ITEM 1A. RISK FACTORS
Investing in our securities carries a significant degree of risk. You should carefully consider the risks described below, together with all of the other information in this Form 10-K, including our consolidated financial statements and related notes included elsewhere in this Form 10-K, before deciding whether to invest in our securities. If any or a combination of the following risks were to materialize, our results of operations, financial condition and prospects could be materially adversely affected. If that were to be the case, the market price of our securities could decline, and investors could lose all or part of their investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.
Risks Related to Our Financial Condition and Capital Requirements
We have incurred significant losses since our inception, do not currently generate any operating income, and expect to continue incurring losses as we work to obtain product approval, and thus we may never achieve or maintain profitability.
Since our inception, we have engaged primarily in development activities, including planning and implementing clinical trials to support commercialization and FDA clearance of our Symphony platform. We have funded our operations primarily through debt and equity financings, and have incurred losses since inception, including a net loss of approximately $6.8 million and approximately $7.7 million for the years ended December 31, 2025 and 2024, respectively, and from our inception through December 31, 2024, we had an accumulated deficit of approximately $41.5 million.
We currently have no product revenue and we may not be able to commercialize our Symphony technology platform or achieve significant revenues or profitability. Our ability to generate revenue and achieve profitability depends upon our ability, alone or with others, to complete the development process of our product candidates, including regulatory clearances, and thereafter achieve substantial acceptance in the marketplace for our products. We may be unable to achieve any or all of these goals.
We expect to need to raise at least $20 million between the date of this filing and the end of the 2027 fiscal year, and failure to do so could require us to undertake a process of liquidation under U.S. bankruptcy laws, which could cause holders of our common stock to recoup little, if any, value for their shares.
As of December 31, 2025, we possessed cash and cash equivalents of approximately $5.2 million, while having current liabilities of approximately $1.1 million. Consistent with prior years, we expect to incur a significant operating loss in 2026 and 2027 given that we do not currently generate any operating income. To achieve our current strategic plan, which strives to be in position to submit a 510(k) regulatory application to the FDA in 2027 and achieve FDA clearance thereafter, we expect to need to raise at least $20 million of further capital through the end of the 2027 fiscal year, which we hope to do in various tranches. If we do not raise additional capital, we expect to run out of available cash resources in the third quarter of 2026. There can be no assurance that such additional capital will be available on a timely basis or on terms that will be acceptable to us. We currently do not have any contracts or commitments for additional financing. In addition, any additional equity financing may involve substantial dilution to our existing stockholders, or provide that an equity or debt financing source obtains rights to control the membership of our board of directors.
Our financial results and financial position, and our expected forward-looking outlook of significant negative cash flow in the future, raise substantial doubt with respect to our ability to continue as a going concern. We expect that we will not be in position to submit a 510(k) regulatory application to the FDA for Symphony until 2027, at the earliest, if we are even able to generate sufficient clinical trial results to support such a submission.
If we fail to obtain additional financing, we likely will be forced to abandon operational activities entirely and file for bankruptcy protection, with the possible loss of properties or assets (including the license to our core technology). Based on our explorations to date, we do not expect that any other strategic alternatives, such as a potential sale of the Company or its assets or other restructuring efforts, will be available to us in the near-term. As a result, any inability to obtain additional financing in the near-term, including a material amount of financing over the next 2 years, would likely result in a material adverse effect on our business, results of operations, cash flow, financial condition and prospects and cause our stockholders to receive little or no return on their shares of common stock.
Since the initial public offering of our common stock in November 2021, the market price of our common stock has fallen by more than 99.9%, and we expect to need additional funding amounts substantially greater than the current market capitalization of our common stock, which may result in future dilution that coincides with further declines in the trading price of our common stock beyond the substantial declines that have occurred in recent years.
Since the initial public offering of our common stock in November 2021, the market price of our common stock has fallen by more than 99.9%, including declines of greater than 80% per year in each of 2025, 2024, 2023 and 2022. During such period of time, we have conducted several public offerings and private placements of securities to raise additional capital, and in each case, the market price of our common stock has declined after the consummation of such offerings. As described above, we expect to need to raise at least $20 million of funding over the next 2 years – an aggregate amount several times the current market capitalization of our outstanding common stock, and we do not expect to be able to complete necessary product re-development, troubleshooting and clinical trial work absent such material funding. This may cause new investors to demand terms in future offerings that substantially dilute existing shareholders, such as the inclusion of warrants with Black Scholes protections in the event of a sale transaction, which could cause our common stock to fall further from current levels on a per share basis.
The number of shares of common stock underlying our outstanding warrants is several times greater than our currently outstanding common stock, which could have a negative effect on the market price of our common stock and make it more difficult for us to raise funds through future equity offerings. In addition, in connection with any merger, consolidation or sale of all or substantially all of our assets, holders of our outstanding warrants would be entitled to receive the Black Scholes value of such warrants, which may reduce the consideration otherwise available for payment to holders of our common stock.
As part of our public offerings and/or private placements of securities in October 2025, April 2025, June 2024, January 2024 and August 2023, we issued warrants to purchase shares of our common stock. As of the date of this filing, remaining warrants exercisable from these transactions included (i) Series F Warrants issued in October 2025 to purchase up to 1,125,000 shares of common stock at an exercise price of $7.00 per share, (ii) October 2025 Placement Agent Warrants to purchase up to 45,000 shares of common stock at an exercise price of $10.00 per share, (iii) Class E Warrants issued in April 2025 to purchase up to 271,277 shares of common stock at an exercise price of $13.68 per share, (iv) Class C Warrants issued in June 2024 to purchase 71,873 shares of common stock at an exercise price of $65.20 per share, (v) January 2024 Warrants to purchase up to 1,682 shares of common stock at an exercise price of $2,080.00 per share, (vi) January 2024 Placement Agent Warrants to purchase up to 117 shares of common stock at an exercise price of $2,600.00 per share, and (vii) warrants issued in August 2023 to purchase up to an aggregate of 142 shares of common stock at exercise prices ranging from $11,584.00 to $14,736.00 per share. All of such warrants expire either five or five and one-half years from the date of issuance (except for the October 2025 Prefunded Warrants, which do not expire).
The warrants generally are only exercisable by means of a cash exercise. In general, holders of these warrants may not exercise any portion of such warrants if such holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of our outstanding common stock immediately after exercise. The warrants include certain rights upon a “fundamental transaction” (as defined in such warrants), including the right of the holders thereof to receive from us or a successor entity cash or the same type or form of consideration (and in the same proportion) that is being offered and paid to the holders of common stock in such fundamental transaction in the amount of the Black Scholes value (as defined in such warrants) of the unexercised portion of the applicable warrants on the date of the consummation of such fundamental transaction.
Although these warrants are subject to beneficial ownership limitations, upon exercise in full of the warrants, the shares issuable upon exercise would represent a significant portion of our outstanding common stock. As a result, the holders of these warrants may be able to exert substantial influence over our business. The concentration of voting power resulting from the exercise of the warrants could delay, defer or prevent a change of control, or delay or prevent a merger, consolidation, takeover or other business combination involving us on terms that other stockholders may desire. In addition, conflicts of interest could arise in the future between us and the holders of these warrants concerning the issuance of additional securities and other matters. In addition, sales of these shares could cause the market price of our common stock to decline.
We have registered the issuance of shares upon exercise of these warrants under registration statements. As a result, the shares issuable upon exercise of these warrants can be freely sold in the public market upon issuance. Sales of these shares into the public market in the future could cause the market price of our common stock to decline. Furthermore, if our stock price rises, the holders of these warrants may be more likely to exercise their warrants and sell a large number of shares, particularly if the price of our common stock substantially exceeds the exercise price of such warrants. Such exercises, particularly if followed up with subsequent sales by the holders receiving shares of common stock, could negatively impact the market price of our common stock and reduce or eliminate any appreciation in our stock price that might otherwise occur.
Given the amount and terms of these warrants, we may find it more difficult to raise additional equity capital on favorable terms or at all while these warrants are outstanding.
Our common stock currently is listed for quotation on the Nasdaq Capital Market. We are required to meet specified financial requirements in order to maintain such listing, including a requirement that the bid price for our common stock remain above $1.00, and that the market value of our publicly held securities be at least $1 million. In addition, Nasdaq has recently proposed a new $5 million market value of listed securities requirement that we would not currently satisfy and therefore could cause our common stock be delisted by Nasdaq on an imminent basis, if approved by the SEC.
Nasdaq Listing Rule 5550(a)(2) requires listed companies to maintain a minimum bid price of $1.00 for continued inclusion on the Nasdaq Capital Market. As of the close of business on March 2, 2026, the most recent closing price of our common stock on the Nasdaq Capital Market. was $2.05 per share. If the trading price were to fall below $1.00 per share, we would not be compliant this requirement. In such event, we would be subject to delisting, and because we consummated a reverse stock split in January 2026, we would be ineligible for any compliance period under recently implemented Nasdaq listing rules if this event occurred prior to the one-year anniversary of such reverse stock split. As a result, such a decline in the price of our common stock, if it were to occur, would be expected to result in the prompt delisting of our common stock from the Nasdaq Capital Market.
In addition, Nasdaq Listing Rules 5550(a)(5) and 5550(b)(1) require that the market value of our publicly held common stock (which is our only outstanding class of capital stock) to be at least $1 million and that our stockholders’ equity as reported in our most recent quarterly balance sheet to be at least $2.5 million. As of the close of business on March 2, 2026, the market value of our publicly held common stock was approximately $2.0 million, and as of December 31, 2025, our stockholders’ equity was approximately $6.0 million. If the market value of our publicly held common stock declines below $1 million or our stockholders’ equity falls below $2.5 million, we would also be subject to Nasdaq delisting proceedings on that basis.
Nasdaq’s staff also maintains discretionary authority under its listing rules to delist companies whose capital structure or public offerings raise public interest and investor protection concerns, including as a result of highly dilutive issuances, and it is possible that Nasdaq could assert that past offerings that we have consummated, or future offerings we may consummate, raise such concerns. In addition, to raise the significant amount of capital that we expect to need to fund our strategic plan, potential investors may require us to accept terms (such as board representation rights in excess of an investor’s beneficial ownership of our common stock) that could conflict with Nasdaq listing standards and result in us being delisted.
In addition to the foregoing requirements, Nasdaq has recently proposed a new listing requirement that would require each Nasdaq listed issuer to maintain a minimum market value of listed securities of at least $5 million. Under this proposal, if the value of an issuer’s listed securities, as measured by each applicable trading day’s closing price, continues to be less than $5 million for a period of 30 consecutive trading days, the issuer’s securities would immediately be delisted, with no compliance or cure period. The proposed rule would also preclude an issuer’s ability to seek stay of delisting during any appeals process, and would preclude Nasdaq hearings panels from reversing the delisting determination to situations where there was an error and the company never actually failed to satisfy the requirement. The panel would also not be able to consider any facts indicating that issuer subsequently regained compliance with the requirement or grant an issuer any additional time to regain compliance. The proposed rule is subject to review and approval by the SEC, and it is unknown whether the SEC will approve the proposal. If approved by the SEC, the rule could become effective on an imminent basis. Our common stock currently trades at levels that are below the $5 million aggregate market value threshold proposed by Nasdaq. As such, if this proposal is approved by the SEC, our common stock could be imminently delisted by Nasdaq on this basis.
If our common stock is delisted, we may seek to have our common stock quoted on an over-the-counter marketplace, such as on the OTCQX. The OTCQX is not a stock exchange, and if our common stock trades on the OTCQX rather than a securities exchange, there may be significantly less trading volume and analyst coverage of, and significantly less investor interest in, our common stock, which may lead to lower trading prices for our common stock.
Any potential delisting of our common stock from the Nasdaq Capital Market may have materially adverse consequences to our stockholders, including:
A reduced market price and liquidity with respect to our shares of common stock;
limited dissemination of the market price of our common stock;
limited news coverage;
limited interest by investors in our common stock;
volatility of the prices of our common stock, due to low trading volume;
our common stock being considered a “penny stock,” which would result in broker-dealers participating in sales of our common stock being subject to the regulations set forth in Rules 15g-2 through 15g-9 promulgated under the Exchange Act;
increased difficulty in selling our common stock in certain states due to “blue sky” restrictions; and
limited ability to issue additional securities or to secure additional financing.
Our ability to raise additional capital via a registered public offering on Form S-3 will be limited in the near-term as a result of the SEC’s “baby shelf” rules.
In June 2023 we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on June 20, 2023 (the “Shelf Registration Statement”). The Shelf Registration Statement allows us to sell from time to time up to $25 million of common stock, preferred stock, debt securities, debentures, warrants, rights or units comprised of any combination of these securities, for our own account in one or more offerings. In August 2023, we completed a public offering under the Shelf Registration Statement pursuant to which we raised gross proceeds of approximately $1.6 million. Under applicable SEC rules, smaller companies like us are only permitted to raise up to 1/3rd of their public float under Form S-3 over a 12-month period. As a result, based on our current public float, we are only able to sell up to approximately $700,000 as of the date of this filing pursuant to our Form S-3, assuming we continue the applicable eligibility requirements thereof. This limit on our use of Form S-3 in the near-term may make it more difficult for us to raise equity capital in the public markets, as we expect to be required to conduct any such fundraising via private placements, or sales on Form S-1, which sales of Form S-1 may be more difficult for us to execute in a timely manner.
We may be obligated to current and/or prior financial advisors under engagement letters that we enter into from time to time, and we are currently subject to such an obligation.
As part of our capital raising and financial planning measures, we have entered into, and may in the future enter into, various engagement letters with financial advisors. Such engagement letters have included, and may in the future include, rights of first offer or refusal and similar provisions that require us to offer such financial advisors the right to serve as underwriter, placement agent or in similar roles in connection with certain future public or private financing transactions, or that require us to pay prior financial advisors fees in connection with certain transactions consummated using other financial advisors.
Risks Related to Our Business
To preserve cash resources, we downsized our organization in 2025, which may reduce business continuity, affect our ability to apply for certain patents, and affect our product development and timelines.
To preserve cash resources, we implemented a series of cost savings measures in 2025 related to our product development operations. As of the date of this filing, we have reduced our overall Company-wide full-time employee headcount to 6 persons. To the extent we obtain sufficient funding, we may hire appropriate personnel in the future to expedite our commercialization efforts, but there is no assurance that we will be able to do so.
We are subject to the risks associated with new businesses.
We are effectively a new business with a plan to commercialize our licensed technology. Our limited operating history may not be adequate to enable you to fully assess our ability to develop and market our Symphony platform and test cartridges, assuming we receive regulatory clearances, for which there is no assurance, and respond to competition. Our efforts to date have related to the organization and formation of our Company, research and development and performing clinical trials. We have no approved products, have not yet generated sustainable revenue, and we cannot guarantee we will ever be able to generate future revenues. Therefore, we are, and expect for the foreseeable future to be, subject to all the risks and uncertainties, inherent in a new business focused on the development and sale of new medical devices. As a result, we may be unable to further develop, obtain regulatory clearance for, manufacture, market, sell and derive revenues from our Symphony platform and test cartridges and the other product candidates in our pipeline, and our inability to do so would materially and adversely impact our viability. In addition, we still must optimize many functions necessary to operate a business, including expanding our managerial, personnel and administrative structure, continuing product research and development, and assessing and commencing our marketing activities.
Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies that have not yet commercialized their products, particularly those in the medical device field. In particular, potential investors should consider that there is a significant risk that we will not be able to:
implement or execute our current business plan, or that our business plan is sound;
maintain our management team and Board of Directors;
determine that the technologies that have been developed are commercially viable;
attract, enter into or maintain contracts with, and retain customers; and
raise any necessary additional funds in the capital markets or otherwise to effectuate our business plan.
In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.
Our agreements with Toray, which relate to the license of the core technology used in our Symphony cartridges and for Sanyoseiko to manufacture cartridges for Bluejay, are subject to significant risks that may threaten our viability or otherwise have a material adverse effect on us and our business, assets and its prospects.
We have an exclusive license with Toray for the entire world, excluding Japan, to use their patents and know-how related to our Symphony test cartridges for the manufacturing, marketing and sale of such products. We also have a nonexclusive license for manufacturing purposes in Japan. We have a right to sublicense these Toray patents and know-how (upon either (a) obtaining consent from Toray prior to obtaining FDA clearance or (b) giving notice to Toray after obtaining FDA clearance), and for the purpose of obtaining FDA clearance, we will need to exercise this sublicence to have the cartridges manufactured for Bluejay by a Japanese manufacturer, Sanyoseiko, Inc. (“Sanyoseiko”). We have no contractual rights to the intellectual property covered in the license agreement other than as expressly set forth therein. Our plans, business, prospects and viability are substantially dependent on that intellectual property and subject to the limitations relating thereto as set forth in the license agreement. Some of the risks this may give rise to are described below.
We are required to use our best efforts to establish a cartridge manufacturing site by October 2026. We have begun cartridge manufacturing process modifications through Sanyoseiko, a third-party contractor who is managing such modification. Such modification is intended to address several technical challenges to bring Symphony to a level consistent with necessary performance and quality requirements. After the cartridge manufacturing process modification is completed, we plan to have the manufacturing process occur at Sanyoseiko, a FDA-registered CMO, including for verification and validation testing and commercial manufacturing. The manufacturing site is being established by us without Toray’s technical assistance. If Toray were to assert that we have not used our best efforts to establish the cartridge manufacturing site by October 2026, they could seek to terminate the license agreement as early as November 2026. If Toray were to be successful in terminating the license agreement, we would lose access to certain technology required to produce the cartridges that the Symphony system relies on to function, which would likely result in a material adverse effect on our commercialization efforts.
After the receipt of regulatory clearance in a country, we are required to pay Toray a minimum royalty of $60,000 for the initial year that royalties are payable increasing to a minimum of $100,000 thereafter, regardless of the actual amount of sales by us of licensed products. Accordingly, we could be obligated to pay royalties even though we have generated no or limited revenue. Such payments could materially and adversely affect our profitability and could limit our investment in our business.
The license and regulatory clearances (once obtained) are non-assignable. These restrictions may limit our flexibility to structure our operations in the most advantageous manner.
At our sole expense, we must file for, prosecute the application for, and obtain all regulatory clearances for the licensed products and obtain all legal permits necessary for promoting, marketing, offering or selling each licensed product. The regulatory clearance process can be expensive and time consuming, and there can be no assurances that we will be able to obtain or maintain any or all required permits.
We are required to use reasonable efforts to obtain market approval for the products in the United States or the European Union by October 2026 or we may lose exclusivity in territory of the license agreement with Toray. We will not obtain market approval by this date, though we believe we have used and are continuing to use reasonable efforts to do so.
We are required to use reasonable efforts to start commercial sales by October 2028, though this period may be extended in 6-month increments for up to 2 years in total if such inability to start commercial sales is due to reasons not attributable to us. If we are unable to start commercial sales by such later date, Toray would have the right to terminate the license agreement or make it non-exclusive.
Except with respect to (a) Toray’s ownership of, or rights to license, all intellectual property rights in respect of the licensed property and (b) Toray’s applicable patents being duly maintained and in effect, Toray provides no, and disclaims all, representations, warranties or covenants relating to the licensed intellectual property or any other matters under the license agreement and in particular disclaims any fitness of the intellectual property for any purpose or any warranty against infringement of any third-party patent. These provisions limit our recourse in the event that the licensed intellectual property is flawed, defective, inadequate, incomplete, uncommercial, wrongly described or otherwise not useful for our purposes. We have not independently verified all of the technical, scientific, commercial, legal, medical or other circumstances or nature of the licensed intellectual property and therefore there can be no assurances that any of the foregoing risks have been reduced or eliminated. We have performed numerous evaluations of the Symphony product and have identified numerous risks. These risks are described below. These provisions represent a significant risk of a material adverse impact on us, our business and our prospects.
While we are in principle permitted, even after the license agreement expires or is terminated, to continue manufacturing and selling products that incorporate Toray intellectual property and the royalties for which are fully paid up, if we commit certain material breaches of the agreement, Bluejay may be obligated to use reasonable efforts to arrange for the transfer to Toray of FDA or any other regulatory clearances for any products the royalties for which are not fully paid up. Where any such transfer is possible and approved by the regulator (if necessary), then depending on the nature of the material breach, we may be required to undertake the transfer at no cost to Toray or on reasonable terms and conditions. The loss of any such market approvals, especially if we are unable to receive any consideration for them, could have a material adverse impact on us, our business and our prospects, and depending on the timing and extent of the loss, it could even threaten our viability.
In addition, see the risks in “ Risks Related to Our Intellectual Property ” below. These risks are not the only risks inherent in the license agreement with Toray.
As an intermediate step to regulatory submission, we need to demonstrate that our collected clinical samples do not degrade over time.
We are currently conducting testing to demonstrate specimen stability of the samples collected from the SYMON-II clinical study, which is one of the integral aspects that we will have to establish before we can proceed to FDA clearance. We plan to establish sample stability using standard plate ELISA technology that is accepted by the FDA. If we fail to prove that IL-6 is stable over time, we might have to redesign our business plan.
There is a risk that validation of the primary outcome measure of our SYMON-I study will not achieve statistical significance.
Although our SYMON-I study found promising results, there is a risk that subsequent validation will not achieve statistical significance, which would render those results subject to scrutiny and subject us to setbacks, including having to redesign our preliminary study at considerable expense and time delay.
There is a risk of our cartridges not passing analytical validation, one of the key requirements of FDA clearance.
There is a risk that our cartridges, a core component of our Symphony system, will not pass analytical validation due to failures in performance. We are working on plans in order to reduce this risk, but we cannot be sure that our attempts will be successful until they have been tested and have successfully passed analytical validation themselves.
FDA requirements could change prior to submission and lead to delays and additional costs.
The Symphony analyzer has previously passed all safety validations required by the FDA. However, due to recent FDA requirement changes should other FDA standards change, we could need to perform those tests as well, incurring additional expenses and delays that are impossible to predict due to the uncertain nature of what standards the FDA might change in the future.
The FDA could request additional data or testing after our application submission, requiring additional costs and delaying approval.
Although we have had a pre-submission meeting with FDA and included FDA feedback into our plan, the FDA could decide to request additional data or testing after we have submitted our FDA application. This could result in significant additional costs generated in the process of gathering whatever additional data or developing and running the additional testing requested by the FDA. Furthermore, it can take several months to years to conduct testing and collect data, and depending on the extent of the FDA’s additional request, the delay caused could be significant. During any such period of delay, not only would we be incurring the additional expenses of the testing, but we would also continue to not generate any revenue.
We depend on, and are liable for, Sanyoseiko as our Symphony analyzer and cartridge contract manufacturing organization (CMO), so its inability or failure to perform appropriately in that capacity may threaten our viability or have a material adverse effect on us and our business, assets and its prospects.
We are dependent on Sanyoseiko to maintain compliance with the FDA requirements, and continuously manufacture and supply us with our Symphony analyzers and cartridges. If Sanyoseiko is unable to do so for any reason and we are unable to activate a new CMO to produce analyzers, we may be unable to obtain FDA clearance and commence any commercial sales or unable to supply products to our customers in a timely manner or at all, either of which could threaten our viability.
We are also liable for Sanyoseiko’s performance and actions as our CMO, and any breach by Sanyoseiko of our license and/or supply agreements with Toray may have a material adverse effect on us and our business.
We have not yet launched any products and the ability to do so will depend on the acceptance of our Symphony platform in the healthcare market.
We have not yet launched or received regulatory clearances in any country or territory for our Symphony platform or test cartridges. Even if we receive regulatory clearances, we are faced with the risk that our Symphony platform will not be accepted over competing products and that we will be unable to enter the marketplace or compete effectively. We cannot assure you that our Symphony platform or test cartridges will gain market acceptance. If the market for our future products fails to develop or develops more slowly than expected, or if any of the technology and standards supported by us do not achieve or sustain market acceptance, our business and operating results would be materially and adversely affected.
We cannot accurately predict the volume or timing of any sales, making the timing of any revenues difficult to predict.
We may be faced with lengthy and unpredictable customer evaluation and approval processes associated with our Symphony platform. Consequently, we may incur substantial expenses and devote significant management effort and expense in developing customer adoption of our Symphony platform, which may not result in revenue generation. We must also obtain regulatory clearances or approvals of our Symphony platform and test cartridges in jurisdictions in which we pursue approvals, which is subject to risk and potential delays. The same risks apply to other tests we may develop based on our Symphony platform. As such, we cannot accurately predict the volume, if any, or timing of any future sales.
If third-party payors do not provide coverage and reimbursement for the use of our platform, our business and prospects may be negatively impacted.
Third-party payors, whether governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in certain countries, no uniform policy of coverage and reimbursement for medical device products and services exists among third-party payors. Therefore, coverage and reimbursement for medical device products and services can differ significantly from payor to payor. In addition, payors continually review new technologies for possible coverage and can, without notice, deny coverage for these new products and procedures. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.
Our Symphony platform, including its software and systems, may contain undetected errors, which could limit our ability to provide our products and diminish the attractiveness of our offerings.
Our Symphony platform may contain undetected errors, defects, or bugs. As a result, our customers or end users may discover errors or defects in our products, software or systems, or our products, software or systems may not operate as expected. We may discover significant errors or defects in the future that we may not be able to fix. Our inability to fix any of those errors could limit our ability to provide our products and services, impair the reputation of our brand and diminish the attractiveness of our product and service offerings to our customers.
In addition, we may utilize third party technology or components in our products, and we rely on those third parties to provide support services to us. The existence of errors, defects, or bugs in third party technology or components, or the failure of those third parties to provide necessary support services to us, could materially adversely impact on our business.
We will rely on the proper function, security and availability of our information technology systems and data to operate our business, and a breach, cyber-attack or other disruption to these systems or data could materially and adversely affect our business, results of operations, financial condition, cash flows, reputation, or competitive position.
We will depend on sophisticated software and other information technology systems to operate our business, including to process, transmit and store sensitive data, and our future products and services may include information technology systems that collect data regarding patients. We could experience attempted or actual interference with the integrity of, and interruptions in, our technology systems, as well as data breaches, such as cyber-attacks, malicious intrusions, breakdowns, interference with the integrity of our products and data or other significant disruptions. Furthermore, we may rely on third-party vendors to supply and/or support certain aspects of our information technology systems. These third-party systems could also become vulnerable to cyber-attack, malicious intrusions, breakdowns, interference, or other significant disruptions, and may contain defects in design or manufacture or other problems that could result in system disruption or compromise the information security of our own systems.
If in the future we pursue foreign jurisdictions, such international operations will mean that we are subject to laws and regulations, including data protection and cybersecurity laws and regulations, in many jurisdictions. Furthermore, there has been a developing trend of civil lawsuits and class actions relating to breaches of consumer data held by large companies or incidents arising from other cyber-attacks. Any data security breaches, cyber-attacks, malicious intrusions or significant disruptions could result in actions by regulatory bodies and/or civil litigation, any of which could materially and adversely affect our business, results of operations, financial condition, cash flows, reputation, or competitive position.
In addition, our information technology systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving legal and regulatory standards, the increasing need to protect patient and customer information, changes in the techniques used to obtain unauthorized access to data and information systems, and the information technology needs associated any new products and services. There can be no assurance that our process of consolidating, protecting, upgrading and expanding our systems and capabilities, continuing to build security into the design of our products, and developing new systems to keep pace with continuing changes in information processing technology will be successful or that additional systems issues will not arise in the future.
If our information technology systems, products or services or sensitive data are compromised, patients or employees could be exposed to financial or medical identity theft or suffer a loss of product functionality, and we could lose existing customers, have difficulty attracting new customers, have difficulty preventing, detecting, and controlling fraud, be exposed to the loss or misuse of confidential information, have disputes with customers, physicians, and other health care professionals, suffer regulatory sanctions or penalties, experience increases in operating expenses or an impairment in our ability to conduct our operations, incur expenses or lose revenues as a result of a data privacy breach, product failure, information technology outages or disruptions, or suffer other adverse consequences including lawsuits or other legal action and damage to our reputation.
If we are not able to attract and retain highly skilled managerial, scientific and technical personnel, we may not be able to implement our business model successfully, and our limited cash resources could require us to make further cost reductions.
We believe that our management team must be able to act decisively to apply and adapt our business model in the markets in which we will compete. Our future performance depends to a large extent on the continued service of our President and Chief Executive Officer, Neil Dey, who is our sole executive officer. In addition, we rely upon technical and scientific employees or third-party contractors to effectively establish, manage and grow our business. Consequently, we believe that our future viability will depend largely on our ability to attract and retain highly skilled managerial, sales, scientific and technical personnel.
In order to do so, we may need to pay higher compensation or fees to our employees or consultants than we currently expect, and such higher compensation payments would have a negative effect on our operating results. Competition for experienced, high-quality personnel is intense and we cannot assure that we will be able to recruit and retain such personnel, or that we will possess the cash resources to do so. For example, our limited cash resources have caused us to reduce our overall full-time employment headcount to 6 persons, and we could need to implement further personnel-related cost reductions in the future. As such, we may not be able to hire or retain the necessary personnel to implement our business strategy. For example, Mr. Dey is currently serving as our principal financial and accounting officer, in addition to serving as our principal executive officer. Our failure to hire and retain such personnel could impair our ability to develop new products and manage our business effectively. In the event that we lose the continued services of such key personnel for any reason, this could have a material adverse effect on our business, operations and prospects.
We do not have a meaningful amount of authorized shares remaining under our equity compensation plans and therefore cannot incentivize our directors and employees with non-cash compensation, and our cash compensation obligations for directors and officers are substantial relative to our market capitalization.
We have undergone a series of reverse stock splits at a cumulative ratio of 1-for-32,000 since our equity incentive plans were adopted. As a result, the authorized shares in such plans have been correspondingly reduced, and we only possess a de minimus amount of equity under these plans. As a result, we currently cannot incentivize our directors and employees with non-cash compensation, and even if we possessed such available shares, the substantial declines in the value of our common stock in each of the prior three years may substantially depress the desired incentive effects of using such shares for compensatory purposes. We believe that stock incentive plans serve to closely align the interests of directors and officers with the interests of the Company’s shareholders, and without this tool we are left paying all compensation in cash. Giving effect to compensation increases approved by our board of directors (and its compensation committee) in the fourth quarter of 2025, our anticipated cash compensation fees owed to non-employee directors in 2026 is expected to be $540,000 in the aggregate, and Mr. Dey receives annual base cash compensation of $400,000. Given our lack of available equity incentives as a compensatory tool, we expect to continue incurring significant cash compensation expense relative to our overall market capitalization. We currently expect to seek stockholder approval at our 2026 annual meeting of stockholders to reload the shares available under our equity incentive plans, but there is no assurance that such proposal will be approved by stockholders.
If we or our manufacturers fail to comply with the regulatory quality system regulations or any applicable equivalent regulations, our proposed operations could be interrupted, and our operating results would suffer.
We and any third-party manufacturers and suppliers of ours will be required, to the extent of applicable regulation, to follow the quality system regulations of each jurisdiction we will seek to penetrate and also will be subject to the regulations of these jurisdictions regarding the manufacturing processes. If we or any third-party manufacturers or suppliers of ours are found to be in significant non-compliance or fail to take satisfactory corrective action in response to adverse regulatory findings in this regard, regulatory agencies could take enforcement actions against us and such manufacturers or suppliers, which could impair or prevent our ability to produce our products in a cost-effective and timely manner in order to meet customers’ demands. Accordingly, our operating results would suffer.
Product liability suits, whether or not meritorious, could be brought against us due to an alleged defective product or for the misuse of our Symphony platform or test cartridges. These suits could result in expensive and time-consuming litigation, payment of substantial damages, and an increase in our insurance rates.
If our Symphony platform or test cartridges, or any future tests based on our Symphony platform, are defectively designed or manufactured, contain defective components or are misused, or if someone claims any of the foregoing, whether or not meritorious, we may become subject to substantial and costly litigation. Misusing our devices or failing to adhere to the operating guidelines or our devices producing inaccurate readings could cause significant harm to patients. In addition, if our operating guidelines are found to be inadequate, we may be subject to liability. Product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us. While we expect to maintain product liability insurance, we may not have sufficient insurance coverage for all future claims. Any product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, could harm our reputation in the industry and could reduce revenue. Product liability claims in excess of our insurance coverage would be paid out of cash reserves harming our financial condition and adversely affecting our results of operations.
If we are found to have violated laws protecting the confidentiality of patient health information, we could be subject to civil or criminal penalties, which could increase our liabilities and harm our reputation or our business.
There are a number of laws around the world protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. Privacy rules protect medical records and other personal health information by limiting their use and disclosure, giving individuals the right to access, amend and seek accounting of their own health information and limiting most use and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purpose. We may face difficulties in holding such information in compliance with applicable law. If we are found to be in violation of the privacy rules, we could be subject to civil or criminal penalties, which could increase our liabilities, harm our reputation and have a material adverse effect on our business, financial condition and results of operations.
Significant raw material shortages, supplier capacity constraints, supplier disruptions, and sourcing issues may adversely impact or limit our products sales and or impact our product margins.
Our key suppliers are limited- or sole-source suppliers. Disruptions in deliveries, capacity constraints, production disruptions up- or down-stream, price increases, or decreased availability of raw materials or commodities, including as a result of war, natural disasters (including the effects of climate change such as sea level rise, drought, flooding, wildfires and more intense weather events), actual or threatened public health emergencies or other business continuity events, adversely affect our operations and, depending on the length and severity of the disruption, can limit our ability to meet our commitments to customers or significantly impact our operating profit or cash flows.
Specific raw materials used in the production of Symphony IL-6 cartridges are being limited in supply and the process of finding a suitable substitute could be expensive, use important resources, reduce the efficacy of the platform, or lead to other delays and setbacks.
Certain raw materials used in production of Symphony IL-6 cartridges are being discontinued and we might need to be validate new materials to use as substitutes. These materials include hydrophobic coating solution, side film plastic laminate, and antibody. Testing new raw materials might add extra expense and delay. We cannot currently predict what substitute materials will be found to work for the discontinued ones, whether they will perform as well, their availability, or their precise cost.
We might not be able to resolve certain causes of a Symphony performance reproducibility issue, and if the issues persist we might have to take a different approach.
We continue to face a performance reproducibility issue with the Symphony cartridges, and might not be able to resolve the issues in a timely manner, and might significantly delay the FDA clearance process.
If there is a shift in customer demand for the type of near-patient diagnostic test that we are working to develop, we would be left without a commercially marketable product in the pipeline.
Our only viable product in development at this time is a near-patient diagnostic test. If there is a shift in consumer demand away from such tests, for any reason, by or before the time we are ready to reach the market, we might find ourselves without a viable product sales market. We cannot be certain that there will be demand for our product by the time it is ready for commercial use or sale, and if there is not, we could be left without a revenue-generating product, as we do not currently have any other products under development.
Our relationships with customers, health care professionals, and patients may be subject to applicable healthcare laws, which could expose us to penalties, including administrative, civil or criminal penalties, damages, fines, imprisonment, exclusion from participation in federal healthcare programs such as Medicare and Medicaid, reputational harm, the curtailment or restructuring of our operations and diminished future profits and earnings.
Healthcare professionals will play a primary role in the recommendation and use of any product candidates for which we obtain marketing approval and commercialize. Our current and future arrangements with customers, healthcare professionals, and patients may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we conduct research, market, sell and distribute any products for which we obtain marketing approval. Federal and state healthcare laws and regulations that may affect our operations, directly or indirectly, include the following, among others:
the federal Anti-Kickback Statute, which prohibits persons and entities from, among other things, knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid;
federal false claims laws, including civil whistleblower or qui tam actions under the federal False Claims Act, which impose criminal and civil penalties against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, which imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and also imposes obligations, including mandatory contractual terms, on covered entities, including certain healthcare providers, health plans, and healthcare clearinghouses, and their respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of the covered entity as well as their covered subcontractors, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
the federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;
the federal Physician Payments Sunshine Act, created under the Affordable Care Act, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to annually report information related to certain payments or other transfers of value provided to physicians and any ownership and investment interests held by physicians or their immediate family members. Beginning in 2022, applicable manufacturers were also required to report such information regarding payments and other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives during the previous year; and
analogous state laws and regulations, including (among others) state anti-kickback and false claims laws, which may apply to our business practices, including, but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require medical device companies to comply with the voluntary compliance guidelines and the relevant compliance guidance promulgated by the United States federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require medical device companies to file reports relating to pricing and marketing information and that require tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; state and local laws that require the registration of sales representatives; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal law, thus complicating compliance efforts.
Efforts to comply with applicable healthcare laws and regulations will involve substantial costs. Interpretations of standards of compliance under these laws and regulations are rapidly changing and subject to varying interpretations and it is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other laws that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, reputational harm, imprisonment, additional reporting obligations and oversight (if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws), and the curtailment or restructuring of our operations, any of which could diminish our future profits or earnings. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
Healthcare legislative reform measures could have a material adverse effect on our business, future revenue, if any, and results of operations.
Our ability to commercialize any product candidates successfully will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicare and Medicaid, private health insurers, and other third-party payors provide coverage for and establish adequate reimbursement levels for our product candidates. In the United States, there have been a number of legislative and regulatory initiatives and changes affecting the healthcare system, including focused efforts on containing the cost of healthcare. Private health insurers and other third-party payors often provide reimbursement for products and services based on the level at which the government provides reimbursement through the Medicare or Medicaid programs for such products and services. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of payment for certain products and services. The cost containment measures that payors and providers are instituting and the effect of any healthcare reform initiative implemented in the future could significantly reduce our future revenues from the sale of our product candidates once they are approved and commercialized.
For example, the Patient Protection and Affordable Care Act (the “ACA”) substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the healthcare industry. The ACA is intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, and impose additional health policy reforms. Changes in healthcare policy, including changes in the implementation or the repeal of the ACA, could increase our costs, decrease our future revenue, and impact future sales of and reimbursement and coverage for our product candidates. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA. For example, in June 2021 the U.S. Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case on procedural grounds without specifically ruling on the constitutionality of the ACA. Thus, the ACA will remain in effect in its current form. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges or any healthcare measures promulgated will impact the ACA or our business.
Additionally, the increased emphasis on managed healthcare in the United States may put additional pressure on product pricing, reimbursement, and utilization, which may adversely affect our future product sales, if any, and results of operations. These pressures can arise from rules and practices of managed care groups, competition from other products, judicial decisions and governmental laws and regulations related to Medicare, Medicaid, and healthcare reform, and pricing in general. Future sales of our product candidates will depend substantially on the extent to which the costs of our products will be paid by health maintenance, managed care, and similar healthcare management organizations, or reimbursed by government health administration authorities, such as Medicare and Medicaid, private health insurers, and other third-party payors. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our products or exclusion of our products from coverage.
Further legislative and regulatory changes remain possible. It is unknown what form any such changes or any law would take, and how or whether it may affect our business in the future. We expect that changes or additions to the Medicare and Medicaid programs, and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the healthcare industry. At the state level, legislatures have also increasingly passed legislation and implemented regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures. We expect that additional federal and state healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement, additional pricing pressures, and reduced demand for our products once they are approved and commercialized.
Risks Related to Product Development and Regulatory Clearance
We adapted our clinical trial design in 2023 to obtain more patient data to reflect recent FDA feedback, and our regulatory pathway remains subject to further FDA review and feedback and the results of ongoing and future clinical studies.
In the second quarter of 2024, we completed a multicenter SYmphony IL-6 MONitoring Sepsis (“SYMON”) clinical study investigating the role of interleukin-6 (IL-6) in patients diagnosed with sepsis and septic shock. This prospective study assessed the performance of IL-6 upon initial presentation to the intensive care unit (ICU). A primary endpoint of the SYMON-I pilot clinical study (registered clinical trial number NCT06181604) suggested that IL-6 levels within 24 hours of sepsis or septic shock diagnosis and admission to the ICU may predict patient mortality out to 28 days. Furthermore, a secondary endpoint of the SYMON-I study suggested that IL-6 levels within 24 hours of sepsis or septic shock diagnosis and admission to the ICU is a predictor of patient mortality during their hospitalization. Other secondary endpoints suggested that lactate and Sequential Organ Failure Assessment (SOFA), standard clinical tests used for sepsis and septic shock patients, were not predictors of patient mortality out to 28 days. We believe that the findings underscore the potential importance of IL-6 as a predictor and provide new insights into the potential pathways for improving sepsis outcomes.
Using the data analysis from the SYMON-I pilot clinical study, we initiated the SYMON-II pivotal clinical study in the third quarter of 2024. The SYMON II clinical study has three components: (1) collection, freezing, and biobanking of patient samples, (2) measuring IL-6 concentrations in the biobanked samples near the end of patient enrollment or after the patient enrollment has completed, and (3) analysis of the IL-6 data with the patient outcomes to see if the established IL-6 cutoff value has been validated for 28-day all-cause mortality. Patient enrollment started during the fourth quarter of 2024. As of the date of this filing, we have enrolled approximately 583 hospital patients among a target of 750 patients, and we have collected, frozen and biobanked blood samples from the enrolled patients, while also obtaining all patient related data regarding their disease progression and outcomes. We expect to complete patient enrollment in the study in the summer of 2026. Our goal is to use the Symphony IL-6 test to complete the testing in the SYMON-II clinical trial. We are not yet testing the samples because we are simultaneously working with Sanyoseiko to manufacture the cartridges that will be used in the test, and these cartridges are still being manufactured and verified to ensure that they meet FDA requirements for submission and commercial production. Our goal is to produce and verify these cartridges during 2026.
Although we believe that we have a sound strategy for obtaining FDA regulatory clearance, there can be no assurance that it will ultimately be obtained. Reasons that approval and clearance might not be obtained, on our expected timeline or at all, include that we are unable to complete our planned studies (due to lack of funding, delays or interruptions in the manufacturing of quality-sufficient cartridges needed to be used in the study, or otherwise), that clinical results are not sufficient to demonstrate required efficacy, or that the FDA does not agree with our study design or aspects of our submission. In addition, the FDA could also change its clearance and approval policies, adopt additional regulations, or revise existing regulations, or take other actions which could prevent or delay approval or clearance. Any of these actions could have a material adverse effect on our business, financial condition, and results of operations.
The regulatory clearance process which we may be required to navigate may be expensive, time-consuming, and uncertain and may prevent us from obtaining clearance for our planned products.
We intend to market our Symphony platform and test cartridges following regulatory clearance. To date, we have not received regulatory clearance in any jurisdiction. The research, design, testing, manufacturing, labeling, selling, marketing, and distribution of medical devices are subject to extensive regulation by country-specific regulatory authorities, which regulations differ from country to country. There can be no assurance that, even after such time and expenditures, we will be able to obtain necessary regulatory clearances for clinical testing or for the manufacturing or marketing of any products. In addition, during the regulatory process, other companies may develop other technologies with the same intended use as our products.
We also will be subject to numerous post-marketing regulatory requirements, which may include labeling regulations and medical device reporting regulations, which may require us to report to different regulatory agencies if our device causes or contributes to a death or serious injury, or malfunctions in a way that would likely cause or contribute to a death or serious injury. In addition, these regulatory requirements may change in the future in a way that adversely affects us. If we fail to comply with present or future regulatory requirements that are applicable to us, we may be subject to enforcement action by regulatory agencies, which may include, among others, any of the following sanctions:
warning letters, fines, injunctions, consent decrees and civil penalties;
customer notification, or orders for repair, replacement, or refunds;
voluntary or mandatory recall or seizure of our products;
imposing operating restrictions, suspension, or shutdown of production;
refusing our requests for clearance or pre-market approval of new products, new intended uses or modifications to any products;
rescinding clearance or suspending or withdrawing pre-market approvals that have already been granted; and
criminal prosecution.
The occurrence of any of these events may have a material adverse effect on our business, financial condition and results of operations.
Product clearances and approvals can often be denied or significantly delayed.
Under FDA regulations, unless exempt, a new medical device may only be commercially distributed after it has received 510(k) clearance, is authorized through the de novo classification process, or is the subject of a PMA. The FDA will clear marketing of a medical device through the 510(k) process if it is demonstrated that the new product is substantially equivalent to another legally marketed product not subject to a PMA. Sometimes, a 510(k) clearance must be supported by preclinical and clinical data.
The PMA process typically is more costly, lengthy, and stringent than either the 510(k) process or the de novo classification process. Unlike a 510(k) review, which determines “substantial equivalence,” a PMA requires that the applicant demonstrate reasonable assurance that the device is safe and effective by producing valid scientific evidence, including data from preclinical studies and human clinical trials. Therefore, to obtain regulatory clearance or approvals, we typically must, among other requirements, provide the FDA and similar foreign regulatory authorities with preclinical and clinical data that demonstrate to their satisfaction that our products satisfy the criteria for approval. Preclinical testing and clinical trials must comply with the regulations of the FDA and other government authorities in the United States and similar agencies in other countries.
We may be required to obtain PMAs, PMA supplements, de novo classification, or additional 510(k) pre-market clearances to market modifications to our products once they are approved and commercialized. The FDA requires device manufacturers to make and document a determination of whether a device modification requires approval or clearance; however, the FDA can review a manufacturer’s decision. The FDA may not agree with our decisions not to seek approvals or clearances for particular device modifications. If the FDA requires us to obtain PMAs, PMA supplements or pre-market clearances for any modification to a previously cleared or approved device, we may be required to cease manufacturing and marketing of the modified device and perhaps also to recall such modified device until we obtain FDA clearance or approval. We may also be subject to significant regulatory fines or penalties.
The FDA may not clear or approve our product submissions or applications on a timely basis or at all. Such delays or refusals could have a material adverse effect on our business, financial condition, and results of operations.
The FDA may also change its clearance and approval policies, adopt additional regulations, or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis. Any of these actions could have a material adverse effect on our business, financial condition, and results of operations.
International regulatory clearance processes may take more or less time than the FDA’s clearance process. If we fail to comply with applicable FDA and comparable non-U.S. regulatory requirements, we may not receive regulatory clearances or approvals or may be subject to FDA or comparable non-U.S. enforcement actions. We may be unable to obtain future regulatory clearance or approval in a timely manner, or at all, especially if existing regulations are changed or new regulations are adopted. For example, the FDA’s clearance or approval process can take longer than anticipated due to requests for additional clinical data and changes in regulatory requirements. Any failure or delay in obtaining necessary regulatory clearances or approvals would materially adversely affect our business, financial condition, and results of operations.
Clinical data obtained in the future may not meet the required objectives, which could delay, limit or prevent any regulatory clearance.
There can be no assurance that we will successfully complete any clinical evaluations necessary to receive regulatory clearances. While preliminary results have been encouraging and indicative of the potential performance of our Symphony platform and test cartridges, data already obtained, or in the future obtained, from clinical studies do not necessarily predict the results that will be obtained from later clinical evaluations. The failure to adequately demonstrate the performance characteristics of the device under development could delay or prevent regulatory clearance of the device, which could prevent or result in delays to market launch and could materially harm our business. There can be no assurance that we will be able to receive approval for any potential applications of our principal technology, or that we will receive regulatory clearances from targeted regions or countries.
We may be unable to complete required clinical evaluations, or we may experience significant delays in completing such clinical evaluations, which could prevent or significantly delay our targeted product launch timeframe and impair our viability and business plan.
The completion of any future clinical evaluations of our Symphony platform or test cartridges, or other studies that we may be required to undertake in the future, could be delayed, suspended, or terminated for several reasons, including:
we may fail to or be unable to conduct the clinical evaluation in accordance with regulatory requirements;
sites participating in the trial may drop out of the trial, which may require us to engage new sites for an expansion of the number of sites that are permitted to be involved in the trial;
patients may not enroll in, remain in or complete, the clinical evaluation at the rates we expect; and
clinical investigators may not perform our clinical evaluation on our anticipated schedule or consistent with the clinical evaluation protocol and good clinical practices.
If our clinical evaluations are delayed it will take us longer to ultimately launch our Symphony platform and test cartridges in the market and generate revenues. Moreover, our development costs will increase if we have material delays in our clinical evaluation or if we need to perform more or larger clinical evaluations than planned.
We and our suppliers may not meet regulatory quality standards applicable to our manufacturing processes, which could have an adverse effect on our business, financial condition, and results of operations.
As a medical device manufacturer, we will need to register with the FDA and various non-U.S. regulatory agencies and will be subject to periodic inspection by the FDA and foreign regulatory agencies, for compliance with certain Good Manufacturing Practices, including design controls, product validation and verification, in process testing, quality control and documentation procedures. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by the FDA and foreign regulatory agencies. Our product and component suppliers may also be required to meet certain standards applicable to their manufacturing processes.
We cannot assure you that we or our products or component suppliers will comply with all regulatory requirements. The failure by us or one of our suppliers to achieve or maintain compliance with these requirements or quality standards may disrupt our ability to supply products sufficient to meet demand until compliance is achieved or, until a new supplier has been identified and evaluated. Our or any product or component supplier’s failure to comply with applicable regulations could cause sanctions to be imposed on us, including warning letters, fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products, delays, suspension or withdrawal of approvals or clearances, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, which could harm our business. We cannot assure you that if we need to engage new suppliers to satisfy our business requirements, we can locate new suppliers in compliance with regulatory requirements at a reasonable cost and in an acceptable timeframe. Our failure to do so could have a material adverse effect on our business, financial condition and results of operations.
We may be liable if the FDA or another regulatory agency concludes that we have engaged in the off-label promotion of our products.
Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of the off-label use of our products. Once our products are cleared or approved for clinical use, healthcare providers may use our products for off-label uses, as the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine. However, if the FDA determines that our promotional, or training materials for sales representatives or physicians constitute promotion of an off-label use, the FDA could request that we modify our training, promotional materials and/or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, disgorgement of profits, significant penalties, including civil fines and criminal penalties. Other federal, state or foreign governmental authorities also might take action if they consider our promotion, reimbursement or training materials to constitute promotion of an off-label use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In those possible events, our reputation could be damaged, and adoption of the products would be impaired.
Our products may be subject to recalls after receiving FDA or foreign approval or clearance or cause or contribute to a death or a serious injury or malfunction in certain ways prompting voluntary corrective actions or agency enforcement actions, which could divert managerial and financial resources, harm our reputation, and adversely affect our business.
The FDA and similar foreign governmental authorities have the authority to require the recall of our products because of any failure to comply with applicable laws and regulations, or defects in design or manufacture, or if there is a reasonable likelihood our products might cause or contribute to a death or a serious injury or malfunction. A government mandated or voluntary product recall by us could occur because of, for example, component failures, device malfunctions or other adverse events, such as serious injuries or deaths, or quality-related issues, such as manufacturing errors or design or labeling defects. Any future recalls of our products could divert managerial and financial resources, harm our reputation, and adversely affect our business.
If we initiate a correction or removal for one of our devices to reduce a risk to health posed by the device, we would be required to submit a publicly available Correction and Removal report to the FDA and, in many cases, similar reports to other regulatory agencies. This report could be classified by the FDA as a device recall which could lead to increased scrutiny by the FDA, other international regulatory agencies and our customers regarding the quality and safety of our devices. Furthermore, the submission of these reports has been and could be used by competitors against us in competitive situations and cause customers to delay purchase decisions or cancel orders and would harm our reputation.
In addition, we will be subject to medical device reporting regulations that will require us to report to the FDA or similar foreign governmental authorities if one of our products may have caused or contributed to a death or serious injury or if we become aware that it has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction recurred. Failures to properly identify reportable events or to file timely reports, as well as failure to address each of the observations to the FDA’s satisfaction, can subject us to sanctions and penalties, including warning letters and recalls. Physicians, hospitals, and other healthcare providers may make similar reports to regulatory authorities. Any such reports may trigger an investigation by the FDA or similar foreign regulatory bodies, which could divert managerial and financial resources, harm our reputation, and have a material adverse effect on our business, financial condition and results of operations. Any 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, would require our time and capital, distract management from operating our business and may harm our reputation and have a material adverse effect on our business, financial condition, and results of operations.
Legislative or regulatory reforms may make it more difficult and costly for us to obtain regulatory clearance or approval of any future products and to manufacture, market and distribute our products after clearance or approval is obtained.
From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory clearance or approval process, manufacture and marketing of regulated products, or the reimbursement thereof. In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of planned or future 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.
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 statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to obtain clearance or approval for, manufacture, market or distribute our products. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require additional testing prior to obtaining clearance or approval; changes to manufacturing methods; recall, replacement or discontinuance of our products; or additional record keeping.
Any change in the laws or regulations that govern the clearance and approval processes relating to our current, planned and future products could make it more difficult and costly to obtain clearance or approval for new products or to produce, market and distribute existing products. Significant delays in receiving clearance or approval or the failure to receive clearance or approval for any new products would have an adverse effect on our ability to expand our business. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing clearance that we may have obtained and we may not achieve or sustain profitability.
Risks Related to Our Intellectual Property
We depend on intellectual property licensed from Toray, and any dispute over the license would significantly harm our business.
We are dependent on the intellectual property licensed from Toray. Disputes may arise between us and Toray regarding intellectual property subject to our license agreement with Toray. If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms or are insufficient to provide us the necessary rights to use the intellectual property, we may be unable to successfully develop and launch our Symphony platform and our other product candidates. If we or Toray fail to adequately protect this intellectual property, our ability to launch our products in the market could be limited. For so long as we are dependent on the intellectual property covered by the license agreement for the pursuit of our business, any such disputes relating to the license agreement or failure to protect the intellectual property could threaten our viability.
We will depend primarily on Toray to file, prosecute, maintain, defend and enforce intellectual property that we license from it and that is material to our business.
The key underlying intellectual property relating to our Symphony platform is owned by Toray. Under our license agreement with Toray, Toray generally has the right to file, prosecute, maintain and defend the intellectual property we have licensed from Toray. If Toray fails to conduct these activities for intellectual property protection covering any of our product candidates, our ability to develop and launch those product candidates may be adversely affected and we may not be able to prevent competitors from making, using or selling competing products. In addition, pursuant to the terms of the license agreement, Toray generally has the right to control the enforcement of our licensed intellectual property and the defense of any claims asserting the invalidity of that intellectual property. We cannot be certain that Toray will allocate sufficient resources to and otherwise prioritize the enforcement of such intellectual property or the defense of such claims to protect our interests in the licensed intellectual property. In the absence of action by Toray, we may be unable to protect and enforce the proprietary rights on which our business relies. Even if we are not a party to these legal actions, an adverse outcome could harm our business because it might prevent or impede us from continuing to use the licensed intellectual property that we need to operate our business or from realizing the full commercial benefit contemplated by the agreement. In addition, even if we take control of the prosecution of licensed intellectual property and related applications, enforcement of licensed intellectual property, or defense of claims asserting the invalidity of that intellectual property, we may still be adversely affected or prejudiced by actions or inactions of Toray and its counsel that took place prior to or after our assuming control, and we cannot ensure the cooperation of Toray in any such action. Furthermore, if we take action to protect, enforce or defend the licensed intellectual property, we may incur significant costs and the attention of our management may be diverted from our normal business operations. As a result, our business, results of operations and financial condition could be materially and adversely affected.
We and Toray may be unable to protect or enforce the intellectual property rights licensed to us, which could impair our competitive position.
In order for our business to be viable and to compete effectively, the proprietary rights with respect to the technologies and intellectual property used in our products must be developed and maintained. Toray relies primarily on patent protection and trade secrets to protect its technology and intellectual property rights. There are significant risks associated with Toray’s ability (or our ability, in the absence of action by Toray) to protect the intellectual property licensed to us, including:
pending intellectual property applications may not be approved or may take longer than expected to result in approval in one or more of the countries in which we operate;
Toray’s intellectual property rights may not provide meaningful protection;
other companies may challenge the validity or extent of Toray’s patents and other proprietary intellectual property rights through litigation, oppositions and other proceedings. These proceedings can be protracted as well as unpredictable;
other companies may have independently developed (or may in the future independently develop) similar or alternative technologies, may duplicate Toray’s technologies or may design their technologies around Toray’s technologies;
enforcement of intellectual property rights is complex, uncertain and expensive, and may be subject to lengthy delays. In the event we take control of any such action under the our license agreement with Toray, our ability to enforce our intellectual property protection could be limited by our financial resources; and
the other risks described in “— Risks Related to Our Intellectual Property.”
If any of Toray’s patents or other intellectual property rights fail to protect the technology licensed by us, it would make it easier for our competitors to offer similar products. Any inability on Toray’s part (or on our part, in the absence of action by Toray) to adequately protect its intellectual property may have a material adverse effect on our business, financial condition and results of operations. In addition, the patents we rely on are generally set to expire within the next five years, which could have a material impact on the future of our products.
We and/or Toray may be subject to claims alleging the violation of the intellectual property rights of others.
We may face significant expense and liability as a result of litigation or other proceedings relating to intellectual property rights of others. In the event that another party has intellectual property protection relating to an invention or technology licensed by us from Toray, we and/or Toray may be required to participate in an interference proceeding declared by the regulatory authorities to determine priority of invention, which could result in substantial uncertainties and costs for us, even if the eventual outcome was favorable to us. We and/or Toray also could be required to participate in interference proceedings involving intellectual property of another entity. An adverse outcome in an interference proceeding could require us and/or Toray to cease using the technology, to substantially modify it or to license rights from prevailing third parties, which could delay or prevent the launch of our products in the market or adversely affect our profitability.
The cost to us of any intellectual property litigation or other proceeding relating the intellectual property licensed by us from Toray, even if resolved in our favor, could be substantial, especially given our early stage of development. A third party may claim that we and/or Toray are using inventions claimed by their intellectual property and may go to court to stop us and/or Toray from engaging in our normal operations and activities, such as research, development and the sale of any future products. Such lawsuits are expensive and would consume significant time and other resources. There is a risk that a court will decide that we and/or Toray are infringing the third party’s intellectual property and will order us to stop the activities claimed by the intellectual property. In addition, there is a risk that a court will order us and/or Toray to pay the other party damages for having infringed their intellectual property. Moreover, there is no guarantee that any prevailing intellectual property owner would offer us a license so that we could continue to engage in activities claimed by the intellectual property, or that such a license, if made available to us, could be acquired on commercially acceptable terms.
We and Toray may be subject to claims challenging the invention of the intellectual property that we license from Toray.
We and Toray may be subject to claims that former employees, collaborators or other third parties have an interest in intellectual property as an inventor or co-inventor. For example, we and Toray may have inventorship disputes arising from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we and Toray fail in defending any such claims, in addition to paying monetary damages, we and Toray may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. As a result, it is unclear whether and, if so, to what extent employees of ours and Toray may be able to claim compensation with respect to our future revenue. We may receive less revenue from future products if any of our or Toray’s employees successfully claim compensation for their work in developing our intellectual property, which in turn could impact our future profitability.
Risks Related to Our Industry
We face intense competition in the diagnostic testing market, particularly in the IL-6 space, and as a result we may be unable to effectively compete in our industry.
We expect to compete directly and primarily with large medical device companies. These large companies have most of the diagnostic testing business and strong research and development capacity. Their dominant market position and significant control over markets could significantly limit our ability to introduce our Symphony platform or effectively market and generate sales of our products.
We have not yet entered the revenue stage and most of our competitors have long histories and strong reputations within the industry. They have significantly greater brand recognition, financial and human resources than we do. They also have more experience and capabilities in researching and developing testing devices, obtaining and maintaining regulatory clearances and other requirements, manufacturing and marketing those products than we do. There is a significant risk that we may be unable to overcome the advantages held by our competition, and our inability to do so could lead to the failure of our business.
Competition in the diagnostic testing markets is intense, which can lead to, among other things, price reductions, longer selling cycles, lower product margins, loss of market share and additional working capital requirements. To succeed, we must, among other critical matters, gain consumer acceptance for our products, technical solutions, prices and response time, or a combination of these factors. If our competitors offer significant discounts on certain products, we may need to lower our prices or offer other favorable terms in order to compete successfully. Moreover, any broad-based changes to our prices and pricing policies could make it difficult to generate revenues or cause our revenues, if established, to decline. Moreover, if our competitors develop and commercialize products that are more desirable than the products that we may develop, we may not convince customers to use our products. Any such changes would likely reduce our commercial opportunity and revenue potential and could materially adversely impact our operating results.
If we or Toray fail to respond quickly to technological developments, our products may become uncompetitive and obsolete.
The diagnostic testing market may experience rapid technology developments, changes in industry standards, changes in customer requirements and frequent new product introductions and improvements. If we or Toray are unable to respond to these developments, we may lose competitive position, and our products or technology may become uncompetitive or obsolete, causing our business and prospects to suffer. In order to compete, we and Toray may have to develop, license or acquire new technology on a schedule that keeps pace with technological developments and the requirements for products addressing a broad spectrum and designers and designer expertise in our industries.
Risks Related to Ownership of Our Common Stock
Sales of substantial amounts of our securities in the public market could depress the market price of our common stock.
Our common stock is listed for trading on the Nasdaq Capital Market. If our stockholders sell substantial amounts of our common stock in the public market, including the shares of common stock issuable upon the exercise of our outstanding warrants, or the market perceives that such sales may occur, the market price of our securities could fall and we may be unable to sell our securities in the future.
We could issue “blank check” preferred stock without stockholder approval with the effect of diluting interests of then-current stockholders and impairing their voting rights, and provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.
Our Certificate of Incorporation provides for the authorization to issue up to 5,000,000 shares of “blank check” preferred stock with designations, rights and preferences as may be determined from time to time by our Board of Directors. Our Board of Directors is empowered, without stockholder approval, to issue one or more series of preferred stock with dividend, liquidation, conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. The issuance of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. For example, it would be possible for our Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our Company. In addition, advanced notice is required prior to stockholder proposals, which might further delay a change of control.
We do not currently intend to pay dividends on our common stock in the foreseeable future, and consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We do not anticipate paying any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.
If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.
Any trading market for our common stock will be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our common stock could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage or us, the market price and market trading volume of our common stock could be negatively affected.
As an “emerging growth company” under applicable law, we are subject to lessened disclosure requirements, which could leave our stockholders without information or rights available to stockholders of other public companies that are not “emerging growth companies.”
For as long as we remain an “emerging growth company” as defined in the JOBS Act, we have elected 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 of the Sarbanes-Oxley Act;
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We expect to take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of: (1) December 31, 2026, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (3) the date on which we are deemed to be a large accelerated filer, which is the end of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the end of our most recent second fiscal quarter, and (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Because of these lessened regulatory requirements, our stockholders would be left without information or rights available to stockholders of other public companies that are not “emerging growth companies.” In addition, we cannot predict if investors will find our common stock less attractive because we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may suffer or be more volatile.
Because we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company” our financial statements may not be comparable to companies that comply with public company effective dates.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. While we are not currently delaying the implementation of any relevant accounting standards, in the future we may avail ourselves of these rights, and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock.
Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our Company and may affect the trading price of our common stock.
We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change in control would be beneficial to our existing stockholders. In addition, our amended and restated certificate of incorporation and by-laws may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Our amended and restated certificate of incorporation and bylaws will:
provide for the issuance of “blank check” preferred stock that could be issued by our Board of Directors to thwart a takeover attempt;
provide that stockholders will not be able to take action by written consent, and special meetings of stockholders may only be called by our Chief Executive Officer, our President, our Board of Directors or a majority of our stockholders;
provide that our stockholders are required to provide advance notice and additional disclosures in order to nominate individuals for election to our Board of Directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our Company; and
do not provide stockholders with the ability to cumulate their votes, which limits the ability of minority stockholders to elect director candidates.
These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.
We will continue incurring increased costs as a result of operating as a public company, and our management is now required to devote substantial time to new compliance initiatives and corporate governance practices.
Our common stock began trading on the NASDAQ Global Select Market in November 2021. As a public company, and particularly after we are no longer an EGC, we are incurring and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NASDAQ Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. These requirements result in significant legal and financial compliance costs and make some activities more time-consuming and costly. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This results in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have material adverse effect on our business and stock price, and our limited internal staffing may enhance the likelihood of such a controls failure. To reduce expenses, our President and Chief Executive Officer, in addition to serving as principal executive officer, currently serves as our principal financial and accounting officer, and we have no employees devoted on a full-time basis to our finance, accounting, legal or compliance functions, which may substantially increase the likelihood that we will fail to successfully maintain effective internal controls over financial reporting, or effective disclosure controls and procedures.
Pursuant to SOX Section 404 we are required to furnish a report by our management on our internal control over financial reporting in our Annual Reports on Form 10-K with the SEC since becoming a public company, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain an EGC, we are not required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To comply with SOX Section 404, we document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we have and will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, we may identify one or more material weaknesses (as we did in connection with the preparation of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024), which could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. Neil Dey, our President and Chief Executive Officer, serves as our principal financial and accounting officer, in addition to serving as our principal executive officer, and Mr. Dey is not a certified public accountant. We also do not presently employ an internal legal officer. Our lack of a directly employed principal financial and accounting officer or principal legal officer may increase the likelihood that we will fail to successfully maintain effective internal controls over financial reporting, or effective disclosure controls and procedures.
Our amended and restated certificate of incorporation will provide, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, subject to limited exceptions, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel in any action brought to enforce the exclusive forum provision. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation.
Notwithstanding the foregoing, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. In addition, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As a result, the exclusive forum provision will provide that the Court of Chancery and the federal district court for the District of Delaware will have concurrent jurisdiction over any action arising under the Securities Act or the rules and regulations thereunder, and the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder or any other claim for which the federal courts have exclusive jurisdiction. To the extent the exclusive forum provision restricts the courts in which our stockholders may bring claims arising under the Securities Act and the rules and regulations thereunder, there is uncertainty as to whether a court would enforce such provision. Investors cannot waive compliance with the federal securities laws and the rules and regulations promulgated thereunder.
This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. By requiring a stockholder to bring such a claim in the Court of Chancery (or the federal district court for the District of Delaware, in the case of an action under the Securities Act or the rules and regulations thereunder), the exclusive forum provision also may increase the costs to a stockholder of bringing such a claim. Alternatively, if a court were to find the exclusive forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
