NeuroPace (NPCE) risk factors, FY2024 10-K

Risks related to operational, commercial and manufacturing matters

1. 01If we fail to successfully market and sell our RNS System cost-effectively and maintain and expand our market share, our sales, business, financial condition and results of operations will be negatively affected
2. 02Various factors outside our direct control may negatively impact our manufacturing of our RNS System, which could harm our business, financial condition, and results of operations
3. 03We depend on a limited number of single-source suppliers and vendors in connection with the manufacture of our RNS System, which makes us vulnerable to supply shortages and price fluctuations that could harm our business, financial condition, and results of operations
4. 04Our results of operations may be harmed if we are unable to accurately forecast customer demand for our products
5. 05If we fail to optimize our sales and marketing capabilities and develop widespread brand awareness cost-effectively, our growth will be impeded and our business may suffer
6. 06We may be unable to compete successfully with other treatment options for drug-resistant focal epilepsy, which could harm our sales, business, financial condition and results of operations
7. 07Adoption of our RNS System depends on positive clinical data as well as clinician acceptance of the data and our products, and negative clinical data or perceptions among these clinicians would harm our sales, business, financial condition, and results of operations
8. 08If adequate reimbursement becomes unavailable for the procedures to implant our RNS System and for clinicians to provide ongoing care for patients treated with our RNS System, it could diminish our sales or affect our ability to sell our RNS System profitably
9. 09We expect our RNS System will continue to be purchased by hospital facilities who will then seek reimbursement from third-party payors for brain-responsive neuromodulation for drug resistant focal epilepsy
10. 10Use of our RNS System requires appropriate neurosurgeon training for implantation and epileptologist training for programming and ongoing patient care, and inadequate training may lead to negative patient outcomes, which could harm our business, financial condition, and results of operations
11. 11We are highly dependent on our senior management team and key personnel, and our business could be harmed if we are unable to attract and retain personnel necessary for our success
12. 12notice. We also do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees
13. 13We expect to increase the size of our organization in the future, and we may experience difficulties in managing the operational elements or timing of this growth. If we are unable to manage or appropriately time the anticipated growth of our business, our future revenue and operating results may be harmed
14. 14We may not be able to achieve or maintain satisfactory pricing and margins for our RNS System, which could harm our business and results of operations
15. 15Our growth prospects may be harmed if we are unable to successfully use our unique data asset and analysis capabilities, either internally or through collaboration, or if our expectations with respect to our ability to leverage our unique data asset prove to be incorrect
16. 16These and other risks associated with international operations may harm our ability to attain or maintain profitable operations internationally, which would harm our growth potential

Risks related to government regulation and our industry

1. 17Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could harm our business, financial condition and results of operations
2. 18Regulatory compliance is expensive, complex and uncertain, and a failure to comply could lead to enforcement actions against us and other negative consequences for our business
3. 19If any of these events were to occur, it would have a negative impact on our business, financial condition and results of operations
4. 20Our operations are subject to pervasive and continuing FDA regulatory requirements, and failure to comply with these requirements could harm our growth potential, and our business, financial condition and results of operations
5. 21Modifications to our products or products we sell may require new 510(k) clearances or PMAs or may require us to recall or cease marketing these products until clearances or approvals are obtained, which could harm our business, financial condition and results of operations
6. 22Our products or products we distribute may be subject to recalls after receiving FDA approval or clearance, which could divert managerial and financial resources, harm our reputation and our business
7. 23Healthcare reform initiatives and other administrative and legislative proposals may harm our business, financial condition, results of operations and cash flows in our key markets
8. 24Compliance with environmental laws and regulations could be expensive, and the failure to comply with these laws and regulations could subject us to significant liability
9. 25Clinical studies may be delayed, suspended or terminated for many reasons, which will increase our expenses and delay the time it takes to support label expansion for additional indications
10. 26We may become subject to numerous laws and regulations related to anti-bribery and anti-corruption laws, such as the FCPA and the U.K. Bribery Act, in which violations of these laws could result in substantial penalties and prosecution

Risks related to privacy, information technology and cybersecurity

1. 27risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services
2. 28Remote work has increased risks to our information technology systems and data, as our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations
3. 29unsuccessful phishing attempts in the past and expect such attempts will continue in the future. A security incident or other interruption could disrupt our ability (and that of third parties with whom we work) to provide our services
4. 30We face potential liability related to the privacy of health information we obtain

Risks related to our intellectual property

1. 31protection with respect to our RNS System or other aspects of our business could harm our business, competitive position, financial condition and results of operations
2. 32pursue with respect to our products is challenged, it could dissuade companies from collaborating with us to develop, or threaten our ability to commercialize, our products
3. 33We may not be successful in obtaining necessary rights to any products or processes we may develop through acquisitions and in-licenses
4. 34Patents covering our products, including our RNS System could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad, which could harm our business, financial condition and results of operations
5. 35Obtaining and maintaining our patent protection depends on compliance with various procedural measures, document submissions, fee payments and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements
6. 36If we fail to comply with our obligations in any current or future agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business
7. 37If we are unable to obtain patent term extension under the Hatch-Waxman Amendments, our business may be materially harmed
8. 38We have limited foreign intellectual property rights and may not be able to protect our intellectual property and proprietary rights throughout the world, which could harm our business, financial condition and results of operations
9. 39Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products
10. 40Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could harm our business, financial condition and results of operations
11. 41We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time-consuming and unsuccessful
12. 42If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be harmed
13. 43Intellectual property rights do not necessarily address all potential threats, and limitations in intellectual property rights could harm our business, financial condition and results of operations
14. 44If we are unable to protect the confidentiality of our other proprietary information, our business and competitive position may be harmed
15. 45Our inability to use software licensed from third parties, or our use of open-source software under license terms that interfere with our proprietary rights, could disrupt our business

Risks related to financial matters

1. 46We have a history of net losses, and we expect to continue to incur losses for the foreseeable future. If we do achieve profitability, we may not be able to sustain it
2. 47We are party to an existing Term Loan Agreement, which contains restrictive covenants as well as financial maintenance covenants, and if we are unable to comply with these covenants then the lenders could declare an event of default and we may need to immediately repay the amounts due under the Term Loan Agreement
3. 48If our distribution agreement with DIXI Medical is not renewed or we fail to negotiate a new agreement, our revenue growth, financial condition and results of operations may be materially affected
4. 49Our actual operating results may differ significantly from any guidance provided
5. 50Our operating results may fluctuate across periods, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations
6. 51Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations
7. 52If we identify any material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations
8. 53Our history of recurring losses and anticipated expenditures as well as the significant amount of debt that we have incurred may affect our ability to operate our business and secure additional financing in the future
9. 54Our estimates of market opportunity and forecasts of market and revenue growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all
10. 55If our distribution agreement with DIXI Medical is not renewed, it may have an adverse effect on our financial condition
11. 56The failure of third parties to meet their contractual, regulatory and other obligations could adversely affect our business
12. 57Future legislation, potential changes in federal regulatory agency leadership, and new policies and priorities under the current Administration may adversely impact our company
13. 58rulemaking, supervision, examination and enforcement priorities and policies of the agency. The potential impact of changes in agency personnel, policies and priorities on the medical device sector, including us, cannot be predicted at this time

Risks related to ownership of our common stock

1. 59If we sell shares of our common stock in future financings, stockholders may experience immediate dilution and, as a result, our stock price may decline
2. 60Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to decline
3. 61Concentration of ownership of our common stock among our executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions
4. 62Our stock price has been volatile, an active or liquid market in our common stock may not be sustainable and the value of our common stock may decline
5. 63We are an emerging growth company and a smaller reporting company, and our compliance with the reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies could make our common stock less attractive to investors
6. 64of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved and extended adoption period for accounting pronouncements
7. 65We cannot predict whether investors will find our common stock less attractive as a result of our reliance 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 be more volatile
8. 66Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management
9. 67Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price
10. 68Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses
11. 69Litigation and other legal proceedings may harm our business
12. 70If securities or industry analysts do not continue to publish research or publish unfavorable or inaccurate research about our business, our common stock price and trading volume could decline
13. 71We are obligated to develop and maintain proper and effective internal control over financial reporting and any failure to maintain the adequacy of these internal controls may negatively impact investor confidence in our company and, as a result, the value of our common stock
14. 72company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404
15. 73We will continue to incur significant costs as a result of operating as a public company, and our management and board of directors will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices
16. 74We may partner with or acquire other businesses, which could require significant management attention, disrupt our business, dilute stockholder value and harm our results of operations