What changed in this filing

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Item 1A. Risk Factors

2024-05-08 compared with 2023-11-08 · 30 added, 42 removed, 555 unchanged (11% of the section changed)

43 unchanged sentences

• We have a limited operating history in China and we face risks with respect to conducting business in connection with our joint venture in China due to certain legal, political, economic and social uncertainties relating to China.

• The occurrence of pandemics and epidemics, including potential resurgences, poses risks to our business, results of operations, financial condition, and cash flows.

General Risks:

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We have a history of losses and may continue to incur operating and net losses for the foreseeable future.

We have recorded a net loss of approximately $5.1 million for the nine months ended September 30, 2023.

We have recorded a net loss of approximately $0.5 million for the three months ended March 31, 2024.

We incurred net losses of approximately $4.9 million and $16.5 million for the years ended December 31, 2023 and December 31, 2022, respectively.

As of September 30, 2023, our accumulated deficit was approximately $190.6 million.

As of March 31, 2024, our accumulated deficit was approximately $191.0 million.

We have not achieved profitability on an annual basis.

Our net losses and negative cash flow have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital, and if we are not able to achieve and sustain profitability in the near future or at all our stock price may be depressed.

Our net losses and history of negative cash flow have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital, and if we are not able to achieve and sustain profitability in the near future or at all our stock price may be depressed.

We expect to continue to incur increasing expenses as we develop our sales, marketing distribution and other commercial infrastructure and continue to develop and commercializing our products, including the cost of obtaining and maintaining regulatory approvals.

As of September 30, 2023, our cash and cash equivalents totaled approximately $26.8 million, of which $26.6 million was unrestricted, and we had no borrowings outstanding under our line of credit up to $10.0 million, subject to certain terms and conditions, with Western Alliance Bank.

As of March 31, 2024, our cash and cash equivalents totaled approximately $27.6 million, of which $27.4 million was unrestricted, and we had no borrowings outstanding under our line of credit up to $10.0 million, subject to certain terms and conditions, with Western Alliance Bank.

However, we may require additional funds, either through additional equity or debt financings, including pursuant to the At Market Issuance Sales Agreement, dated as of June 12, 2020, with B.

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We have no commitments to obtain such additional financing, and we may not be able to obtain any such additional financing on terms favorable to us, or at all.

Further, in recent years as a result of various factors including global instability, increased interest rates, inflationary conditions and failures of regional banks, among other factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability and uncertainty about economic stability.

Further, in recent years as a result of various factors including global instability, increased interest rates, and inflationary conditions, among other factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability and uncertainty about economic stability.

There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur.

If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive.

If adequate financing is not available, the Company will further delay, postpone or terminate product and service expansion and curtail certain selling, general and administrative operations.

If adequate financing is not available, the Company will delay, postpone or terminate product and service expansion and curtail certain selling, general and administrative operations.

The inability to raise additional financing may have a material adverse effect on the future performance of the Company.

Interruptions in our relationships or declines in our business with major customers could materially harm our business and financial results.

Watson Group, a related party, accounted for approximately 15.7% of our sales during the nine months ended September 30, 2023.

Watson Group, a related party, accounted for approximately 13.4% of our sales during the three months ended March 31, 2024.

Any interruption in our relationship or decline in our business with this customer or other customers upon whom we become highly dependent could cause harm to our business.

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• effectively manage marketing costs (including creative and media) to maintain acceptable customer acquisition costs;

• acquire cost-effective television advertising;

• select the most effective markets, media and specific media vehicles in which to market and advertise;

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Our products compete and will compete with other similar products produced by our competitors.

These competitive products could be marketed by well-established, successful companies that possess greater financial, marketing, distributional, personnel and other resources than we possess.

These competitive products are and may in the future be marketed by well-established, successful companies that possess greater financial, marketing, distributional, personnel and other resources than we possess.

Using these resources, these companies can implement extensive advertising and promotional campaigns, both generally and in response to specific marketing efforts by competitors, and enter into new markets more rapidly to introduce new products.

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Our competitors also may obtain regulatory approval for their products in markets we have not yet entered or before we are able to obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter that market.

We believe that customers in our markets display a significant amount of loyalty to their supplier of a particular product.

To the extent we are not the first to develop, offer and/or supply new products, customers may buy from our competitors or make materials themselves, causing our competitive position to suffer.

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Disputes from time to time with such companies, organizations or individuals are not uncommon, and we cannot assure you that we will always be able to resolve such disputes on terms favorable to us.

As further described in Note 10, Commitments and Contingencies, Contingencies in the Notes to the Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we are currently involved in substantial and complex litigation.

As further described in Note 10, Commitments and Contingencies, Contingencies in the Notes to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we are currently involved in substantial and complex litigation.

Unexpected results could cause us to have financial exposure in these matters in excess of recorded reserves and insurance coverage, requiring us to provide additional reserves to address these liabilities, therefore impacting profits.

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• our ability to develop, introduce and distribute new products or product enhancements that meet customer requirements and to effectively manage product transitions;

• our reliance on third-party partners involved in the development and supply of new or existing products;

• changes in the competitive dynamics of our markets, including new entrants, new products, or discounting of product prices;

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• information technology related costs, disruptions and hindrances;

• our ability to effectively incorporate artificial intelligence (AI) solutions into our operations, services, and systems;

• future regulation by federal, state or local governments;

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We use our data centers and our networks, and those of third parties, to store and access our proprietary business and other sensitive information.

We and the third parties upon which we rely may face various cyber security threats, which are prevalent and continue to increase, including, without limitation, cyber security attacks to our information technology infrastructure and attempts by others to gain access to our proprietary or sensitive information and other similar threats.

We rely upon third parties service providers and technologies to operate critical business systems to process confidential and personal information in a variety of contexts, including, without limitation, third-party providers of cloud-based infrastructure, employee email, and other functions.

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We depend on key personnel, the loss of any of which could negatively affect our business .

Our business depends greatly on the expertise and contributions of several key individuals, including Robert Fried, Brianna Gerber and Heather Van Blarcom who are our Chief Executive Officer, Chief Financial Officer and Senior Vice President of Legal and Corporate Secretary, respectively.

Our business depends greatly on the expertise and contributions of several key individuals, including Robert Fried and Brianna Gerber who are our Chief Executive Officer and Chief Financial Officer, respectively.

Additionally, we rely on other critical team members, including professionals in scientific research and marketing.

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In addition, our operations may not provide sufficient cash to meet the repayment obligations of debt incurred under the Credit Agreement.

The Credit Agreement contains affirmative and restrictive covenants, including covenants regarding delivery of financial statements, maintenance of inventory, payment of taxes, maintenance of insurance, dispositions of property, business combinations or acquisitions and incurrence of additional indebtedness, among other customary covenants, in each case subject to limited exceptions.

The Credit Agreement contains affirmative and restrictive covenants, including covenants regarding delivery of financial statements, the amount of cash maintained at Western Alliance Bank, maintenance of inventory, payment of taxes, maintenance of insurance, dispositions of property, business combinations or acquisitions and incurrence of additional indebtedness, among other customary covenants, in each case subject to limited exceptions.

There can be no assurance that we will be able to comply with the financial and other covenants in the Credit Agreement.

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Grace, for NR and a limited number of third-party suppliers for the raw materials required to produce our products.

Our dependence on a limited number of third-party suppliers or on a single supplier, and the challenges we may face in obtaining adequate supplies of raw materials, involve several risks, including limited control over pricing, availability, health epidemics affecting the region of such suppliers, quality and delivery schedules.

We cannot be certain that our current suppliers will continue to provide us with the quantities of these raw materials that we require or satisfy our anticipated specifications and quality requirements.

Due to other worldwide macroeconomic conditions such as, but not limited to, geopolitical conflicts and unrest, pandemics, labor shortages, port congestion, and government restrictions there may be delays in shipments from our suppliers.

Any supply interruption in limited or sole sourced raw materials could materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified.

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Our supply of NR is subject to periodic renewals and these renewals are not guaranteed.

In January 2019, Grace was issued patents related to the crystalline form of NR chloride which limit our ability to find alternatives for supply.

In January 2019, Grace was issued patents related to the crystalline form of NR chloride which limit our ability to find alternatives for supply if we are unable to further extend our agreement with Grace.

There is no guarantee that we will be able to continue to contract with Grace for the supply of NR, or that such terms will be favorable to us.

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governments, our suppliers and our company.

We may never develop any additional products to commercialize.

We may experience delays in the development in, or may never develop, any additional products to commercialize.

We have invested a substantial amount of our time and resources in developing various new products.

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Despite our efforts, these products may not become commercially successful products for a number of reasons, including but not limited to:

• we may not be able to obtain regulatory approvals for our products, or the approved indication may be narrower than we seek;

• we may not be able to obtain or maintain regulatory approvals for our products, or the approved indication may be narrower than we seek;

• our products may not prove to be safe and effective in clinical trials;

• we may experience delays in our development program;

• we may rely on third-parties to develop and produce our products, which could lead to increased costs, unanticipated delays, or other negative impacts;

• any products that are approved may not be accepted in the marketplace;

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The litigation includes multiple complaints and counterclaims by us and Elysium in venues in California and New York, as well as a patent infringement complaint filed by the Company and Trustees of Dartmouth College.

For further details on this litigation, please refer to Note 10, Commitments and Contingencies, Legal Proceedings in the Notes to the Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For further details on this litigation, please refer to Note 10, Commitments and Contingencies, Legal Proceedings in the Notes to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The litigation is substantial and complex, and it has caused and could continue to cause us to incur significant costs, as well as distract our management over an extended period.

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Outside the United States, an increasing number of laws, regulations, and industry standards apply to data privacy and security.

For example, the European Union’s General Data Protection Regulation (GDPR) and the United Kingdom’s GDPR (UK GDPR) imposes strict obligations on the processing of personal data, including, without limitation, and personal health data.

The GDPR and UK GDPR set out extensive compliance requirements, including providing detailed disclosures about how personal data is collected and processed, demonstrating that an appropriate legal basis is in place or otherwise exists to justify data processing activities;

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We continue to execute contracts involving the transfer of personal data outside of the European Economic Area with the Standard Contractual Clauses in the ordinary course.

As supervisory authorities issue further guidance on personal data export mechanisms, including updates to the Standard Contractual Clauses, and/or start taking

enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we or third parties we work with are otherwise unable to transfer personal data between and among countries and regions in which clinical trials of our products are conducted, it could affect our business.

As supervisory authorities issue

further guidance on personal data export mechanisms, including updates to the Standard Contractual Clauses, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we or third parties we work with are otherwise unable to transfer personal data between and among countries and regions in which we conduct business.

Following the United Kingdom’s withdrawal from the EEA and the EU, we also have to comply with the UK-specific requirements related to data protection, including with respect to transfer of personal data outside of the UK, which increases our regulatory compliance burden.

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Each of these state laws adds potential compliance and risk for us with respect to data necessary to operate our business.

A United States federal privacy bill advanced to the U.S.

House of Representatives on July 20, 2022, which has been amended as of December 30, 2022, and recommended for passage as law, would establish new requirements for how companies handle personal data, including information that identifies or is reasonably linked to an individual, such as our consumers.

A United States federal privacy bill has been introduced, which would establish new requirements for how companies handle personal data, including information that identifies or is reasonably linked to an individual, such as our consumers.

If this bill becomes law, we may be required to implement certain security practices to protect and secure personal data against unauthorized access, and we may be subject to further requirements for complying with this requirement if the FTC issues related regulations.

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Future sales of these shares could adversely affect the market price of our common stock.

As of September 30, 2023, we had outstanding options for an aggregate of approximately 11.9 million shares of common stock at a weighted average exercise price of $3.70 per share and unvested restricted stock units of approximately 0.7 million shares.

As of March 31, 2024, we had outstanding options for an aggregate of approximately 13.8 million shares of common stock at a weighted average exercise price of $3.22 per share and unvested restricted stock units of approximately 0.9 million shares.

The holders may sell many of these shares in the public markets from time to time, without limitations on the timing, amount or method of sale.

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During fiscal year 2022, we entered into an agreement to form a joint venture to expand the Company’s market strategy to include opportunities in Mainland China and its territories, excluding Hong Kong, Macau and Taiwan.

Operating activity under the joint venture was not material during the three and nine months ended September 30, 2023.

Operating activity under the joint venture was not material during the three months ended March 31, 2024.

Our participation in the joint venture in China is subject to general, as well as industry-specific, economic, political and legal developments and risks in China.

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There is no guarantee that we will be able to successfully launch our joint venture.

The occurrence of pandemics and epidemics, including potential resurgences, poses risks to our business, results of operations, financial condition, and cash flows.

In the past, we have seen how pandemics, like the COVID-19 outbreak, have adversely affected various aspects of our business.

Future outbreaks or resurgences of pandemics may lead to events that could again adversely affect our business, results of operations, financial condition and cash flows including:

• the implementation of measures by authorities, businesses and individuals to contain the spread, such as travel restrictions, quarantines, social distancing orders, and vaccination requirements;

• disruptions in our supply chain due to global shortages of components and materials necessary for our products;

• increased product costs and operating expenses;

• reduced consumer and investor confidence;

• reduced business and consumer spending lowering demand for our products;

• increased market volatility and interest rates as well as diminished credit availability;

• adoption of entirely remote work arrangements and enhanced health and safety protocols;

• unforeseen risks that we or our customers, suppliers, and other partners are not aware of or able to respond to effectively.

The impact of an outbreak of any pandemic or epidemic can also exacerbate other risks discussed in these risk factors and throughout this report.

Our ability to use our net operating loss (NOL) carryforwards and certain other tax attributes may be limited.

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If we identify material weaknesses in our internal controls and/or fail to establish and maintain effective controls and procedures and internal control over financial reporting it could result in material misstatements in our financial statements and/or a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.

The SEC has proposed a new rule regarding climate change that, if adopted, requires significant new disclosure obligations of us and requires us to update and develop our controls to accommodate these new obligations.

The SEC has adopted new rules regarding climate change that, while stayed pending the resolution of various legal challenges, will require significant new disclosure obligations of us and requires us to update and develop our controls to accommodate these new obligations if implemented as adopted.

Environmental, social and governance matters may impact our business and reputation.

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This increased scrutiny and changing expectations with respect to the Company’s ESG practices as well as new rules and regulations may result in additional costs or risks.

The SEC has proposed new rules regarding climate change that, if adopted, require significant new disclosure obligations of us and require us to update and develop our controls to accommodate these new obligations.

The SEC has adopted new rules regarding climate change that, while stayed pending the resolution of various legal challenges, will require significant new disclosure obligations of us and require us to update and develop our controls to accommodate these new obligations if implemented as adopted.

Standards and research regarding ESG practices could change as a result of these rules.

In addition, the State of California recently passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act that will impose broad climate-related disclosure obligations on certain companies doing business in California, starting in 2026.

New or revised laws and regulations or new interpretations of existing laws and regulations, such as those related to climate change, could affect the operation of our properties or result in significant additional expense and restrictions on our business operations.

If we are unable to satisfy such new criteria, investors may conclude that our policies with respect to corporate responsibility are inadequate.

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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-Q

Item 1A. Risk Factors