QT Imaging Holdings (QTI) risk factors, FY2024 10-K

Risks Related to Our Business, Financial Condition, and Need for Additional Capital

1. 01We may not be able to successfully execute our business model
2. 02We have a limited operating history. If we successfully commercially launch the QT Breast Scanner, products under development that are cleared by the FDA and other regulatory agencies, and they do not achieve widespread market acceptance, we will not be able to generate the revenue necessary to support our business
3. 03The success of our business model is subject to numerous risks and uncertainties
4. 04Any of the above factors may negatively affect the successful commercialization and implementation of our business model, causing our business to fail
5. 05We may need to raise additional capital, which may not be available on favorable terms, if at all, and which may cause dilution to stockholders, restrict our operations or adversely affect our ability to operate our business
6. 06Our ability to make scheduled payments on, or to refinance our obligations under, any indebtedness depends on our financial and operating performance and prevailing economic and competitive conditions. Certain of these financial and business factors, many of which may be beyond our control, are described above
7. 07Our debt agreements contain restrictions that may limit our flexibility in operating our business
8. 08We are highly dependent on the successful development, marketing and sale of our breast imaging device and on other products and product candidates which are still in the development stage
9. 09Our industry is highly competitive and is subject to technological change, which may result in new products or solutions that are superior to our technology or other future products we may bring to market from time to time
10. 10We may experience development or manufacturing problems and higher costs, or delays that could limit our revenue, if any, or increase our losses
11. 11We plan to do business globally, including in certain countries where we might have limited resources and would be subject to additional regulatory burdens and other risks and uncertainties
12. 12If in the future we are approved for and are otherwise able to commercialize any of our products or services, but are unable to obtain adequate reimbursement or insurance coverage from third-party payors, we may not be able to generate significant revenue, in which case we may need to obtain additional financing
13. 13Recent changes in the United States related to payment policies for imaging procedures could have a negative impact on the utilization of our imaging services
14. 14Billing complexities associated with obtaining payment or reimbursement may negatively affect our revenue, cash flow and profitability
15. 15In addition, we may be required to seek new billing codes for imaging services using the QT Breast Scanner, and regulatory authorities may not approve the creation of separate codes. Additionally, even if we are successful, these billing codes or the payment amounts associated with such codes may change in the future
16. 16If any of these scenarios materialize, they could have a material adverse effect on our business, financial condition, results of operations and prospects
17. 17Even if we obtain all necessary FDA approvals, our products and product candidates may not achieve or maintain market acceptance
18. 18The outcome of any future claims and litigation could have a material adverse impact on our business, financial condition and results of operations
19. 19We could become subject to product liability claims, product recalls, and warranty claims that could be expensive, divert management’s attention and harm our business reputation and financial results
20. 20Any of these outcomes may have an adverse effect on our business, financial condition and results of operations, and may increase the volatility of our share price
21. 21We do not expect to carry any business interruption insurance or any other insurance (except for director and officer, property and product liability insurance). As a result, we may incur uninsured losses, increasing the possibility that you would lose your entire investment in our company
22. 22The mishandling or the perceived mishandling of sensitive information, or the occurrence of data security breaches, could harm our business
23. 23Our business and operations would suffer in the event of computer system failures, cyber-attacks or deficiencies in our cyber-security
24. 24Cyber-attacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our competitive position
25. 25We are exposed to data and cybersecurity risks that could result in data breaches, service interruptions, ransomware and demands, harm to our reputation, protracted and costly litigation or significant liability
26. 26If we fail to maintain properly the integrity or availability of our data or successfully consolidate, integrate, upgrade or expand our existing information systems, or if our technology products do not operate as intended, our business could be materially and adversely affected
27. 27If significant tariffs or other restrictions related to “trade wars” are placed on U.S. made products or any related counter-measures are taken by any of the countries in which we operate or expect to operate, our revenue and results of operations may be materially harmed
28. 28Our business may be impacted by changes in general economic conditions
29. 29Technological change may adversely affect sales of our products and may cause our products to become obsolete
30. 30Employee attrition may have an adverse impact on our business, results of operations or internal controls
31. 31We plan to expand our operations and may not be able to manage our growth effectively, which could strain our resources and delay or derail implementation of our business objectives
32. 32If we do not manage our growth or control costs related to growth, our financial condition, results of operations and future growth prospects will suffer
33. 33If we are unable to anticipate or keep pace with changes in the marketplace and the direction of technological innovation and customer demands, our technology may become less useful or obsolete and our operating results and financial condition will suffer
34. 34We may be unable to sustain revenue growth or profitability
35. 35Our marketing efforts, including any social media marketing efforts that we may implement in the future, may expose our company to additional regulatory scrutiny, including from the FTC and other consumer protection agencies and regulators

Risks Related to Healthcare Industry Shifts and Government Regulation

1. 36We are subject to extensive government regulation, which could restrict the development, marketing, sale and distribution of our products and services, and could cause us to incur significant costs
2. 37Failure to comply with applicable regulation in the United States and in the countries where we will sell and distribute our products could harm our business
3. 38We may not receive, or may be delayed in receiving, the necessary clearances or approvals for our future products, and failure to timely obtain necessary clearances or approvals for our future products would adversely affect our ability to grow our business
4. 39Failure to comply with post-marketing regulatory requirements could subject us to enforcement actions, including substantial penalties, and might require us to recall or withdraw a product from the market
5. 40Our products must be manufactured in accordance with federal, state and foreign regulations, and we could be forced to recall our devices or terminate production if we fail to comply with these regulations
6. 41We have limited experience in identifying and working with large-scale contracts with medical device manufacturers
7. 42patients. As described above, product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizeable damage awards against us that may not be covered by insurance
8. 43Our QT Breast Scanner technology may become obsolete
9. 44Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings
10. 45Any restrictions on our ability to obtain or use data could harm our business
11. 46If we do not obtain and maintain international regulatory registrations, clearances or approvals for our products, we will be unable to market and sell our products outside of the United States
12. 47Legislative or regulatory reforms in the United States or the EU may make it more difficult and costly for us to obtain regulatory clearances or approvals for our products or to manufacture, market or distribute our products after clearance or approval is obtained
13. 48uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical devices and ensure a high level of safety and health while supporting innovation
14. 49Healthcare reform laws could adversely affect our products and financial condition
15. 50Consolidation in the U.S. healthcare industry may negatively impact our results of operations
16. 51Failure to comply with anti-bribery and anti-corruption laws could subject us to penalties and other adverse consequences
17. 52Changes in accounting principles or their application to us could result in unfavorable accounting charges or effects, which could adversely affect our results of operations and growth prospects
18. 53If our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in our stock price
19. 54We could be subject to additional tax liabilities

Risks Related to our Intellectual Property

1. 55It is difficult and costly to protect our intellectual property and our proprietary technologies, and we may not be able to ensure their protection
2. 56If we are unable to protect or enforce our patents or other proprietary rights, or if we become subject to claims or litigation alleging infringement of the patents or other proprietary rights of others, our competitiveness and business prospects may be materially damaged
3. 57Patent terms may be inadequate to protect our competitive position on our future products for an adequate amount of time
4. 58Claims that our technology or our future products or the sale or use of our future products infringe the patents or other intellectual property rights of third parties could result in costly litigation or could require substantial time and money to resolve, even if litigation is avoided
5. 59Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated if we or our future licensors do not comply with these requirements
6. 60We may be subject to claims that our employees, consultants or advisers have wrongfully used or disclosed alleged trade secrets of their former employers or claims asserting ownership of what we regard as our own intellectual property
7. 61If 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 adversely affected
8. 62Our rights to develop and commercialize our products may be subject to the terms and conditions of licenses and sublicenses granted to us by third parties
9. 63We may be required to pay certain milestones and royalties and fulfill other obligations under our license agreements with third-party licensors
10. 64If we choose to license our technology to third parties, this could result in disputes or otherwise limit our future operations
11. 65We may in the future be subject to intellectual property rights claims, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies
12. 66our software or features, we could lose existing customers, and we may be unable to compete effectively. Any of these results would harm our business, financial condition, and results of operations

Risks Related to Our Management

1. 67We are highly dependent on key members of our executive management team. Our inability to retain these individuals could impede our business plan and growth strategies, which could have a negative impact on our business and the value of your investment
2. 68Our management team has limited experience managing a public company
3. 69Certain of our directors and/or officers may have interests that compete with ours
4. 70Our lack of adequate directors and officers insurance may also make it difficult for us to retain and attract talented and skilled directors and officers

Risks Related to Ownership of Common Stock and Other Securities

1. 71The price of shares of common stock may be volatile or may decline regardless of our operating performance. You may lose some or all of your investment
2. 72We do not intend to pay dividends on shares of common stock for the foreseeable future
3. 73If securities analysts do not publish research or reports about us, or if they issue unfavorable commentary about us or our industry or downgrade our common stock, the price of shares of common stock could decline
4. 74Our issuance of additional shares of common stock or securities convertible or exchangeable into common stock could make it difficult for another company to acquire us, may dilute your ownership of us and could adversely affect our stock price
5. 75Future sales, or the perception of future sales, of common stock by us or our existing stockholders in the public market could cause the market price for our common stock to decline
6. 76As a public reporting company, we are subject to rules and regulations established from time to time by the SEC regarding our internal control over financial reporting
7. 77which may subject the Company to adverse regulatory consequences and could harm investor confidence and the market price of our common stock
8. 78As an “emerging growth company,” we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our common stock less attractive to investors
9. 79Anti-takeover provisions in our governing documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock
10. 80The Charter provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees
11. 81The exercise price for the public and private warrants is $2.30 per share of common stock. There is no guarantee that the public and private warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless
12. 82Our warrants will become exercisable for the common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders
13. 83We have no obligation to net cash settle the warrants other than the warrants issued to Lynrock Lake and YA II PN, Ltd
14. 84Our public warrants, private warrants, and the warrants issued to Lynrock Lake and YA II PN, Ltd are, and our PIPE Warrants will become, exercisable for common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders
15. 85Certain of the Company’s warrants are accounted for as a warrant liability and were recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of the common stock
16. 86Our common stock will no longer be listed on The Nasdaq Global Market
17. 87Trading on the OTCQB Venture Market tier is volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares of our common stock
18. 88Our common stock is quoted on the OTCQB Venture Market tier, which may have an unfavorable impact on our stock price and liquidity
19. 89Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees
20. 90We may not be able to attract and retain the highly skilled employees we need to support our planned growth
21. 91Industry data, projections and estimates relied upon by us are inherently uncertain, subject to interpretation and may not have been independently verified
22. 92We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect the Company’s business, results of operations, and financial condition
23. 93Certain estimates of market opportunity included in this annual report may prove to be inaccurate
24. 94We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment
25. 95Exchange rate fluctuations between the U.S. dollar and other currencies and inflation may negatively affect our results of operations, and we may not be able to hedge our currency exchange risks successfully
26. 96We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations
27. 97Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud
28. 98Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations
29. 99Our only significant asset is its ownership interest in QT Imaging, Inc. and such ownership may not be sufficient to pay dividends or make distributions or loans to enable the Company to pay any dividends on the common stock or satisfy its other financial obligations