NATURE OF OPERATIONS |
1.
NATURE OF OPERATIONS
Organization
and Nature of Operations
At
the meeting of shareholders of CNS Response, Inc. held on October 28, 2015, the shareholders approved a proposal to change the
Company’s name to MYnd Analytics, Inc. The Company’s charter was officially amended on November 2, 2015.
MYnd
Analytics, Inc. (“MYnd,” “CNS,” “we,” “us,” “our,” or the “Company”),
formerly known as CNS Response Inc., was incorporated in Delaware on March 20, 1987, under the name Age Research, Inc. Prior
to January 16, 2007, the Company (then called Strativation, Inc.) was a “shell company” with nominal assets and our
sole business was to identify, evaluate and investigate various companies to acquire or with which to merge. On January
16, 2007, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CNS Response, Inc.,
a California corporation formed on January 11, 2000 (“CNS California”), and CNS Merger Corporation, a California corporation
and the Company’s wholly-owned subsidiary (“MergerCo”) pursuant to which the Company agreed to acquire CNS California
in a merger transaction wherein MergerCo would merge with and into CNS California, with CNS California being the surviving corporation
(the “Merger”). On March 7, 2007, the Merger closed, CNS California became a wholly-owned subsidiary of the Company,
and on the same date the corporate name was changed from Strativation, Inc. to CNS Response, Inc. At the annual meeting held on
October 28, 2015, shareholders approved a change in our name from CNS Response, Inc. to MYnd Analytics, Inc. On November 2, 2015,
the Company filed an amendment to its Articles of Incorporation which, among other things, effected the name change to MYnd Analytics,
Inc.
The
Company is a cloud-based predictive analytics company that provides objective clinical decision support to mental healthcare providers
for the treatment of behavioral disorders, including depression, anxiety, bipolar disorder and post-traumatic stress disorder
(“PTSD”). The Company uses its proprietary neurometric platform, PEER Online, to generate Psychiatric EEG Evaluation
Registry (“PEER”) Reports to predict the likelihood of response by an individual to certain medications for the treatment
of behavioral disorders. In April 2013, the Company commenced a reimbursed clinical trial at Walter Reed National Military Medical
Center (“Walter Reed”) and Fort Belvoir Community Hospital (“Fort Belvoir”) (collectively, the “Walter
Reed PEER Trial”) using its neurometric platform to provide PEER Reports to military psychiatrists treating patients primarily
for depression with various comorbidities, including PTSD and mild traumatic brain injury (“mTBI”). In April 2014, based
on an interim analysis of less than 10% of the planned clinical trial enrollees, statistically significant results were achieved
for ten of twelve endpoints of the Walter Reed PEER Trial. In May 2014, following the interim analysis, the Walter Reed Institutional
Review Board (the “Walter Reed IRB”) suspended enrollment of new patients in order to conduct an internal review. Our
management expected enrollment of the Walter Reed PEER Trial to recommence in 2015: however, due to limited action on the part
of the Walter Reed IRB, or Walter Reed Leadership, and no formal communication or due-process, we now believe that the Walter
Reed PEER Trial is unlikely to re-start in the foreseeable future. Consequently, management intends to conduct a clinical trial
focused on Southern California (the “SoCal Trial”) and using substantially the same protocol as had been approved by
the Walter Reed IRB. Our management believes the SoCal Trial will provide additional information to demonstrate the clinical and
economic utility of our neurometric platform. We are also focusing our marketing efforts on Southern California to boost our commercialization
of the PEER Online platform and its PEER Reports.
The
Company acquired the Neuro-Therapy Clinic, Inc. (“NTC”) on January 15, 2008, to provide behavioral health care services. NTC’s
operations were discontinued effective September 30, 2012. See Note 3. Discontinued Operations.
Going
Concern Uncertainty
The
accompanying condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting
principles (“GAAP”), which contemplate continuation of the Company as a going concern. The Company has a limited operating
history and its operations are subject to certain problems, expenses, difficulties, delays, complications, risks and uncertainties
frequently encountered in the operation of a business with a limited operating history. These risks include the ability to obtain
adequate financing on a timely basis, if at all, the failure to develop or supply technology or services to meet the demands of
the marketplace, the failure to attract and retain qualified personnel, competition within the industry, government regulation
and the general strength of regional and national economies.
The
Company’s continued operating losses and limited capital raise substantial doubt about its ability to continue as a going
concern. The Company has limited cash resources for its operations and will need to raise additional funds to meet its obligations
as they become due. As of September 30, 2015, we had an accumulated deficit of $62,592,900. For the year ended September 30, 2015,
we had a net loss from operations of $3,379,400 and net cash used in operating activities of $2,114,800.
To
date, the Company has financed its cash requirements primarily from debt and equity financings. The Company will need
to raise additional funds immediately to continue its operations and needs to raise substantial additional funds before the Company
can increase demand for its PEER Online services. Until it can generate a sufficient amount of revenues to finance its cash requirements,
which it may never do, the Company must continue to finance future cash needs primarily through public or private equity offerings,
debt financings, borrowings or strategic collaborations. The Company’s liquidity and capital requirements depend on several
factors, including the rate of market acceptance of its services, the future profitability of the Company, the rate of growth
of the Company’s business and other factors described elsewhere in this Annual Report on Form 10-K. The Company
continues to explore additional sources of capital, but there is substantial doubt as to whether any financing arrangement will
be available in amounts and on terms acceptable to the Company to permit it to continue operations. The accompanying consolidated
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Between
October 4, 2013 and September 23, 2015, the Company issued an aggregate of 6,940,000 shares of its Common Stock, at a price of
$0.25 per share, in private placements to an aggregate of 20 accredited investors. The gross proceeds to the Company were $1,735,000,
net of $44,000 in placement agent fees for net proceeds to the Company of $1,691,000. Furthermore between September 22, 2014,
and September 24, 2015, the Company issued secured convertible debt in the aggregate principal amount of $3,000,000. During the
2015 fiscal year the aggregate gross proceeds to the Company were $1,350,000 from the debt offering.
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