Shoulder Innovations (SI) risk factors, FY2025 10-K

Risks Related to Our Financial Condition and Capital Requirements

1. 01We are an early-stage company with a history of significant net losses, we expect to incur operating losses in the future and we may not be able to achieve or sustain profitability
2. 02If we fail to manage our growth effectively, our business could be materially and adversely affected
3. 03We have a significant amount of debt, which may affect our ability to operate our business and secure additional financing in the future
4. 04The covenants related to the Trinity Loan Agreement, as well as any future financing agreements into which we may enter, may restrict our ability to finance our operations and engage in, expand or otherwise pursue our business activities and strategies
5. 05commercial product or net sales, divert our management’s attention, result in additional dilution to our stockholders, cause us to incur significant expense and otherwise disrupt our business
6. 06We may require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not available, may require us to delay, scale back, or cease our innovation efforts or operations

Risks Related to Our Business and Industry

1. 07We operate in a very competitive business environment, and if we are unable to compete successfully against our existing or potential competitors, our business, financial condition and results of operations may be adversely affected
2. 08If we fail to develop and retain an effective commercial organization, or if we are unable to successfully expand our organization, it could negatively impact our sales, and we may not generate sufficient net revenue to sustain profitability
3. 09We rely in part on independent distributors to sell our products to our customers, and if we are unable to maintain and expand our network of independent distributors, we may be unable to generate anticipated sales
4. 10Our business is dependent upon the adoption of our implant systems by hospitals, ASCs, surgeons and patients
5. 11The seasonality of our business creates variance in our quarterly revenue, which makes it difficult to compare or forecast our financial results
6. 12Our long-term growth depends on our ability to enhance our implant systems, expand our indications and develop and commercialize additional products in a timely manner. If we cannot innovate, we may not be able to develop or exploit new products in time to remain competitive
7. 13We may expend our limited resources to pursue particular improvements or enhancements or new products and fail to capitalize on development opportunities that may be more profitable or for which there is a greater likelihood of success
8. 14We face the risk of product liability claims that could be expensive, divert management’s attention and harm our reputation and business. We may not be able to maintain adequate product liability insurance
9. 15Industry trends have resulted in increased downward pricing pressure on medical services and products, which may affect our ability to sell our products at prices necessary to support our current business strategy
10. 16incentive programs for surgeons that are less advantageous to our business model, including capitation models where surgeons are paid a fixed amount per patient, per period
11. 17If rising prices or unavailability of raw materials continue to persist, our business and results of operations may be adversely affected

Risks Related to Administrative, Organizational and Commercial Operations and Growth

1. 18If hospitals, ASCs, and other health care facilities do not approve the use of our implant systems, our sales may not increase
2. 19Performance issues, service interruptions or price increases by shipping carriers could adversely affect our business and harm our reputation and ability to provide our systems on a timely basis
3. 20If coverage or adequate levels of reimbursement from third-party payors for procedures using our implant systems, or any future products we may seek to commercialize, are not obtained or maintained, shoulder specialists and patients may be reluctant to use our systems and our business will suffer
4. 21Our results of operations will be materially harmed if we are unable to accurately forecast demand for our implant systems and manage our inventory
5. 22We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third parties that may not result in the development of commercially viable products, product improvements or the generation of significant future revenues
6. 23AI presents risks and challenges that can impact our business including by posing security risks to our confidential information, proprietary information and personal data
7. 24We may not be able to establish or strengthen our brand
8. 25Our inability to maintain contractual relationships with health care professionals could have a negative impact on our research and development and medical education programs
9. 26We may be unable to continue to successfully demonstrate to shoulder specialists or key opinion leaders the merits of our implant systems and technologies compared to those of our competitors, which may make it difficult to achieve market acceptance
10. 27These reasons may affect the pace of adoption of our systems and future products that we may offer
11. 28using our systems or if the benefits offered by our systems are not sufficient to justify their cost, shoulder specialists, hospitals, ASCs and other health care facilities may not use our systems and we might be unable to achieve market acceptance
12. 29If surgeons fail to safely and appropriately use our implant systems, or if we are unable to train surgeons on the safe and appropriate use of our systems, we may be unable to achieve our expected sales, growth or profitability
13. 30The loss of any member of our executive management team or our inability to attract and retain highly skilled members of our dedicated commercial leadership and marketing teams as well as certain third-party engineers could have a material adverse effect on our business, financial condition and results of operations
14. 31Certain of our officers and directors also serve as directors of, and are affiliates of, Genesis Innovation, Genesis Software and cultivate(MD), which may give rise to a perceived or actual conflict of interest which may adversely impact your interests
15. 32Any future international expansion will subject us to additional costs and risks that may have a material adverse effect on our business, financial condition and results of operations

Risks Related to Our Intellectual Property

1. 33Obtaining and maintaining intellectual property protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental agencies, and our intellectual property protection could be reduced or eliminated for non-compliance with these requirements
2. 34We rely on intellectual property licensed from others and may become dependent on patents or other intellectual property licensed from others in the future. If we lose our licenses for intellectual property that is important to our business, we may not be able to continue developing or selling our products
3. 35We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect our ability to develop and market our products
4. 36portfolio may thus have no deterrent effect. If a patent infringement suit were threatened or brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the actual or threatened suit
5. 37If we fail to execute invention assignment agreements with our employees and contractors involved in the development of intellectual property or are unable to protect the confidentiality of our trade secrets, the value of our products and our business and competitive position could be harmed
6. 38If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our competitive position may be harmed
7. 39Patent terms may not be sufficient to effectively protect our systems and business for an adequate period of time
8. 40Changes in U.S. or foreign patent laws or their interpretation may limit our ability to obtain, maintain, defend and/or enforce our patents
9. 41We have foreign intellectual property rights and may be unable to enforce our intellectual property rights throughout the world
10. 42If our third-party manufacturing partners do not respect our intellectual property and trade secrets and produce competitive products using our designs or intellectual property, our business, financial condition and results of operations would be harmed
11. 43Our use of open source software could impose limitations on our ability to commercialize our product
12. 44Intellectual property rights do not necessarily address all potential threats to our competitive advantage

Risks Related to Regulatory Matters

1. 45Our devices and operations are subject to extensive government regulation and oversight in the United States, and our failure to comply with applicable requirements could harm our business
2. 46Failure to maintain marketing authorizations for our systems, or to timely obtain necessary marketing authorizations for our future products, may have a material adverse effect on our business, financial condition, results of operations, and prospects
3. 47We are subject to ongoing regulatory review and scrutiny. Failure 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
4. 48submit the reports in a timely manner, could result in enforcement action by the FDA. Following its review of the periodic reports, the FDA might ask for additional information or initiate further investigation
5. 49Any of these sanctions could result in negative publicity, higher than anticipated costs, or lower than anticipated sales, and have a material adverse effect on our reputation, business, financial condition, results of operations, and prospects
6. 50Our products must be manufactured in accordance with applicable laws and regulations, and we could be forced to recall our devices or terminate production if we fail to comply with these regulations
7. 51Legislative or regulatory reforms may have a material adverse effect on us

Risks Related to Ownership of Our Common Stock

1. 52We are an “emerging growth company” and a “smaller reporting company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors
2. 53We continue to incur increased costs and are subject to additional regulations and requirements as a public company, which could lower our profits or make it more difficult to run our business
3. 54If we are unable to design, implement, and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may decline
4. 55We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the market price of our common stock
5. 56The market price of our common stock may be volatile, which could result in substantial losses for owners of our common stock
6. 57If our operating and financial performance in any given period does not meet any guidance that we provide to the public, the market price of our common stock may decline
7. 58Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval
8. 59Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception of these sales, could reduce the market price of our common stock
9. 60Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management
10. 61Claims for indemnification by our directors, officers, and other employees or agents may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us
11. 62If we engage in acquisitions or strategic partnerships, it may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks
12. 63Unfavorable global and regional economic, political and health conditions could adversely affect our business, financial condition or results of operations
13. 64In addition, during certain crises and events, patients may prioritize other items over certain or all of their treatments or delay their requisite shoulder care, which could have a negative impact on our commercial sales
14. 65We are subject to risks from legal and arbitration proceedings that may prevent us from pursuing our business activities or require us to incur additional costs in defending against claims or paying damages
15. 66The requirements of being a public company may divert our management’s attention from our growth strategies and other business concerns
16. 67If securities or industry analysts issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline
17. 68Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud
18. 69Our insurance may not cover all potential losses or liabilities that may arise
19. 70maintain an adequate system of internal accounting controls. We can be held liable for the corrupt or illegal activities of our agents and intermediaries, even if we do not explicitly authorize or have actual knowledge of such activities
20. 71Changes in tax laws or regulations or in their implementation or interpretation that are applied adversely to us or our customers may seriously harm our business
21. 72Our ability to use our net operating loss carryforwards and certain other tax attributes may be subject to limitation
22. 73The increasing use of social media platforms presents new risks and challenges
23. 74We could be subject to securities class action litigation