NeuroPace (NPCE) risk factors, FY2025 10-K

Risks related to operational, regulatory, 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 operations92% rewritten
4. 04single-source suppliers of several key components of our products, including printed circuit assemblies and batteries. In addition, certain of our suppliers are not under long-term contracts with usNew
5. 05Our results of operations may be harmed if we are unable to accurately forecast customer demand for our products
6. 06If 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
7. 07We 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
8. 08Adoption 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
9. 09If 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 profitably65% rewritten
10. 10Use of our RNS System requires appropriate neurosurgeon training for implantation and epileptologist training for prescribing, 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. 12employment, which means that any of our employees could leave our employment at any time, with or without notice. 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 operations40% rewritten
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 incorrect74% rewritten
16. 16approved. A variety of risks associated with marketing our RNS System internationally could harm our growth potentialNew
17. 17These 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. 18Our 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. 19Regulatory 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. 20If any of these events were to occur, it would have a negative impact on our business, financial condition and results of operations
4. 21Our 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. 22Modifications 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. 23Our 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. 24Healthcare reform initiatives and other administrative and legislative proposals may harm our business, financial condition, results of operations and cash flows in our key markets46% rewritten
8. 25Compliance 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. 26Clinical 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. 27We 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 prosecution28% rewritten

Risks related to privacy, information technology and cybersecurity

1. 28reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences, which could have a material and adverse impact on our business, financial condition and results of operationsNew
2. 29Remote 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 locations44% rewritten
3. 30that such coverage will pay future claims. Therefore, failure to maintain or protect our information systems and data integrity effectively could harm our business, financial condition, and results of operationsNew
4. 31We face potential liability related to the privacy of health information we obtain

Risks related to our intellectual property

1. 32We may not be successful in obtaining necessary rights to any products or processes we may develop through acquisitions and in-licenses
2. 33Patents 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
3. 34Obtaining 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
4. 35If 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
5. 36If we are unable to obtain patent term extension under the Hatch-Waxman Amendments, our business may be materially harmed
6. 37We 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
7. 38Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products49% rewritten
8. 39We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time-consuming and unsuccessful
9. 40If 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
10. 41Intellectual 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
11. 42If we are unable to protect the confidentiality of our other proprietary information, our business and competitive position may be harmed21% rewritten
12. 43and third parties might make claims against us related to losses of their confidential or proprietary information. Any of the foregoing could materially and adversely affect our business, financial condition and results of operationsNew
13. 44Our 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. 45We 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 it72% rewritten
2. 46achieve profitability, we may not remain profitable for any substantial period of time. Our failure to achieve or maintain profitability could negatively impact the value of our common stockNew
3. 47Our MidCap Term Loan 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 MidCap Term Loan63% rewritten
4. 48With the expiration of our exclusive distribution agreement with DIXI Medical, our revenue growth, financial condition and results of operations may be materially affected100% rewritten
5. 49Our actual operating results may differ significantly from any guidance provided
6. 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
7. 51Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations28% rewritten
8. 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
9. 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
10. 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 all76% rewritten
11. 55The failure of third parties to meet their contractual, regulatory and other obligations could adversely affect our business23% rewritten
12. 56Future legislation, potential changes in federal regulatory agency leadership, and new policies and priorities under the current Administration may adversely impact our company74% rewritten

Risks related to ownership of our common stock

1. 57If 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. 58Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to decline22% rewritten
3. 59Concentration of ownership of our common stock among our executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions21% rewritten
4. 60Our 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. 61We 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 investors62% rewritten
6. 62We 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 volatile50% rewritten
7. 63Provisions 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 management23% rewritten
8. 64Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price29% rewritten
9. 65Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses
10. 66Litigation and other legal proceedings may harm our business
11. 67If 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 decline62% rewritten
12. 68company and we do not have any control over these analysts. If the number of analysts that cover us declines, demand for our common stock could decrease and our common stock price and trading volume may declineNew
13. 69We 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 stock52% rewritten
14. 70We 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
15. 71We 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