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Marizyme Incorporated (MRZM)
OTHER OTC:MRZM
Risk Overview Q2, 2024
Risk Distribution
42% Finance & Corporate
21% Legal & Regulatory
13% Tech & Innovation
10% Macro & Political
8% Ability to Sell
6% Production
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Marizyme Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q2, 2024
Main Risk Category
Finance & Corporate
With 22 Risks
Finance & Corporate
With 22 Risks
Number of Disclosed Risks
52
No changes from last report
S&P 500 Average: 31
52
No changes from last report
S&P 500 Average: 31
Recent Changes
0Risks added
0Risks removed
2Risks changed
Since Jun 2024
0Risks added
0Risks removed
2Risks changed
Since Jun 2024
Number of Risk Changed
2
+2
From last reportS&P 500 Average: 3
2
+2
From last reportS&P 500 Average: 3
See the risk highlights of Marizyme in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 52
Finance & Corporate
Total Risks: 22/52 (42%)Above Sector Average
Share Price & Shareholder Rights9 | 17.3%
Share Price & Shareholder Rights - Risk 1
Our articles of incorporation, bylaws and Nevada law have anti-takeover provisions that could discourage, delay or prevent a change in control, which may cause the prices of our securities to decline.Share Price & Shareholder Rights - Risk 2
If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our common stock adversely, the market price and trading volume of our common stock could decline.The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading prices of our securities would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts who cover us downgrade our securities, the price of our common stock would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our common stock or trading volume to decline.
Share Price & Shareholder Rights - Risk 3
In the event that our common stock is not listed or is delisted from the Nasdaq Capital Market, U.S. broker-dealers may be discouraged from effecting transactions in shares of our common stock because they may be considered penny stock and thus be subject to the penny stock rules.The SEC has adopted a number of rules to regulate "penny stock" that restricts transactions involving securities which are deemed to be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Exchange Act. These rules may have the effect of reducing the liquidity of "penny stocks". "Penny stocks" generally are equity securities with a price of less than $5.00 per share other than securities registered on the Nasdaq Capital Market and certain national securities exchanges if current price and volume information with respect to transactions in such securities is provided by the exchange or system. Our shares of common stock have in the past constituted, currently constitute, and in the future may continue to constitute, "penny stock" within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our common stock, which could severely limit the market liquidity of such shares of common stock and impede their sale in the secondary market.
A U.S. broker-dealer selling "penny stock" to anyone other than an established customer or "accredited investor" (generally, an individual with a net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with the individual's spouse) must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the "penny stock" regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a "penny stock", a disclosure schedule prepared in accordance with SEC standards relating to the "penny stock" market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the "penny stock" held in a customer's account and information with respect to the limited market in "penny stocks".
Stockholders should be aware that, according to the SEC, the market for "penny stocks" has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the "penny stock" market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our common stock.
Share Price & Shareholder Rights - Risk 4
Our efforts to obtain and maintain a listing of our common stock on the Nasdaq Capital Market may fail and may not prevent, or may cause, the decline of the value of your common stock.In connection with a proposed public offering that we no longer intend to pursue, we previously applied to list our common stock on the Nasdaq Capital Market tier of Nasdaq. In April 2023, we withdrew the registration statement relating to the proposed public offering because we no longer intended to pursue the proposed public offering. We intend to resume the listing process with Nasdaq or another national securities exchange when the Company is able to meet securities exchange listing requirements and standards. We believe that such a listing may be important to the Company's efforts to gain sufficient financing to fund its operations in the short-term and long-term.
In connection with the proposed listing of our common stock on the Nasdaq Capital Market, we may effect, subject to processing by the Financial Industry Regulatory Authority, Inc. ("FINRA"), a reverse stock split of our common stock at the ratio we believe necessary to allow us to obtain listing approval of our common stock. Even if such a reverse stock split achieves the requisite increase in the market price of our common stock for listing of our common stock, there can be no assurance that the market price of our common stock following the reverse stock split will remain at the level required for continuing compliance with such requirements. It is not uncommon for the market price of a company's common stock to decline in the period following a reverse stock split. On August 3, 2022, January 5, 2023, and January 13, 2023, we made certain filings with the Secretary of State of the State of Nevada (the "Nevada Secretary of State") providing for reverse stock splits and stock splits of our common stock that in aggregate would have effected a reverse stock split of our common stock on a 1-for-15 ratio. From August 3, 2022 to the date of this prospectus, our common stock has continued to trade on the OTCQB on a pre-split basis pending FINRA's processing of such a reverse stock split. On May 15, 2023, we made a filing with the Nevada Secretary of State providing for a 15-for-1 forward stock split, which effectively returned the number of outstanding shares to the amount existing prior to the initial filing on August 3, 2022. In addition, FINRA did not process any of the reverse or forward stock splits and they were not reflected in the price or other information relating to our stock quoted on the OTCQB. Nevertheless, our stock price declined from $2.39 per share based on the last reported price on the OTCQB on August 3, 2022 to $0.10 per share based on the last reported price on the OTCQB on May 13, 2024. It is possible that, if we effect a new reverse stock split, even if FINRA does not process it, it may contribute to the further decline of our common stock. In any event, other factors unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could adversely affect the market price of our common stock and thus jeopardize our ability to meet or maintain Nasdaq's minimum bid price requirement.
If we are unable to satisfy Nasdaq's listing requirements or standards, we will not be able to meet Nasdaq's initial listing application requirements. We can provide no assurance that any action taken by us would allow our common stock to be listed on the Nasdaq Capital Market, stabilize the market price or improve the liquidity of our common stock, prevent the price of our common stock from dropping below Nasdaq's minimum bid price requirement, or prevent future non-compliance with Nasdaq listing requirements. If we are unable to list our common stock on the Nasdaq Capital Market, we may experience heightened difficulty in raising sufficient funding to meet our capital and cash requirements over the 12 months ended June 30, 2024 and any period beyond that date.
Assuming that our common stock is listed on the Nasdaq Capital Market, we must continue to meet certain financial and liquidity criteria to maintain such listing. If we violate applicable Nasdaq listing requirements, or fail to meet any applicable listing standards, our common stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on the Nasdaq Capital Market outweighs the benefits of such listing.
The Company's common stock currently trades on the OTCQB, an over-the-counter market. Our common stock will no longer trade on the OTCQB in the event we list our common stock on the Nasdaq Capital Market. The failure to list our common stock on the Nasdaq Capital Market, or the delisting of our common stock from the Nasdaq Capital Market, would cause our common stock to continue to, or become able to, trade in the United States only on the over-the-counter market. The over-the-counter market is a significantly more limited market than the Nasdaq Capital Market and other national securities exchange markets. The quotation of our common stock on the over-the-counter market may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading prices of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. As a result, investors may find it difficult to buy or sell or obtain accurate quotations for our common stock, and the liquidity of our common stock may remain limited. The failure to list or the delisting of our common stock may therefore materially impair our stockholders' ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The failure to list or the delisting of our common stock could also significantly impair our ability to raise capital and the value of your investment.
Share Price & Shareholder Rights - Risk 5
We cannot predict the extent to which an active public trading market for our common stock will develop or be sustained. If an active public trading market for our common stock does not develop or cannot be sustained, you may be unable to liquidate your investment in our common stock.At present, there is minimal public trading in our common stock. We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our securities until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our common stock is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on market price. We cannot give you any assurance that an active public trading market for our common stock will develop or be sustained. If such a market cannot be sustained, you may be unable to liquidate your investment in our common stock.
Share Price & Shareholder Rights - Risk 6
The market prices of our securities may fluctuate, and you could lose all or part of your investment.During and after this offering, the market prices for our securities may be volatile. The price of our common stock has been volatile and has fluctuated significantly in the past on the OTCQB. Our common stock may fluctuate or continue to fluctuate widely in price during and after this offering in response to various factors after this offering, even if our common stock is listed on the Nasdaq Capital Market, which is not assured and which is not a condition to the commencement of this offering. Many of these factors are beyond our control, including: Technological innovations or new products and services by us or our competitors; additions or departures of key personnel; sales of our shares of common stock; our ability to integrate operations, technology, products and services; our ability to execute our business plan; operating results below expectations; loss of any strategic relationships; industry developments; economic and other external factors; and period-to-period fluctuations in our financial results. Because we have a very limited operating history with limited revenues to date, you may consider any one of these factors to be material. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. Your investment in our common stock could lose some or all its value as a result.
Share Price & Shareholder Rights - Risk 7
Raising additional capital may adversely affect your rights as stockholders, restrict our operations or require us to relinquish rights to our technologies or medical devices.We expect to finance our cash needs through a combination of private and public equity offerings, debt financings, government or other third-party funding, and collaboration arrangements or acquisitions. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interest of our stockholders may be materially diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the interests of our stockholders. Debt financing and preferred equity financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management's ability to oversee the development or acquisition of products.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or medical devices or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market medical devices that we would otherwise prefer to develop and market ourselves.
Share Price & Shareholder Rights - Risk 8
Even if our common stock is listed on the Nasdaq Capital Market, we may utilize an exemption from certain corporate governance requirements for "smaller reporting companies" that could have an adverse effect on our public stockholders.Under Nasdaq rules, a "smaller reporting company," as defined in Rule 12b-2 under the Exchange Act, is not subject to certain corporate governance requirements otherwise applicable to companies listed on the Nasdaq Capital Market. For example, a smaller reporting company is exempt from the Nasdaq requirement of having a compensation committee comprised solely of directors meeting certain enhanced independence standards, as long as the compensation committee has at least two members who do meet such standards. Although we have determined not to avail ourselves of this or other exemptions from Nasdaq requirements that are or may be afforded to smaller reporting companies while we seek to obtain and maintain the listing of our shares on the Nasdaq Capital Market, in the future we may elect to rely on any or all of these exemptions. By electing to utilize any such exemptions, our company may be subject to greater risks of poor corporate governance, poorer management decision-making processes, and reduced results of operations from problems in our corporate organization. Consequently, if we were to avail ourselves of these exemptions, our stock price might suffer, and there is no assurance that we would be able to continue to meet all continuing listing requirements of Nasdaq from which we would not be exempt, including minimum stock price requirements.
Share Price & Shareholder Rights - Risk 9
We are a "smaller reporting company" within the meaning of the Exchange Act, and if we take advantage of certain exemptions from disclosure requirements available to smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.Rule 12b-2 of the Exchange Act defines a "smaller reporting company" as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:
- had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or - in the case of an initial registration statement under the Securities Act or the Exchange Act for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or - in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero or whose public float was less than $700 million, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available.
If a company determines that it does not qualify for smaller reporting company status because it exceeded one or more of the above thresholds, it will remain unqualified unless when making its annual determination it meets certain alternative threshold requirements which will be lower than the above thresholds if its prior public float or prior annual revenues exceed certain thresholds.
As a smaller reporting company, we are not required to include a Compensation Discussion and Analysis section in our proxy statements; we may provide only two years of financial statements; and we need not provide the table of selected financial data. We also have other "scaled" disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our securities less attractive to potential investors, which could make it more difficult for our securityholders to sell their securities.
Accounting & Financial Operations6 | 11.5%
Accounting & Financial Operations - Risk 1
We may not be able to monetize intangible assets, which may result in the need to record an impairment charge.Accounting & Financial Operations - Risk 2
If we do not generate sufficient cash flow from operations in the future, we may not be able to fund our product development efforts and acquisitions or fulfill our future obligations.Our ability to generate sufficient cash flow from operations to fund our operations and product development efforts, including the payment of cash consideration in acquisitions and the payment of our other obligations, depends on a range of economic, competitive, and business factors, many of which are outside of our control. We cannot assure you that our business will generate sufficient cash flow from operations, or that we will be able to liquidate our investments, repatriate cash and investments held in our overseas subsidiaries, sell assets, or raise equity or debt financings when needed or desirable. An inability to fund our operations or fulfill outstanding obligations could have a material adverse effect on our business, financial condition, and results of operations. For further information, please refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources."
Accounting & Financial Operations - Risk 3
We have never paid cash dividends on our stock and do not intend to pay dividends for the foreseeable future.We have paid no cash dividends on any class of our stock to date and we do not anticipate paying cash dividends in the near term. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their securities after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.
Accounting & Financial Operations - Risk 4
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.We have and may incur again substantial net operating losses (NOLs) during our history. Unused NOLs may carry forward to offset future taxable income if we achieve profitability in the future, unless such NOLs expire under applicable tax laws. However, under the rules of Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the "Code"), if a corporation undergoes an "ownership change," generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation's ability to use its NOLs and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited. The applicable rules generally operate by focusing on changes in ownership among stockholders considered by the rules as owning, directly or indirectly, 5% or more of the stock of a company, as well as changes in ownership arising from new issuances of stock by the company. As a result of these rules, in the event that we experience one or more ownership changes as a result of the Company's proposed public offering or future transactions in our stock, then we may be limited in our ability to use our NOL carryforwards to offset our future taxable income, if any. In addition, the Tax Cuts and Jobs Act of 2017 imposes certain limitations on the deduction of NOLs generated in tax years that began on or after January 1, 2018, including a limitation on use of NOLs to offset only 80% of taxable income and the disallowance of NOL carrybacks. Although NOLs generated in tax years before 2018 may still be used to offset future income without limitation, the recent legislation may limit our ability to use our NOLs to offset any future taxable income.
As of December 31, 2023, and 2022, the Company had NOL carryforwards of $46,255,000 and $41,733,000, respectively. The NMOL carryforwards are expected to expire at various times through 2041. As discussed above, the Company's NOL carryforwards may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an "ownership change" as described above.
Accounting & Financial Operations - Risk 5
Management has determined that disclosure controls and procedures and internal control over financial reporting were not effective, identified a material weakness in our internal controls, and a failure to remediate it or any future ineffectiveness of internal controls could have a material adverse effect on the Company's business and the price of its securities.Changed
Our management determined that our disclosure controls and procedures and internal control over financial reporting, or ICFR, were not effective at June 30, 2024 due to a material weakness in ICFR as of December 31, 2023.
A "material weakness" is a deficiency, or a combination of deficiencies, in ICFR, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. As previously reported, we have taken, and plan to continue to take, measures to remediate the Company's internal weaknesses in ICFR. However, the implementation of these measures may not address any control deficiencies in our ICFR. Our failure to address any control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. Moreover, effective ICFR is important to prevent fraud. Failure to report its financial information on an accurate or timely basis may thereby subject the Company to adverse regulatory consequences, including sanctions by the SEC or violations of applicable securities exchange or quotation service listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in the Company and the lack of timeliness or reliability of its financial statements. Confidence in the reliability of the Company's financial statements may suffer due to the Company's reporting of a material weakness in its ICFR. This could materially adversely affect the Company's business, financial condition, results of operations and prospects and lead to a decline in the price of its common stock.
Accounting & Financial Operations - Risk 6
We have incurred losses since inception, and we anticipate that we will incur continued losses for the foreseeable future. Moreover, our independent registered public accounting firm's report, contained herein, includes an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern, indicating the possibility that we may not be able to operate in the future.Changed
As of June 30, 2024, we have an accumulated deficit of $161.6 million and incurred a net loss of $10.3 million for the six months ended June 30, 2024. As of December 31, 2023 and December 31, 2022, the Company had an accumulated deficit of approximately $151.3 million and $86.0 million, respectively. We expect to incur significant and increasing operating losses for the next several years as we expand our acquisition efforts, continue clinical trials, acquire, or license technologies, advance other medical devices into clinical development, complete clinical trials, seek regulatory approval and, if we receive FDA approval, commercialize our products. Primarily because of our losses incurred to date, our expected continued future losses, and limited cash balances, our independent registered public accounting firm has included in its report an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is contingent upon, among other factors, the sale of the shares of common stock or obtaining alternate financing. We cannot provide any assurance that we will be able to raise additional capital.
If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays in our clinical and regulatory efforts, which are critical to the realization of our business plan. The accompanying financial statements do not include any adjustments that may be necessary should we be unable to continue as a going concern. It is not possible for us to predict currently the potential success of our business. The revenue and income potential of our proposed business and operations are currently unknown. If we cannot continue as a viable entity, you may lose some or all your investment in our company.
Debt & Financing4 | 7.7%
Debt & Financing - Risk 1
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.Debt & Financing - Risk 2
We will require substantial additional funding which may not be available to us on acceptable terms, or at all. Failing to raise the necessary additional capital could force us to delay, reduce, eliminate or abandon growth initiatives, development or commercialization of our technologies and products.We are currently preparing to make a public offering of equity securities intended to raise sufficient net proceeds for us to fund our operating expenses and capital expenditure requirements through December 2024. Without giving effect to the anticipated net proceeds from the Company's proposed public offering, our existing capital resources will not be sufficient to meet our projected operating requirements beyond April 16, 2025, and there will remain substantial doubt regarding our ability to continue as a going concern unless we receive substantial financing. We have estimated that the expected net proceeds from the Company's proposed public offering may remove such doubt regarding our ability to continue as a going concern. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
We expect to significantly increase our spending to advance the development of our medical devices and launch and commercialize any medical devices for which we receive regulatory approval. This might include the possibility of building our own marketing and sales organizations to address certain markets if we fail to identify and engage third-party organizations that can perform these services for us. We will also require additional capital to fund our other operating expenses and capital expenditures. Our future capital requirements will depend on many factors, including:
- the progress of our product development programs; - the number of technologies and products we pursue; - the time and costs involved in obtaining regulatory approvals; - the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims; - our plans to establish sales, marketing and/or manufacturing capabilities; - the effect of competing technological and market developments; - the terms and timing of any collaborative, licensing, and other arrangements that we may establish; - general market conditions for offerings from life science companies; - our ability to establish, enforce and maintain selected strategic alliances and activities required for technology and product commercialization; and - our revenues, if any, from successful development and commercialization of our technologies and products.
In order to carry out our business plans and implement our strategy beyond 2023, we anticipate that we will need to obtain additional financing from time to time and may choose to raise additional funds through strategic collaborations, licensing arrangements, additional public or private equity or debt financing, bank lines of credit, asset sales, government grants, or other arrangements. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us or at all. Furthermore, any additional equity or equity-related financing may be dilutive to our stockholders, and debt or equity financing, if available, may subject us to restrictive covenants and significant interest costs. If we obtain funding through a strategic collaboration or licensing arrangement, we may be required to relinquish our rights to certain of our medical device or marketing territories. Our inability to raise capital when needed would harm our business, financial condition, and results of operations, and could cause the price of our common stock to decline or require that we wind down our operations altogether.
Debt & Financing - Risk 3
We have negative working capital.The Company had negative working capital (current assets less current liabilities) of approximately $19.6 million as of December 31, 2023, compared to working capital of $1.0 million as of December 31, 2022. Any significant declines in our revenues could result in decreases in our working capital, which would reduce our cash balances. Our failure to generate sufficient revenues or profits or to obtain additional financing or raise additional capital could have a material adverse effect on our operations and on our ability to meet our obligations as they become due. The occurrence of any of the foregoing risks would have a material adverse effect on our financial results, business and prospects.
Debt & Financing - Risk 4
We defaulted under the Convertible Notes and, as a result, the Convertible Note holders may accelerate amounts owed under such Convertible Notes and seek to take possession the assets securing our obligations. Our other indebtedness could also expose us to risks that could adversely affect our business, financial condition and results of operations.We defaulted under the Convertible Notes due to a cross-default provision that was triggered by the non-repayment of principal under a promissory note on May 7, 2023. Under the terms of the Convertible Notes, the aggregate amount that may be due is $14.3 million, or approximately $5.7 million more than would otherwise have been due under the Convertible Notes. Under the unit purchase agreement entered into on May 27, 2021 with certain holders of several of the Convertible Notes, each of the Company's subsidiaries entered into a guaranty to guarantee the repayment of the Company's obligations under the Convertible Notes, and the Company and its subsidiaries entered into security agreements granting security interests in all of their respective assets for up to the dollar value owed under the respective Convertible Notes. The respective Convertible Notes were issued for aggregate principal of approximately $1.2 million. Under each unit purchase agreement entered into with respect to subsequent issuances of the Convertible Notes, the Company and its subsidiaries were obligated to enter into similar security agreements and guaranties, but did not do so.
The holders of the Convertible Notes have not exercised any remedies applicable to the Convertible Notes or given notice of any intention to do so as of the date of this prospectus. If Univest Securities, LLC ("Univest"), as the appointed representative of the Convertible Note holders, remains so appointed, no investor other than Univest may pursue any remedy with respect to the Convertible Notes. However, if the amount owed due to the default is not repaid upon demand, the holders of the Convertible Notes may nonetheless seek to remove Univest from this appointed position, take possession of some or all of the Company's and its subsidiaries' assets, force the Company and its subsidiaries into bankruptcy proceedings, or seek other legal remedies against the Company and its subsidiaries. In such event, the Company's business, operating results and financial condition may be materially adversely affected.
In addition to the Convertible Notes, we have incurred indebtedness under the OID Convertible Notes in the aggregate principal amount of $7.0 million. The OID Convertible Notes accrue interest at 10% and will mature on various dates from February 12, 2024 to August 6, 2024. We have also incurred trade debts to various vendors. In the future, we may incur additional indebtedness.
Even if the holders of the Convertible Notes do not pursue remedies in response to our default under the Convertible Notes, our indebtedness could have significant negative consequences for our security holders, business, results of operations and financial condition by, among other things:
- increasing our vulnerability to adverse economic and industry conditions; - limiting our ability to obtain additional financing; - requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; - limiting our flexibility to plan for, or react to, changes in our business; and - placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves to pay any indebtedness that we may incur. The OID Convertible Notes contain restrictive covenants, including cross-default provisions, that are similar to the Convertible Notes. In addition, any future indebtedness that we may incur may also contain financial and other restrictive covenants that will limit our ability to operate our business, raise capital or make payments under our indebtedness. If we fail to comply with such covenants or to make payments under any of our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that indebtedness becoming immediately payable in full and cross-default or cross-acceleration under our other indebtedness and other liabilities.
Corporate Activity and Growth3 | 5.8%
Corporate Activity and Growth - Risk 1
Acquisitions present many risks, and we may not realize the financial and strategic goals we anticipate at the time of an acquisition.Corporate Activity and Growth - Risk 2
We will need to increase the size of our organization.We are a small company with 11 full-time employees and two full-time consultants as of May 13, 2024. To execute our business plan, including the future conducting of clinical trials and the expected commercialization of our medical devices, we will need to expand our employee base for managerial, operational, financial, and other resources. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Over the next 12 months, depending on the progress of our acquisition efforts and future planned business development and capital raising efforts, we plan to add additional employees to assist us with our development programs. Our future financial performance and our ability to commercialize our products and devices and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to:
- manage development efforts effectively; - manage any future clinical trials effectively; - integrate additional management, administrative, manufacturing and sales and marketing personnel; - maintain sufficient administrative, accounting and management information systems and controls; and - hire and train additional qualified personnel.
We may not be able to accomplish these tasks, and our failure to accomplish any of them could harm our financial results and impact our ability to achieve development milestones.
Corporate Activity and Growth - Risk 3
We have a limited operational history.We have a limited history upon which an evaluation of our prospects and future performance can be made. Our ongoing and proposed operations are subject to all business risks associated with new enterprises. The likelihood of our success must take into consideration the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the expansion of a business operation in an emerging industry, and the continued development of advertising, promotions, and a corresponding customer base. There is a possibility that we could sustain losses in the future, and there are no assurances that we will ever operate profitably.
Legal & Regulatory
Total Risks: 11/52 (21%)Above Sector Average
Regulation6 | 11.5%
Regulation - Risk 1
If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.Regulation - Risk 2
Even if we receive regulatory approval for any product we may develop or acquire, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements.Once regulatory approval has been obtained, the approved product and its manufacturer are subject to continual review by the FDA or non-U.S. regulatory authorities. Our regulatory approval for any products we may develop or acquire may be subject to limitations on the indicated uses for which the product may be marketed. Future approvals may contain requirements for potentially costly post-marketing follow-up studies to monitor the safety and efficacy of the approved product. In addition, we are subject to extensive and ongoing regulatory requirements by the FDA and other regulatory authorities with regard to the labeling, packaging, adverse event reporting, storage, advertising, promotion and recordkeeping for our products. In addition, we are required to comply with cGMP regulations regarding the manufacture of any products we may develop or acquire, which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Further, regulatory authorities must approve these manufacturing facilities before they can be used to manufacture products, and these facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. If we or a third party discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory authority may impose restrictions on that product, the manufacturer or us, including requiring withdrawal of the product from the market or suspension of manufacturing.
Regulation - Risk 3
Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our products internationally.Our current overseas distribution and marketing partners for DuraGraft, and any other distribution and marketing partners for this and other products we may seek to market in foreign countries, must comply with the regulations of the foreign countries in which they operate. The approval procedures vary among countries and can involve additional clinical testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Moreover, clinical studies or manufacturing processes conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and even if we file we may not receive necessary approvals to commercialize our products in any market.
Regulation - Risk 4
Only one of our products has been authorized for marketing in the United States, other products may not be granted authorization, and any authorization may be subject to limitations.The Company's medical device, DuraGraft, has been authorized for marketing in the United States by the FDA for use as an intra-operative vascular conduit storage and flushing solution used during CABG surgeries in the United States, subject to applicable risks, mitigation requirements, and control provisions. However, none of our other current or future products have been approved for sale in the United States. Neither we nor any future collaboration partner can commercialize any products we may develop in the U.S. without first obtaining regulatory approval for the product from the FDA. The regulatory route in the U.S. for any products we may develop will be through a De Novo process. The De Novo grant process may take several years to complete, and De Novo grants may never be obtained for most of our products. Before obtaining regulatory approvals for the commercial sale of any product we may develop in the U.S., we must demonstrate with substantial evidence, gathered in preclinical and well-controlled clinical studies, that the planned product is safe and effective for use for that target indication. We may not have the resources or ability to conduct such a trial or may not successfully enroll or complete any such trial. Any products we may develop may not achieve the required primary endpoint in the clinical trial and may not receive regulatory approval. We must also demonstrate that the manufacturing facilities, processes and controls for any products we may develop are adequate.
To the extent that we or any future collaboration partner has or seeks to successfully obtain a regulatory approval for any product we may develop for sale in the United States, any approval might contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements. If we are unable to obtain regulatory approval for any products we may develop in the United States, or any approval contains significant limitations, we may not be able to obtain sufficient revenue to justify commercial launch. Also, any regulatory approval of a product, once obtained, may be withdrawn. If we are unable to successfully obtain regulatory approval to sell any products we may develop in the U.S., our business, financial condition, results of operations and growth prospects could be adversely affected.
Regulation - Risk 5
Any products we may develop or acquire may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, thereby harming our business.The regulations that govern marketing approvals, pricing and reimbursement for new products vary widely from country to country. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing approval is granted. In some foreign markets, pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product and negatively impact the revenue we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more other products we may develop, even if other products we may develop or acquire obtain regulatory approval. Pressure from social activist groups and future government regulations, whose goal it is to reduce the cost of medical devices, particularly in less developed nations, also may result in downward pressure on the prices of our product.
Our ability to commercialize any products we may develop or acquire successfully also will depend in part on the extent to which reimbursement for these products and related treatments becomes available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which treatments they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular treatments. We cannot be sure that reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product that we successfully develop.
Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research, development, acquisition, manufacture, sale and distribution. Payment rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower cost products that are already reimbursed and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be said at lower prices than in the U.S. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government funded and private payors could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies. Our business could be materially harmed if reimbursement of any products we may develop, if any, is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels.
Regulation - Risk 6
If we continue to fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we discover additional material weaknesses and other deficiencies in our internal control and accounting procedures, our securities' prices could decline significantly and raising capital could be more difficult.If we continue to fail to comply with the rules under the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") related to disclosure controls and procedures, or, if we discover additional material weaknesses and other deficiencies in our internal control and accounting procedures, the prices of our securities could decline significantly and raising capital could be more difficult. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading prices of our securities could drop significantly. In addition, we cannot be certain that additional material weaknesses or significant deficiencies in our internal controls will not be discovered in the future.
Litigation & Legal Liabilities3 | 5.8%
Litigation & Legal Liabilities - Risk 1
As a non-accelerated filer, we are not required to comply with the auditor attestation requirements of the Sarbanes-Oxley Act.Litigation & Legal Liabilities - Risk 2
We may be at risk of securities class action litigation.We may be at risk of securities class action litigation. In the past, life sciences, biotechnology and pharmaceutical companies have experienced significant stock price volatility, particularly when associated with binary events such as clinical trials and product approvals. If we face such litigation, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business and results in a decline in the market prices of our securities.
Litigation & Legal Liabilities - Risk 3
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop or acquire.We face an inherent risk of product liability exposure related to the sale of any products we may develop or acquire. The marketing, sale and use of any products we may develop or acquire could lead to the filing of product liability claims against us if someone alleges that our products failed to perform as designed. We may also be subject to liability for a misunderstanding of, or inappropriate reliance upon, the information we provide. If we cannot successfully defend ourselves against claims that any product we may develop or acquire caused injuries, we may incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
- decreased demand for our products; - injury to our reputation and significant negative media attention; - withdrawal of patients from clinical studies or cancellation of studies; - significant costs to defend the related litigation and distraction to our management team; - substantial monetary awards to patients; - loss of revenue; and - the inability to commercialize any products that we may develop or acquire.
In addition, insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
Taxation & Government Incentives1 | 1.9%
Taxation & Government Incentives - Risk 1
Inadequate funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.Environmental / Social1 | 1.9%
Environmental / Social - Risk 1
Climate change and increased focus by governments, stockholders and customers on sustainability issues, including those related to climate change, may have a material adverse effect on our business and operations.Tech & Innovation
Total Risks: 7/52 (13%)Below Sector Average
Innovation / R&D2 | 3.8%
Innovation / R&D - Risk 1
We may delay or terminate the development or acquisition of a product at any time if we believe the perceived market or commercial opportunity does not justify further investment, which could materially harm our business.Innovation / R&D - Risk 2
Our future performance may depend on the success of products we have not yet developed or acquired.Technology is an important component of our business and growth strategy, and our success depends on the development, implementation and acceptance of our products. Commitments to develop new products must be made well in advance of any resulting sales, and technologies and standards may change during development, potentially rendering our products outdated or uncompetitive before their introduction. Our ability to develop products to meet evolving industry requirements and at prices acceptable to our customers will be significant factors in determining our competitiveness. We may expend considerable funds and other resources on the development of our products without any guarantee that these products will be successful. If we are not successful in bringing one or more products to market, whether because we fail to address marketplace demand, fail to develop viable technologies or otherwise, our revenues may decline and our results of operations could be seriously harmed.
Trade Secrets4 | 7.7%
Trade Secrets - Risk 1
Competitors may violate our intellectual property rights, and we may bring litigation to protect and enforce our intellectual property rights, which may result in substantial expense and may divert our attention from implementing our business strategy.Trade Secrets - Risk 2
We may be subject to intellectual property infringement claims by third parties which could be costly to defend, divert management's attention and resources, and may result in liability.The medical device and life science industry is characterized by vigorous protection and pursuit of intellectual property rights. Companies in the medical device and life science industry have used intellectual property litigation to gain a competitive advantage in the marketplace. From time to time, third parties may assert against us their patent, copyright, trademark and other intellectual property rights relating to technologies that are important to our business. Searching for existing intellectual property rights may not reveal important intellectual property and our competitors may also have filed for patent protection, which is not publicly-available information, or claimed trademark rights that have not been revealed through our availability searches. We may be subject to claims that our team members have disclosed, or that we have used, trade secrets or other proprietary information of our team members' former employers. Our efforts to identify and avoid infringing on third parties' intellectual property rights may not always be successful. Any claims that our products or processes infringe these rights, regardless of their merit or resolution, could be costly, time consuming and may divert the efforts and attention of our management and technical personnel. In addition, we may not prevail in such proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation.
Any claims of patent or other intellectual property infringement against us, even those without merit, could:
- increase the cost of our products; - be expensive and/or time consuming to defend; - result in our being required to pay significant damages to third parties; - force us to cease making or selling products that incorporate the challenged intellectual property; - require us to redesign, reengineer or rebrand our products and technologies; - require us to enter into royalty or licensing agreements in order to obtain the right to use a third party's intellectual property on terms that may not be favorable or acceptable to us; - require us to develop alternative non-infringing technology, which could require significant effort and expense; - require us to indemnify third parties pursuant to contracts in which we have agreed to provide indemnification for intellectual property infringement claims; - result in our customers or potential customers deferring or limiting their purchase or use of the affected products impacted by the claims until the claims are resolved; and - otherwise have a material adverse effect on our business, financial condition and results of operations.
Any of the foregoing could affect our ability to compete or have a material adverse effect on our business, financial condition and results of operations.
Trade Secrets - Risk 3
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information and may not adequately protect our intellectual property.We rely on trade secrets to protect our technology, especially where we do not believe patent protection is obtainable, or prior to us filing patent applications on inventions we may make from time to time. However, trade secrets are difficult to protect. In order to protect our proprietary technology and processes, we also rely in part on confidentiality and intellectual property assignment agreements with our corporate partners, employees, consultants, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of confidential information nor result in the effective assignment to us of intellectual property and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information or other breaches of the agreements. In addition, others may independently discover our trade secrets and proprietary information, and in such case, we could not assert any trade secret rights against such party. Enforcing a claim that a third-party illegally obtained and is using our trade secrets is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the U.S. may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
Trade Secrets - Risk 4
We may not be able to protect or enforce our intellectual property rights, which could impair our competitive position.Our success depends significantly on our ability to protect our rights to the patents, trademarks, trade secrets, copyrights and all the other intellectual property rights used, or expected to be used, in our products. Protecting intellectual property rights is costly and time consuming. We rely primarily on patent protection and trade secrets, as well as a combination of copyright and trademark laws and nondisclosure and confidentiality agreements to protect our technology and intellectual property rights. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or maintain any competitive advantage. Despite our intellectual property rights practices, it may be possible for a third party to copy or otherwise obtain and use our technology without authorization, develop similar technology independently or design around our patents.
We cannot be assured that any of our pending patent applications will result in the issuance of a patent to us. The U.S. Patent and Trademark Office, or PTO, may deny or require significant narrowing of claims in our pending patent applications, and patents issued as a result of the pending patent applications, if any, may not provide us with significant commercial protection or be issued in a form that is advantageous to us. We could also incur substantial costs in proceedings before the PTO. Patents that may be issued to or licensed by us in the future may expire or may be challenged, invalidated or circumvented, which could limit our ability to stop competitors from marketing related technologies. Upon expiration of our issued or licensed patents, we may lose some of our rights to exclude others from making, using, selling or importing products using the technology based on the expired patents. There is no assurance that competitors will not be able to design around our patents. We also rely on unpatented proprietary technology. We cannot assure you that we can meaningfully protect all our rights in our unpatented proprietary technology or that others will not independently develop substantially equivalent proprietary products or processes or otherwise gain access to our unpatented proprietary technology.
Further, we may not be able to obtain patent protection or secure other intellectual property rights in all the countries in which we operate, and under the laws of such countries, patents and other intellectual property rights may be unavailable or limited in scope. If any of our patents fails to protect our technology, it would make it easier for our competitors to offer similar products. Our trade secrets may be vulnerable to disclosure or misappropriation by employees, contractors and other persons. Any inability on our part to adequately protect our intellectual property may have a material adverse effect on our business, financial condition and results of operations.
We seek to protect our know-how and other unpatented proprietary technology with confidentiality agreements and/or intellectual property assignment agreements with our team members, independent distributors and consultants. However, such agreements may not be enforceable or may not provide meaningful protection for our proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements or in the event that our competitors discover or independently develop similar or identical designs or other proprietary information. In addition, we intend to rely on the use of registered and common law trademarks with respect to the brand names of some of our products. Common law trademarks provide less protection than registered trademarks. Loss of rights in our trademarks could adversely affect our business, financial condition and results of operations.
Cyber Security1 | 1.9%
Cyber Security - Risk 1
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.Macro & Political
Total Risks: 5/52 (10%)Above Sector Average
Economy & Political Environment2 | 3.8%
Economy & Political Environment - Risk 1
Our business, financial condition and results of operations could be adversely affected by the political and economic conditions of the countries in which we conduct business.Economy & Political Environment - Risk 2
Healthcare reform measures could hinder or prevent our products' commercial success.In the U.S., there have been, and we expect there will continue to be, ongoing legislative and regulatory changes to the healthcare system which could affect our future revenue and profitability. Federal and state lawmakers regularly propose and, at times, enact legislation that could result in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services. For example, one of the most significant healthcare reform measures in decades, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or "ACA," was enacted in 2010. The ACA contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and abuse measures, all of which will impact existing government healthcare programs.
While the U.S. Supreme Court has repeatedly upheld the constitutionality of most elements of the ACA, other legal challenges are still pending final adjudication in several jurisdictions. Although efforts in Congress to repeal the ACA have repeatedly fallen short, there are a number of ongoing legislative initiatives to modify it. At this time, it remains unclear whether there will be any changes made to the ACA. We cannot assure you that the ACA, as currently enacted or as amended in the future, will not adversely affect our business and financial results and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of health care. Medicare reimbursement for all products and services, including ours, remains highly susceptible to threats of automatic reductions triggered by budgetary shortfalls. Such payments are subject to recovery of purported overpayment for several years. We cannot predict the initiatives that may be adopted in the future or their full impact. We cannot predict whether any additional legislative changes will affect our business.
The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of health care may adversely affect:
- our ability to set a price that we believe is fair for our products; - our ability to generate revenue and achieve or maintain profitability; and - the availability of capital.
Further, changes in regulatory requirements and guidance may occur, both in the United States and in foreign countries, and we may need to amend clinical study protocols to reflect these changes. Amendments may require us to resubmit our clinical study protocols to an IRB for reexamination, which may impact the costs, timing or successful completion of a clinical study. In light of widely publicized events concerning the safety risk of certain drug and medical device products, regulatory authorities, members of Congress, the Governmental Accounting Office, medical professionals and the general public have all raised concerns about potential safety issues. These events have resulted in the recall and withdrawal of medical device products, revisions to product labeling that further limit use of products and establishment of risk management programs that may, for instance, restrict distribution of certain products or require safety surveillance or patient education. The increased attention to safety issues may result in a more cautious approach by the FDA or other regulatory authorities to clinical studies and the medical device approval process. Adverse event data from clinical studies may receive greater scrutiny with respect to product safety, which may make the FDA or other regulatory authorities more likely to terminate or suspend clinical studies before completion, or require longer or additional clinical studies that may result in substantial additional expense and a delay or failure in obtaining approval or approval for a more limited indication than originally sought.
Given the serious public health risks of high profile adverse safety events with certain products, the FDA or other regulatory authorities may require, as a condition of approval, costly risk evaluation and mitigation strategies, which may include safety surveillance, restricted distribution and use, patient education, enhanced labeling, special packaging or labeling, expedited reporting of certain adverse events, preapproval of promotional materials and restrictions on direct-to-consumer advertising.
Natural and Human Disruptions3 | 5.8%
Natural and Human Disruptions - Risk 1
Climate change impacts including supply chain disruptions, operational impacts, and geopolitical events may impact our business operations.Natural and Human Disruptions - Risk 2
The COVID-19 pandemic has adversely impacted the Company's supply chain and could materially and adversely affect our ability to conduct clinical trials and engage with our third-party vendors and thereby have a material adverse effect on our financial results.The Company has been impacted by the COVID-19 pandemic and related supply chain shortages, and some of its earlier plans to further diversify its operations and expand its operating subsidiaries were delayed as a result. During 2021 and 2022, the impact of COVID-19 on the Company's supply chain and its ability to produce DuraGraft inventory was a primary reason that we did not generate substantial revenue from sales of DuraGraft during 2021 and the first two quarters of 2022. There can be no assurance that future supply chain problems due to COVID-19 outbreaks will not adversely impact our revenues.
In addition, the Company is dependent upon certain contract manufacturers and suppliers and their ability to reliably and efficiently fulfill its orders is critical to the Company's business success. The COVID-19 pandemic has impacted and may continue to impact certain of the Company's manufacturers and suppliers, which could result in unavoidable delays and/or increases in our operating costs. If we are unable to obtain our devices in sufficient quantity and in a timely manner, the development and testing of our medical devices may be delayed or become infeasible, and regulatory approval or commercial launch of any of our medical devices may be delayed or not obtained. As a result, the Company has faced and may continue to face additional delays, costs or difficulty sourcing certain products, which could negatively affect the Company's business and financial results.
While it is not possible at this time to estimate the total impact that COVID-19 could have on our business in the future, the continued spread of COVID-19 and variants of the virus, the rate of vaccinations regionally and globally and the measures taken by the government authorities, and any future epidemic disease outbreaks, could: Disrupt the supply chain and the manufacture or shipment of products and supplies for use by us in our research activities and by strategic partners for their distribution and sales activities; delay, limit or prevent us in our research activities and strategic partners in their distribution and sales activities; impede our negotiations with strategic partners; impede testing, monitoring, data collection and analysis and other related activities by us; interrupt or delay the operations of the FDA or other regulatory authorities, which may impact review and approval timelines for initiation of clinical trials or marketing; or impede the launch or commercialization of any approved products; any of which could delay our strategic partnership plans, increase our operating costs, and have a material adverse effect on our business, financial condition and results of operations.
Natural and Human Disruptions - Risk 3
Our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.Natural disasters could severely disrupt our operations or the operations of manufacturing facilities and have a material adverse effect on our business, financial condition, results of operations and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as manufacturing facilities, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans that we have in place currently are limited and may not prove adequate in the event of a serious disaster or similar event. We are in the early stages of constructing an additional manufacturing facility and establishing a relationship with a third-party contract manufacturer as a back-up supplier for the commercial supply of our products, if necessary, but there is no assurance that we will establish such a relationship in a timely manner, on acceptable terms, or at all. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Ability to Sell
Total Risks: 4/52 (8%)Below Sector Average
Competition1 | 1.9%
Competition - Risk 1
The medical device market is highly competitive, and we may not be able to effectively compete against other providers of medical devices, particularly those with greater resources.Sales & Marketing3 | 5.8%
Sales & Marketing - Risk 1
Our products may never achieve market acceptance.Sales & Marketing - Risk 2
We may be dependent on the sales and marketing efforts of third parties, both domestically and internationally, if we choose not to develop an extensive sales and marketing staff.Initially, we will depend on the efforts of third parties (including sales agents and distributors) to carry out the sales and marketing of our products, both domestically and internationally. We currently have distribution partners internationally for DuraGraft, which we expect to continue to work with in the future. We anticipate that each third party will control the amount and timing of resources generally devoted to these activities. However, these third parties may not be able to generate demand for our products. In addition, there is a risk that these third parties will develop products competitive to ours, which would likely decrease their incentive to vigorously promote and sell our products. If we are unable to enter into co-promotion agreements or to arrange for third-party distribution of our products, we will be required to expend time and resources to develop an effective internal sales force. However, it may not be economical for us to market our own products or we may be unable to effectively market our products. Therefore, our business could be harmed if we fail to enter into arrangements with third parties for the sales and marketing of our products or otherwise fail to establish sufficient marketing capabilities.
Sales & Marketing - Risk 3
We currently have no marketing and sales organization and have limited experience as a company in commercializing products, and we may need to invest significant resources to develop these capabilities. If we are unable to establish marketing and sales capabilities in the United States, we may not be able to generate substantial product revenue.We have no internal sales, marketing or distribution capabilities, and have only limited experience with commercializing a product. Although our medical device product DuraGraft has received regulatory authorization in the United States, we must build a marketing and sales organization with technical expertise and supporting distribution capabilities to commercialize this product in the U.S. market, which may be expensive or time-consuming. We have only limited experience as a company with the marketing, sale or distribution of biopharmaceutical products and there are significant risks involved in the building and managing of a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of our products in the United States. If we are not successful in commercializing our product in the U.S., we may not be able to generate substantial future product revenue and we would incur significant additional losses.
Production
Total Risks: 3/52 (6%)Below Sector Average
Employment / Personnel2 | 3.8%
Employment / Personnel - Risk 1
Misconduct of employees, subcontractors, agents and business partners could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and customers and could have a significant adverse impact on our business and reputation.Employment / Personnel - Risk 2
If we fail to retain current members of our senior management, or to identify, attract, integrate and retain additional key personnel, our business will be harmed.In order to develop our medical devices, we need to retain or attract certain personnel, consultants or advisors with experience in medical device development activities that include a number of disciplines, including research and development, clinical trials, medical matters, government regulation medical devices, manufacturing, formulation and chemistry, business development, accounting, finance, regulatory affairs, human resources and information systems. We are highly dependent upon our senior management and consultants. The loss of services of one or more of our members of senior management could delay or prevent the successful completion of our planned product development or the commercialization of medical devices.
Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions, clinicians, and scientists. The competition for qualified personnel in medical device field is intense. We will need to hire additional personnel as we expand our product development and commercial activities. While, generally, we have not had difficulties recruiting qualified individuals, to date, we may not be able to attract and retain quality personnel on acceptable terms given the competition for such personnel among medical device and other life science companies. In connection with the acquisition of My Health Logic, we engaged a new Chief Executive Officer, Chief Financial Officer and Vice President of Finance. If we are not able to retain these individuals in their current functions, we may not be able to execute our business plan and maximize our growth strategy, to the detriment of our business. Additionally, the Company does not carry key person life insurance. If we lose any key managers or employees or are unable to attract and retain qualified key personnel, directors, advisors or consultants, the development of our medical devices could be delayed or terminated, and our business may be harmed.
Supply Chain1 | 1.9%
Supply Chain - Risk 1
We will be dependent on third-party manufacturers since we will not initially directly manufacture our products.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.