prepaid insurance	$ 49	$ 94
Other prepaids and receivables	92	2
Total prepaid expenses and other current assets	$ 141	$ 96

Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 2,176	$ 1,443
Less: accumulated depreciation	(763)	(595)
Total property and equipment	1,413	848
Computer equipment and software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	171	127
Construction in progress
Property, Plant and Equipment [Line Items]
Property and equipment, gross	710	0
Research and development equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	248	245
Lab equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	390	780
Tooling
Property, Plant and Equipment [Line Items]
Property and equipment, gross	366	0
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	271	271
Furniture
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 20	$ 20

Notes Payable - Narrative (Details)	Feb. 19, 2019 USD ($) shares	Feb. 19, 2019 USD ($)	Feb. 19, 2019 USD ($)
Debt Disclosure [Abstract]
Debt conversion, original amount		$ 11,800,000
Converted debt, shares issued (in shares) \| shares	6,825,391
Percentage of stock ownership after conversion			4.99%
Convertible debt	$ 47,800	$ 47,800	$ 47,800
Convertible debt instrument, number of equity instruments	273,034		273,034

Commitments and Contingencies - Narrative (Details) - USD ($)				1 Months Ended	12 Months Ended
	Sep. 15, 2020	Feb. 19, 2019	Feb. 01, 2016	Jun. 30, 2019	Dec. 31, 2020	Dec. 31, 2019	Nov. 20, 2019
Payments for milestones				$ 250,000
Percentage of license income entitlement					50.00%
License income					$ 37,500	$ 200,000
Issuance of common stock (in shares)		2,172,591
Operating lease term (in years)							36 months
Penalty termination fee payment							$ 400,000
Purchase obligation					2,600,000
Purchase obligation due in 2021					1,000,000.0
Purchase obligation due in 2022					1,600,000
Term of extension	12 months
Rent expense					100,000	100,000
Lease payments due					100,000
Postemployment benefits liability					2,900,000
Office Space Lease Arrangement
Operating lease term (in years)			63 months
Monthly lease payment			$ 7,900
Office Space Lease Arrangement \| Maximum
Monthly lease payment			$ 8,900
MD Anderson
Payment for expenses related to agreement					$ 100,000	$ 300,000
Issuance of common stock (in shares)					175,000

Stockholders' (Deficit) Equity - Initial Public Offering and Pipe Offerings (Details) - USD ($)							12 Months Ended
	Jun. 30, 2020	Oct. 10, 2019	Jun. 16, 2019	Feb. 19, 2019	Feb. 19, 2019	Feb. 19, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common shares for IPO, net of costs (in shares)				2,172,591
Stock issued during period (in dollars per share)				$ 5.00	$ 5.00	$ 5.00
Proceeds from issuance of common stock			$ 9,500,000		$ 10,900,000		$ 32,046,000	$ 24,096,000
Net proceeds from issuance of common stock					9,700,000
Debt conversion, original amount					11,800,000
Converted debt, shares issued (in shares)				6,825,391
Amount of accrued dividends converted to common stock					$ 4,800,000
Conversion of accrued dividends into common stock, shares issued (in shares)				954,696
Shares vested (in shares)				127,500
Common stock, shares outstanding (in shares)				14,613,000	14,613,000	14,613,000	21,189,943	16,932,184
Percentage of stock ownership after conversion						4.99%
Convertible debt				$ 47,800	$ 47,800	$ 47,800
Convertible debt instrument, number of equity instruments				273,034		273,034
Exercise price of warrants (in dollars per share)							$ 11.32	$ 10.97	$ 1.75
Number of shares of common stock to be called by each warrant (in shares)		533,775		452,081	452,081	452,081
Warrants Issued in Private Investment in Public Equity Offering
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from issuance of common stock		$ 6,300,000
Exercise price of warrants (in dollars per share)		$ 12.88	$ 14.00
Number of shares of common stock to be called by each warrant (in shares)			472,500
Private Investment in Public Equity Offering
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of units issued		485,250	675,000
Exercise price of warrants (in dollars per share)			$ 16.00
Number of common stock per unit		1	1
Number of warrants per unit		1.1	0.7
Proceeds from warrant exercises			$ 8,600,000
Proceeds From Private Investment In Public Equity Offering		$ 5,700,000
June 2020 Offering
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common shares for IPO, net of costs (in shares)	4,216,868
Stock issued during period (in dollars per share)	$ 8.30
Proceeds from issuance of common stock	$ 35,000,000.0
Net proceeds from issuance of common stock	$ 32,000,000.0
Sale of stock, price per share (in usd per share)	$ 7.719
Conversion of Preferred Stock into Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Incremental common shares attributable to dilutive effect of conversion of preferred stock				2,534,766