What changed in this filing

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Item 1A. Risk Factors

2021-08-27 compared with 2020-08-31 · 85 added, 80 removed, 232 unchanged (42% of the section changed)

6 unchanged sentences

Our business could be adversely affected by the effects of widespread public health epidemics .

We are susceptible to a widespread outbreak of an illness or other health issue, such as the recent COVID-19 Coronavirus outbreak first reported in Wuhan, Hubei Province, China in December 2019 and subsequently spreading throughout the world resulting in millions of confirmed cases worldwide and many deaths.

The outbreak of the COVID-19 virus has caused the various governments, including the U.S., to implement quarantines, various restrictions on travel causing airlines to suspend international and certain domestic flights, shelter in place orders and other restrictions.

We are susceptible to ongoing outbreaks of an illness or other health issue, such as the recent COVID-19 Coronavirus outbreak, including outbreaks of variants of the COVID-19 virus such as the “Delta” variant.

The outbreak of the COVID-19 virus caused the various governments, including the U.S., to implement quarantines, various restrictions on travel causing airlines to suspend international and certain domestic flights, shelter in place orders and other restrictions.

Governments have also implemented work restrictions that prohibit many employees from going to work, and for businesses that are allowed to remain open, many employees are electing to remain at home to avoid spread of the disease.

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a) supply chain disruptions making it difficult for the Company to contract and receive materials needed for production of its products, and needed to ship finished products to our end customers, b) loss of contracts and customers from the financial strains or other disruptions they are experiencing as a result of the pandemic, c) financial risks pertaining to receivables due from customers that may fall into insolvency or otherwise be unable to pay their bills, d) government responses including orders that make it difficult to remain open for business, restrict imports of raw materials or exports of finished goods, refusal to allow the Company’s product to be licensed for sale in their countries, and other seen and unforeseen actions taken by government agencies, e) absenteeism or loss of employees at the Company, or at our partner’s companies, due to health reasons or government restrictions, that are needed to develop, validate, manufacture and perform other necessary functions for our operations, f) equipment failures, loss of utilities and other disruptions that could impact our operations or render them inoperable, g) litigation or government actions against the Company pertaining to existing products new products sold by the Company that are directed at limiting or treating the spread of the pandemic outbreak, h) a local or global recession or depression that could harm the international banking system, limit demand for all products including those made by the Company, i) a drop in demand for our products, that are all medical related, due to patients’ reluctance or refusal to visit hospitals, labs, and doctors’ offices where our products are used due to their fear of contracting a disease, and many other seen and unforeseen events and circumstances, all of which could negatively impact the Company.

If our COVID-19 tests are unable to gain acceptance in the market, proves to be ineffective or less effective than expected, and/or we do not receive regulatory approvals for our COVID-19 tests to be sold, our results of operation could be materially harmed.

Although we believe that our COVID-19 tests represent promising tests to detect prior COVID-19 virus exposure, the tests may never gain significant acceptance in the marketplace and therefore may never generate substantial revenue or profits for us.

We will need to establish a market for our COVID-19 antibody tests.

Gaining acceptance in medical communities requires increasing awareness of our COVID-19 tests and their benefits.

Also, there are a large number of companies around the world now making and selling COVID-19 tests that compete with our COVID-19 tests.

Many of these competitor products are made in China and other parts of Asia where manufacturing costs are low.

As such, we are seeing supply and price competition which could make it difficult for the Company to compete.

Other risks pertaining to these products include:

• our ability to demonstrate the efficacy, speed and cost competitiveness of our COVID-19 tests;

• whether healthcare providers and governmental agencies believe our COVID-19 tests are sufficiently safe, effective, and accurate;

• our ability to transfer, further develop, integrate and use third-party licensed technology;

• our ability to manufacture and scale commercial products;

• our ability to source required raw materials in a cost effective and timely manner;

• development of effective vaccines to the Covid-19 virus that reduce the need to do antibody testing;

• mutations in the COVID-19 virus that render our tests ineffective;

• receipt of regulatory approvals necessary prior to commercialization of our products;

• the FDA or other regulatory agencies retracting their prior approval for our products to be sold in their market or changing regulations for approval;

• whether the medical community accepts our COVID-19 tests as a supplement to, alternative to, or complimentary to, current PCR or other tests for COVID-19 infection.

In addition, each country in which we wish to sell these tests has its own regulatory approval requirements.

We will need to comply with the regulatory requirements of each country before we are permitted to sell in that country.

There can be no assurance that governmental agencies, including the FDA, will provide clearance of our COVID-19 tests to be sold in their markets.

Failure to achieve widespread market acceptance of our COVID-19 tests, or failure to achieve regulatory clearance of our COVID-19 tests, could materially harm our business, financial condition, and results of operations.

Our COVID-19 tests are new tests that only generated revenue during the last two months of our fiscal year.

It is uncertain how long we will be able to generate revenues from these tests, and what level of sales, if any, we will attain in the future.

We have a history of operating losses.

We have historically incurred net losses.

There can be no assurance that we will generate net profits in future periods.

Further, there can be no assurance that we will be cash flow positive in future periods.

In the event that we fail to achieve profitability in future periods, the value of our common stock may decline.

In addition, if we are unable to achieve or maintain positive cash flows, we would be required to seek additional funding, which may not be available on favorable terms, if at all.

Our operating results may fluctuate adversely as a result of many factors that are outside our control, which may negatively impact our stock price.

Fluctuations in our operating results, for any reason, could cause our growth or operating results to fall below the expectations of investors and securities analysts.

We base the scope of our operations and related expenses on our estimates of future revenues.

A significant portion of our operating expenses are fixed, and we may not be able to rapidly adjust our expenses if our revenues fall short of our expectations.

Our revenue estimates for future periods are based, among other factors, on estimated end-user demand for our products.

If end-user consumption is less than estimated, revenues from our distribution partners and other distribution channels would be expected to fall short of expectations, and because such a significant portion of our costs are fixed, could result in operating losses.

Our operating results are dependent upon many factors that are substantially outside of our control that could materially and adversely affect our business, results of operations and financial condition.

Factors that are beyond our control and that could affect our operating results in the future include:

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• changes in the healthcare market including consolidation in our customer base.

Fluctuations in our operating results, for any reason, could cause operating losses as a result of significant fixed expenses.

We base the scope of our operations and related expenses on our estimates of future revenues.

A significant portion of our operating expenses are fixed, and we may not be able to rapidly adjust our expenses if our revenues fall short of our expectations.

Our revenue estimates for future periods are based, among other factors, on estimated end-user demand for our products.

To remain competitive, we must continue to develop, obtain and protect our proprietary technology rights;

otherwise, we may lose market share or need to reduce prices as a result of competitors selling technologically superior products that compete with our products.

otherwise, we may lose market share or need to reduce prices as a result of competitors selling technologically superior products that compete with our products, or selling products at lower prices.

Our ability to compete successfully in the diagnostic market depends on continued development and introduction of new products, technology and the improvement of existing technology.

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There is no assurance that the Company will be able to retain its certification in the future.

This includes the possibility and risk that the Company’s products do not meet the new EU IVDR testing and documentation requirements in the future as described in the above “Research and Development” section of this document.

Significant government regulation exists in countries in which we conduct business.

A large part of the Company’s sales are to distributors in Europe, China and other countries, which require us to maintain certain certifications to sell our products.

A large part of the Company’s sales is to distributors in Europe, China and other countries, which require us to maintain certain certifications to sell our products.

Failure to comply with current governmental regulations and quality assurance guidelines could cause the loss of these certifications, which could materially adversely affect the results of the Company.

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The Company maintains a manufacturing plant in Mexico which presents risks to the Company including risks associated with doing business outside the United States.

The Company has a significant investment in its manufacturing facility in Mexico through its subsidiary, Biomerica de Mexico There are a number of risks associated with doing business in Mexico, including, exposure to local economic and political conditions, social unrest, including risks of terrorism or other hostilities, export and import restrictions, the potential for shortages of trained labor, and the possible effects of currency exchange rate fluctuations.

The Company has a significant investment in its manufacturing facility in Mexico through its subsidiary, Biomerica de Mexico.

In addition, the Company warehouses a significant amount of its inventory at the Mexico facility.

There are a number of risks associated with doing business in Mexico, including, exposure to local economic and political conditions, social unrest, including risks of terrorism or other hostilities, export and import restrictions, the potential for shortages of trained labor, and the possible effects of currency exchange rate fluctuations.

These risks could lead to additional costs that we cannot foresee at this time and may materially adversely impact our business, results of operations and financial condition.

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The loss of any key distributor or an unsuccessful effort by us to directly distribute our products could lead to reduced sales.

For the fiscal years ended May 31, 2020 and 2019, the Company had three and two distributors, respectively, which accounted for a total of 57.2% and 46.3% of our sales, respectively.

Of this, for the fiscal years ended May 31, 2020 and 2019, one of the distributors mentioned above accounted for 25.7% and 36.3%, respectively, of net consolidated sales.

At May 31, 2020 and 2019, the Company had three distributors and two distributors which accounted for a total of 80.08% and 68.1%, respectively, of gross accounts receivable.

The loss of these sales to these accounts could adversely impact the results of the Company.

Of the 80.0% as of May 31, 2020, 43.9% was owed by a distributor in Ecuador.

Total gross receivables for fiscal 2020 and 2019 were $1,836,852 and $1,527,762, respectively.

For the fiscal years ended May 31, 2021 and 2020, the Company had two distributors and three distributors, respectively, which accounted for a total of 60% and 57% of our net consolidated sales, respectively.

Of this, for the fiscal years ended May 31, 2021 and 2020, the largest of the distributors mentioned above accounted for 33% and 26%, respectively, of net consolidated sales.

At May 31, 2021 and 2020, the Company had two distributors and three distributors, respectively, which accounted for a total of 73% and 80%, respectively, of gross accounts receivable.

Of the 73% as of May 31, 2021, 41% was owed by a distributor in China.

Total gross receivables at May 31, 2021 and 2020 were $2,292,466 and $1,836,852, respectively.

Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance or purchasing patterns, could adversely affect our business and consolidated financial statements.

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Further, our ability to collect receivables from these customers through the court systems in those countries can be more difficult than here in the U.S.

Our inability to collect on receivables from customers outside of the U.S.

Our inability to collect on receivables from customers, in particular those outside of the U.S.

could negatively impact the Company.

If we are not able to manage our growth strategy our operating results may be adversely affected.

Our business strategy contemplates further growth, which would likely result in expanding the scope of operating and financial systems and the geographical area of our operations, including further expansion outside the U.S., as new products and technologies are developed and commercialized or new geographical markets are entered.

Because we have a small executive staff, acquisitions and other future growth may divert management’s attention from other aspects of our business, and place a strain on existing management and our operational, financial and management information systems.

Our business strategy contemplates further growth, which would likely result in expanding into larger facilities, expanding the scope of operating and financial systems and the geographical area of our operations, including further expansion outside the U.S., as new products and technologies are developed and commercialized or new geographical markets are entered.

Because we have a small executive staff, acquisitions and other future growth may divert management’s attention from core aspects of our business, and place a strain on existing management and our operational, financial and management information systems.

Furthermore, we may expand into markets in which we have less experience or incur higher costs.

Intellectual property risks and third-party claims of infringement, misappropriation of proprietary rights or other claims against us could adversely affect our ability to market our products, require us to redesign our products or attempt to seek licenses from third parties, and materially adversely affect our operating results.

In addition, the defense of such claims could result in significant costs and divert the attention of our management and other key employees.

Any and all of these potential growth and expansion strategies and events could impose material risks and cause the Company to incur adverse operating and financial results.

Intellectual property risks and third-party claims of infringement, misappropriation of proprietary rights or other claims against us could adversely affect our ability to market our products, require us to redesign our products or attempt to seek licenses from third parties, result in significant costs, and materially adversely affect our operating results.

Companies in or related to our industry often aggressively protect and pursue their intellectual property rights.

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An adverse determination in any of these types of disputes could prevent us from manufacturing or selling some of our products, limit or restrict the type of work that employees involved with such products may perform for us, increase our costs and expose us to significant liability.

As a general matter, our involvement in litigation or in any claims to determine proprietary rights, as may arise from time to time, could materially and adversely affect our business, financial condition and results of operations for reasons such as:

• pending litigation may of itself cause our distributors or end-users to reduce or terminate purchases of our products;

• it may consume a substantial portion of our managerial and financial resources;

• its outcome would be uncertain and a court may find any third-party patent claims valid and infringed by our products (issuing a preliminary or permanent injunction) that would require us to procure costly licensing arrangements from third parties or withdraw or recall such products from the market, redesign such products offered for sale or under development or restrict employees from performing work in their areas of expertise;

• governmental agencies may commence investigations or criminal proceedings against our employees, former employees and us relating to claims of misappropriation or misuse of another party’s proprietary rights;

• an adverse outcome could subject us to significant liability in the form of past royalty payments, penalties, special and punitive damages, the opposing party’s attorneys' fees, and future royalty payments significantly affecting our future earnings;

• failure to obtain a necessary license (upon commercially reasonable terms, if at all) upon an adverse outcome could prevent us from selling our current products or other products we may develop.

In addition, the defense of such claims could result in significant costs and divert the attention of our management and other key employees.

In addition to the foregoing, we may also be required to indemnify some customers, distributors and strategic partners under our agreements with such parties if a third party alleges or if a court finds that our products or activities have infringed upon, misappropriated or misused another person’s proprietary rights.

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We need to continue to raise additional funds to finance our future capital or operating needs, which could have adverse consequences on our operations and the interests of our stockholders.

We need to continue to raise funds through public or private debt or sale of equity to achieve our business strategy.

As a company focused on research and development of new products that do not yet generate revenues, we need to continue to raise funds through public or private debt or sale of equity to achieve our business strategy.

When we raise funds or acquire other technologies or businesses through issuance of equity, this dilutes the interests of our stockholders.

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Costs related to development projects and approvals are hard to estimate due to factors that are unknown to us at this time.

These costs could be much higher than anticipated and current operations may not be able to cover these costs.

These future costs could be much higher than anticipated and current operations are unlikely be able to cover these costs.

Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of studies and trials may not be predictive of future trial results.

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We may not achieve market acceptance of our new products among healthcare providers and physicians, and this would have a negative effect on future sales.

We believe our ability to introduce new products that gain acceptance among healthcare providers and physicians is an important part of our ability to grow our revenue in future periods.

We believe our ability to introduce new products that gain acceptance among consumers, healthcare providers and physicians is an important part of our ability to grow our revenue in future periods.

However, any new products we introduce may not gain market acceptance to the extent we anticipate or project.

The acceptance of which in the medical community is unpredictable at this time.

In addition, the Company will need to spend considerable funds in order to introduce the products into the marketplace.

The acceptance in the medical community for any of our new products is unpredictable at this time.

In addition, the Company will need to spend considerable funds in order to introduce new products into the marketplace.

Sales, if any, of these products in the future are uncertain.

In addition, our competitors may offer different products and product formats at suggested prices that are lower than for our products or are more accurate than our products.

We can provide no assurances that the medical community will purchase our products or that they will not prefer to purchase a competitive product.

In addition, our competitors may offer different products and product formats at suggested prices that are lower than our products or whose products are more accurate than our products.

We can provide no assurances that consumers and the medical community will purchase our products or that they will not prefer to purchase a competitive product.

The industry and market segments in which we operate are highly competitive, and intense competition with other providers of diagnostic products may reduce our sales and margins.

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We also face competition from our distributors as some have created, and others may decide to create, their own products to compete with ours.

A number of our competitors have a potential competitive advantage because they have substantially greater financial, technical, research and other resources, and larger, more established marketing, sales, distribution and service organizations than we have.

A number of our competitors have a potential competitive advantage because they have substantially greater financial, technical, research and other resources, larger, more established marketing, sales, distribution and service organizations;

more established relationships with healthcare professionals;

and greater experience in conducting research and development, manufacturing, clinical trials, and obtaining regulatory approval for products .

Moreover, some competitors offer broader product lines and have greater name recognition than we have.

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Changes in government policy could have a significant impact on our business by increasing the cost of doing business, affecting our ability to sell our products and negatively impacting our profitability.

Such changes could include tariffs or modifications to existing legislation, such as U.S.

tax policy, or entirely new legislation, such as the Affordable Healthcare Act ("AHA") in the U.S.

We cannot fully predict the many ways that healthcare reform might affect our business.

Such changes could include tariffs, embargos, trade wars or modifications to existing legislation, such as U.S.

tax policy, or entirely new legislation, such as the Affordable Healthcare Act in the U.S.

We cannot predict the many ways that healthcare reform in the U.S.

and internationally, and changing trade legislation and policies could adversely affect our business.

It is unclear whether and to what extent, if at all, other anticipated developments, including changes due to new presidential administration priorities, or changes resulting from healthcare reform, such as a change in the number of people with health insurance, may impact us.

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In addition, our product manufacturing of certain product lines is concentrated in our two manufacturing sites.

Weather, natural disasters (including pandemics), fires, terrorism, political change, failure to follow specific internal protocols and procedures, equipment malfunction, environmental factors or damage to one or more of our facilities could adversely affect our ability to manufacture our products.

Weather, natural disasters (including pandemics), fires, terrorism, political change, governmental restrictions or stay-at-home orders in response to natural disasters (including pandemics), failure to follow specific internal protocols and procedures, equipment malfunction, environmental factors or damage to one or more of our facilities could adversely affect our ability to manufacture our products.

This, in turn, could have a material adverse effect on our business.

If we experience unexpected increases in the demand for our products, we may be required to expend additional capital resources to meet these demands.

If we experience unexpected increases in the demand for our products, we may be required to expend additional capital resources or engage third-party manufacturers to meet these demands.

These capital resources could involve the cost of new machinery or even the cost of new manufacturing facilities.

This would increase our capital costs, which could adversely affect our earnings and cash resources.

If we are unable to develop or obtain necessary manufacturing capabilities in a timely manner, our total revenue could be adversely affected.

In addition, engaging third-party manufacturers would increase manufacturing costs and reduce margins.

This would increase our capital costs or third-party expenses, which could adversely affect our earnings and cash resources.

If we are unable to develop or obtain necessary manufacturing capabilities in a timely manner or to engage third-party manufacturers to meet demand, our total revenue could be adversely affected.

Failure to cost-effectively increase production volumes, if required, or lower than anticipated yields or production problems, including those encountered as a result of changes that we may make in our manufacturing processes to meet increased demand or changes in applicable laws and regulations, could result in shipment delays as well as increased manufacturing costs, which could also have a material adverse effect on our business, operating results and financial condition.

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Some raw materials require significant ordering lead time and we may not be able to timely access sufficient raw materials in the event of an unexpected increase in demand, particularly those obtained from a sole supplier or a limited group of suppliers.

If one or more of our products is claimed to be defective, or does not meet the performance criteria we claim in our marketing materials we could be subject to claims of liability and harm to our reputation that could adversely affect our business.

If one or more of our products is claimed to be defective, or does not meet the performance criteria we claim in our marketing materials we could be subject to product recalls, claims of liability and harm to our reputation that could adversely affect our business.

A claim of a defect in the design or manufacture of our products could have a material adverse effect on our reputation in the industry and subject us to claims of liability for injuries and otherwise.

Further, a claim that one of our products is defective or does not actually meet the performance criteria we claim in our marketing materials, could have a substantial impact on our revenues and financial performance.

Any substantial underinsured loss resulting from such a claim would have a material adverse effect on our operating results and financial conditions and the damage to our reputation or product lines in the industry could have a material adverse effect on our business.

Further, a claim that one of our products is defective or does not actually meet the performance criteria we claim in our marketing materials, could require a product recall or otherwise have a substantial impact on our revenues and financial performance.

Any substantial underinsured loss resulting from such a claim or defect would have a material adverse effect on our operating results and financial conditions and the damage to our reputation or product lines in the industry could have a material adverse effect on our business.

We are exposed to business risks which, if not covered by insurance, could have an adverse effect on our results of operations.

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Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems.

Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our systems, sustained or repeated system failures that interrupt our ability to generate and maintain data, could result in a material disruption in our operations.

Cyber security is a great and growing risk to operating companies.

Cyber-attacks may result in loss of vital Company documentation and data, or confidential third-party documents held by the Company, that are necessary for the Company to operate.

Furthermore, to the extent that any disruption or security breach resulted in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could face a variety of negative consequences, including regulatory actions or litigation, fines or penalties, adverse publicity, increased cybersecurity protection costs, and lost revenue.

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In addition, the loss of any of our key personnel, particularly key research and development personnel, could harm our business and prospects and could impede the achievement of our research and development, operation or strategic objectives.

The Company’s lease obligations and growth expectations could create financial and operating risks.

Given the recent growth in the Company’s operations, it is uncertain the current leased facilities will be able to accommodate the Company’s operations in the future.

As such, the Company may need to move to new facilities that would require the Company to seek to sublease its current facilities for the remainder of the lease(s) at a potential discount to the existing monthly lease obligation cost.

Alternatively, the Company could be required to move a portion of its operations to a new facility which could be disruptive both short term and long term to the Company’s operations and create additional fixed costs.

We face risks relating to our international sales, including inherent economic, political and regulatory risks, which could impact our financial performance, cause interruptions in our current business operations and impede our growth strategy.

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Sales of our common stock in the public market could lower the market price for our common stock and adversely impact the trading price of our securities.

Future sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock and could make it more difficult for us to raise funds in the future through a public offering of our securities.

On July 21, 2020, we filed with the SEC a new “Shelf” registration statement on Form S-3.

The new registration statement registers our common shares to be issued in a maximum aggregate amount of $90,000,000.

Shares of our common stock may be sold from time to time under this registration statement once it is declared effective.

Future sales by the Company of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock and could make it more difficult for us to raise funds in the future through a public offering of our securities.

On July 21, 2020, we filed with the SEC a “shelf” registration statement on Form S-3.

The registration statement registers common shares that may be issued by the Company in a maximum aggregate amount of up to $90,000,000.

Shares of our common stock may be sold from time to time under this registration statement for up to three years from the filing date.

On January 22, 2021, we filed a prospectus supplement for the sale of up to $15,000,000 of shares of our common stock in an at-the-market offering under the shelf registration statement, of which $12,984,273, remains available for sale under the prospectus supplement.

The issuance of additional shares of our common stock, or issuances of additional securities, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock and impair our ability to raise capital through the sale of additional equity securities.

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• introductions of new products;

• FDA, SEC, FINRA and foreign regulatory actions against the Company;

• FDA, SEC, Financial Industry Regulation Authority and foreign regulatory actions against the Company;

• developments or disputes relating to patents or proprietary rights;

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• lawsuits or liability claims from shareholders or other parties;

• legal disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our product candidates, and the results of any proceedings or lawsuits, including patent or shareholder litigation;

• sales of our common stock or other securities by us or our stockholders in the future;

• trading volume of our common stock

• actual or anticipated variations in quarterly operating results;

• publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;

• effects of natural or man-made catastrophic events, including widespread public health epidemics like the pandemic related to COVID-19;

• general stock market conditions and other factors unrelated to our operating performance.

A sale of a substantial number of shares of the common stock by the Company may cause the price of our common stock to decline.

Trading of our common stock is not significant, therefore sales of a larger volume of the stock could adversely affect the stock price.

As of August 26, 2016, the Company's stock has been traded on the Nasdaq Capital Market.

Trading of the Company's stock is limited and liquidation of the Company’s stock may be difficult as there is a limited market for the Company’s stock.

As of August 26, 2016, our Company's stock has been traded on the Nasdaq Capital Market.

Trading of our stock is limited and liquidation of the Company’s stock may be difficult as there is a limited market for our stock.

Our ability to use our net operating loss carry forwards in the future may be subject to limitation.

Although the Company has Federal income tax net operating loss carryforwards of approximately $9,213,000 and California state income tax net operating loss carryforwards of approximately $5,025,000, use of these loss carryforwards will depend on future income in relationship to expirations dates of these carryforwards.

Although we have Federal income tax net operating loss carryforwards of approximately $12,957,000 and California state income tax net operating loss carryforwards of approximately $6,768,000, use of these loss carryforwards will depend on future income in relationship to expirations dates of these carryforwards.

We do not anticipate declaring any cash dividends on our common stock.

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There is no guarantee that our common stock will appreciate in value or even maintain the price at which shares were purchased, and returns may not be realized on investments in our common stock.

We face risks related to our intellectual property including our patents (IP).

We rely on IP for the current products we sell and for the new products in research, development and in clinical trials.

While the Company tries to protect its IP with confidentiality agreements and internal policies, we still face risks that our IP will be stolen or otherwise misappropriated, by parties inside or outside of the U.S.

Further, we have filed over 100 patents around the world on much of the research and development done by the Company, and the proposed products to come from this research.

The vast majority of these filed patents are still under review and have not yet been allowed or issued.

We may not be able to attain patent claims that adequately protect the company from competitors developing similar products or copying our products.

Finally, there is a great number of issued patents owned by others that pertain to the product categories in which we operate.

While we do not know of any patents with claims that we are violating by manufacturing or selling our current products, there is a risk that certain third party patents will emerge that prohibit us from selling our products or that require us to pay royalty payments.

Such third party claims could have a material negative impact on the Company.

Any of these IP related risks could cause material damage to future revenues and to the long term enterprise values of the Company.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors