What changed in this filing

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Item 1A. Risk Factors

2024-03-28 compared with 2023-03-16 · 120 added, 122 removed, 448 unchanged (35% of the section changed)

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In that case, the trading price of our securities could decline, and you may lose some or all of your investment.

RISK FACTOR SUMMARY

Below is a bulleted summary of our principal risk factors, however this list does not fully represent all of our known risk factors.

We encourage you to carefully review the full risk factors contained in this Annual Report in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky.

These risks and uncertainties include, but are not limited to, the following:

Risks Related to our Business

We have a history of operating losses, we may never achieve or maintain profitability, and we will need to raise significant additional capital if we are going to continue as a going concern.

We have limited commercial experience upon which investors may evaluate our prospects.

Our efforts may never result in the successful development of commercial applications based on our TAEUS technology, on which our success is substantially dependent.

Our TAEUS platform applications may not achieve adequate market acceptance by the physicians, patients, third-party payors and others in the medical community.

The outbreak of pandemics, such as COVID-19, could adversely impact our business, including our pre-sales activities, clinical trials and ability to obtain regulatory approvals.

We may not remain commercially viable if there is an inadequate level of reimbursement by governmental programs and other third-party payors for our planned products or associated procedures.

We have limited resources and depend on third parties to design and manufacture, and seek regulatory approval of, our TAEUS applications.

We will need to develop marketing and distribution capabilities both internally and through our relationships with third parties in order to sell any of our TAEUS products receiving regulatory approval.

Competition in the medical imaging market is intense and we may be unable to successfully compete.

We market our TAEUS liver device in the EU and are subject to the risks of doing business outside of the United States.

We depend on our senior management team and the loss of one or more key employees or an inability to attract and retain highly skilled employees could harm our business.

Misdiagnosis, warranty and other claims, as well as product field actions and regulatory proceedings, initiated against us could increase our costs, delay or reduce our sales and damage our reputation.

Risks Related to Intellectual Property and Other Legal Matters

If we are unable to protect our intellectual property, which entails significant expense and resources, then our financial condition, results of operations and the value of our technology and products could be adversely affected.

Policing unauthorized use of our proprietary rights can be difficult, expensive and time-consuming, and we might be unable to determine the extent of this unauthorized use.

Intellectual property rights may not provide adequate protection, which may permit third parties to compete against us more effectively.

Risks Related to Government Regulation

If we fail to obtain and maintain necessary regulatory clearances or approvals for our TAEUS applications, or if clearances or approvals for future applications and indications are delayed or not issued, our commercial operations will be harmed.

Healthcare reform measures could hinder or prevent our planned products' commercial success.

If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.

Risks Related to Owning Our Securities

Our quarterly and annual results may fluctuate significantly, may not fully reflect the underlying performance of our business and may result in volatility in the price of our securities.

Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future for reasons unrelated to our operating performance or prospects, and as a result, investors in our common stock could incur substantial losses.

We may be subject to securities litigation, which is expensive and could divert management attention.

If we are unable to implement and maintain effective internal control over financial reporting, including by remediating current material weaknesses in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities may decrease.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our at-the-market offering program or equity incentive plan, could result in dilution of the percentage ownership of our stockholders and could cause the price of our securities to fall.

Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable.

General Risk Factors

Our business is affected by macroeconomic conditions.

Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.

The ongoing military action in Ukraine and the Middle East could have negative impact on the global economy, which could materially adversely affect our business, operations, operating results and financial condition.

Our business could be negatively impacted by corporate social responsibility and sustainability matters.

Risks Related to Our Business

We have a history of operating losses and will need to raise significant additional capital to continue our business and operations.

If we are unable to raise capital or secure financing on favorable terms, or at all, to meet our capital and operating needs, we will be forced to delay or reduce our product development program and commercialization efforts, which would have a material adverse effect on our business.

We are experiencing financial and operating challenges.

We have only generated limited revenues to date and have a history of losses from operations.

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Our independent registered public accounting firm, in its report on our financial statements for the year ended December 31, 2023, has raised substantial doubt about our ability to continue as a going concern.

We will require additional capital in the near term to continue as a going concern to proceed with the commercialization of our planned TAEUS applications and to meet our growth and profitability targets.

We have expended and expect to continue to expend significant resources on hiring of personnel, payroll and benefits, continued scientific and potential product research and development, potential product testing and pre-clinical and clinical investigations, expenses associated with the development of relationships with strategic partners, intellectual property development and prosecution, marketing and promotion, capital expenditures, working capital, and general and administrative expenses.

We also expect to incur costs and expenses related to consulting, laboratory development, and the hiring of scientists and other operational personnel.

We may not be able to secure financing on favorable terms, or at all, to meet our future capital needs and our failure to obtain financing when needed could force us to delay, reduce or eliminate our product development programs and commercialization efforts.

We will need to raise additional capital in order to finance the full commercialization of our NAFLD TAEUS application and to complete the development of any other TAEUS application through public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives.

To date, we have financed our operations primarily through the net proceeds from offerings of common and preferred stock and convertible notes.

We do not know when or if our operations will generate sufficient cash to fund our ongoing operations.

Therefore, we will require additional capital in order to:

(i) continue to conduct research and development activities;

(ii) continue to conduct clinical studies;

(iii) fund the costs of seeking regulatory approval of TAEUS applications;

(iv) expand our sales and marketing infrastructure;

(v) acquire complementary business technology or products;

and (vi) respond to business opportunities, challenges, increased regulatory obligations or unforeseen circumstances.

To remain viable, we will require additional capital in the near term to proceed with the commercialization of our planned TAEUS applications and to meet our growth targets.

Our near-term capital needs include supporting the hiring of personnel, payroll and benefits, continued scientific and potential product research and development, clinical studies to support our FDA de novo submission, expenses associated with the development of relationships with strategic partners, intellectual property development and prosecution, funding the costs of seeking regulatory approval of TAEUS applications, expanding our sales and marketing infrastructure, capital expenditures, working capital, responses to business opportunities, and general and administrative expenses.

We are actively exploring additional sources of liquidity and may seek to raise such capital through, among other means, public or private equity offerings (including sales of our common stock under our at-the-market equity offering program), debt financings, corporate collaborations and/or licensing arrangements.

However, general market conditions or the market price of our common stock may not support these capital raising transactions on terms favorable to us, or at all.

If we are unable to obtain adequate financing or financings on terms satisfactory to us when we require it, we will be forced to undertake capital preservation measures that may include delaying or reducing our product development programs and commercialization efforts, materially curtailing or eliminating our operations, selling or disposing of our rights or assets, pursuing a sale or other strategic transactions, or undergoing restructuring or insolvency proceedings.

Factors that could limit our ability to raise additional capital after this offering include, among other matters:

the expectation that we will continue to incur losses and generate negative cash flows from operations;

our substantially limited liquidity and capital resources to meet our obligations as they become due;

the potential that our common stock will be delisted by Nasdaq in the event we fail to maintain compliance with the minimum bid price requirement;

risks and uncertainties that are described in more detail in the Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations sections in this Annual Report on Form 10-K.

To date, we have financed our operations through the net proceeds from offerings of common and preferred stock, warrants and convertible notes.

Our future funding requirements will depend on many factors, including, but not limited to:

the costs, timing and outcomes of regulatory reviews associated with our future products, including TAEUS applications;

the progress, timing, costs and outcomes of our clinical trials, including the ability to timely enroll patients in such clinical trials;

the progress, timing, costs and outcomes of our clinical studies, including the ability to timely enroll patients in such clinical trials;

the costs and expenses of expanding our sales and marketing infrastructure;

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the amount of sales and other revenues from technologies and products that we may commercialize, if any, including the selling prices for such potential products and the availability of adequate third-party reimbursement;

selling and marketing costs associated with our potential products, including the cost and timing of expanding our marketing and sales capabilities;

the terms and timing of any potential future collaborations, licensing or other arrangements that we may establish;

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the time and cost necessary to respond to technological and market developments.

We may raise funds in equity or debt financings or enter into credit facilities in order to access funds for our capital needs.

Any debt financing obtained by us in the future would cause us to incur debt service expenses and could include restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and pursue business opportunities.

If we raise additional funds through issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of our Company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.

See “ Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plan, could result in dilution of the percentage ownership of our stockholders and could cause the price of our securities to fall.

In addition, 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 or products or to grant licenses on terms that may not be favorable to us and our collaborators and strategic partners may not perform as expected.

General market conditions or the market price of our common stock may not support capital raising transactions such as a public or private offering of our common stock or other securities.

If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, we may terminate or delay the development of one or more of our products, or delay establishment of sales and marketing capabilities or other activities necessary to commercialize our products, or materially curtail or reduce our operations.

We could be forced to sell or dispose of our rights or assets.

Any inability to raise adequate funds on commercially reasonable terms could have a material adverse effect on our business, results of operation and financial condition, including the possibility that a lack of funds could cause our business to fail and liquidate with little or no return to investors.

Our efforts may never result in the successful development of commercial applications based on our TAEUS technology.

Our TAEUS technology is still in development.

We have received regulatory clearance for the commercial sale of our NAFLD application in the European Union but otherwise do not have any applications for our TAEUS technology approved for sale.

Applications for our TAEUS technology, even if approved for sale, may never become commercially viable or generate significant revenue.

Our ability to generate significant revenues and, ultimately, achieve profitability will depend on whether we can obtain additional capital when we need it, complete the development of our technology, receive all required regulatory approvals for our TAEUS applications and find customers who will purchase our future products or strategic partners that will incorporate our technology into their products.

Even if we develop commercially viable applications for our TAEUS technology, which may include licensing, we may never recover our research and development expenses and we may never be able to produce material revenues or operate on a profitable basis.

Our research and development efforts remain subject to all of the risks associated with the development of new products based on emerging technologies, including, without limitation, unanticipated technical or other problems, the inability to develop a product that may be sold at an acceptable price point and the possible insufficiency of funds needed in order to complete development of these products.

Technical problems may result in delays and cause us to incur additional expenses that would increase our losses.

If we cannot complete, or if we experience significant delays in developing applications based on, our TAEUS technology, particularly after incurring significant expenditures, our business may fail.

Our success is substantially dependent on the success of applications for our TAEUS platform.

Our ability to generate meaningful revenues in the future will depend on the successful development and commercialization of our TAEUS platform applications.

The commercial success of our TAEUS platform applications and our ability to generate revenues will depend on many factors, including the following:

our successful development of applications for our TAEUS technology, such as those we intend to pursue for the diagnosis of NAFLD and the monitoring of thermal ablation surgery, and the acceptance in the marketplace by physicians and patients of such applications;

the successful design and manufacturing of a device or devices which enable the use of our TAEUS technology by physicians on their patients;

receipt of necessary regulatory approvals;

sufficient coverage or reimbursement by third-party payors;

our ability to successfully market our products;

our ability to demonstrate that our TAEUS applications have advantages over competing products and procedures;

the amount and nature of competition from competing or alternative imaging products;

our ability to establish and maintain commercial manufacturing, distribution and sales force capabilities.

Our TAEUS platform applications may not achieve adequate market acceptance by the physicians, patients, third-party payors and others in the medical community.

Our TAEUS platform applications may not achieve adequate market acceptance by physicians, patients, third-party payors and others in the medical community.

Our TAEUS applications that receive regulatory approval may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community.

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Our revenues will be adversely affected if, due to these or other factors, the products we are able to commercialize do not gain significant market acceptance.

Public health crises, such as COVID-19 , can adversely impact our business, including our pre-sales activities, clinical trials and ability to obtain regulatory approvals.

Public health crises, such as COVID-19 or other similar pandemics in the future, can adversely impact our business, including our pre-sales activities, clinical trials and ability to obtain regulatory approvals.

Public health crises such as pandemics or similar outbreaks could adversely impact our business.

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The level and nature of the disruption caused by COVID-19 and any other pandemic is unpredictable, may be cyclical and long-lasting and vary from location to location.

In addition to the foregoing effects, as a result of future COVID-19 outbreaks or other pandemics we have and may in the future experience disruptions that could severely impact our business, preclinical studies and clinical trials, including:

interruption of key clinical trial activities and attendance at industry events due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures;

delays or difficulties in enrolling patients in clinical trials of our TAEUS FLIP device;

interruption or delays in the operations of the FDA and comparable foreign regulatory agencies, which may impact approval timelines;

absenteeism or loss of employees at the Company, or at our collaborator companies, due to health reasons or government restrictions or otherwise, that are needed to develop, validate, manufacture and perform other necessary functions for our operations;

supply chain disruptions making it difficult for our collaborator companies to order and receive materials needed for the manufacture of our TAEUS product;

government responses including orders that make it difficult for us, our supplier and our potential customers to remain open for business, and other seen and unforeseen actions taken by government agencies;

equipment failures, loss of utilities and other disruptions that could impact our operations or render them inoperable;

effects of a local or global recession or depression that could depress economic conditions for a prolonged period and limit access to capital by the Company.

Even if not rising to the level of a global pandemic, the outbreak of illness locally at the location of our offices or clinical trials could have a material adverse impact on our operations and financial condition and results.

We may not remain commercially viable if there is an inadequate level of reimbursement by governmental programs and other third-party payors for our planned products or associated procedures.

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If any of our applications that receive regulatory approval do not perform in accordance with our expectations, we are unlikely to successfully commercialize our applications.

Although we have completed a number of studies with respect to our TAEUS liver device, we have limited data regarding the efficacy of other TAEUS platform applications.

Since our success depends in large part on the medical and third-party payor community’s acceptance of our TAEUS applications, even if we receive regulatory approval for our applications, we believe that we will need to obtain additional clinical data from users of our applications to persuade medical professions to use our applications.

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Negative results of these clinical studies could have a material, adverse impact on our business.

We cannot be certain that results from limited animal and human studies of any of our TAEUS applications will be indicative of future studies or that any of our TAEUS applications will be successfully commercialized.

We cannot be certain that results from limited human studies of our TAEUS liver device will be indicative of future studies or that any of our TAEUS applications will be successfully commercialized.

To successfully commercialize any application based on our TAEUS platform technology, we expect it will be necessary to conduct various pre-clinical and human studies to demonstrate that the product is safe and effective for human use.

However, there can be no assurance that results from these studies are indicative of results that would be achieved in future animal studies or human clinical studies of this or any future TAEUS applications, which may be required in order for our applications incorporating our technology to obtain or maintain regulatory approval .

For instance, we have conducted a number of human studies with respect to our TAEUS liver device.

These studies have initially demonstrated a meaningful correlation between the measurement of liver fat by our TAEUS FLIP product and by MRI-PDFF.

However, there can be no assurance that results from these studies are indicative of results that would be achieved in future studies of this or any future TAEUS applications, which may be required in order for our applications incorporating our technology to obtain or maintain regulatory approval.

Even if clinical trials or other studies demonstrate the safety and effectiveness of any applications of our technology and the necessary regulatory approvals are obtained, the commercial success of any of such application will depend upon their acceptance by patients, the medical community, and third-party payers and on our partners’ ability to successfully manufacture and commercialize a device for such application.

Our limited commercial experience makes it difficult to evaluate our business, predict our future results or forecast our financial performance and growth.

We discontinued our initial pre-clinical Nexus 128 product in 2019 and our NAFLD TAEUS device has obtained CE mark approval but has not yet been fully commercialized.

We discontinued our initial pre-clinical Nexus 128 product in 2019 and our TAEUS liver device has obtained CE mark approval but has not yet been fully commercialized.

This limited commercial experience makes it difficult to evaluate our business, predict our future results or forecast our financial performance and growth.

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In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex.

If we license technologies or applications, we may not be able to realize the intended benefit of such transactions.

Further, strategic alliances and collaborations are subject to numerous risks, which may include the following:

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collaborators may not pursue development and commercialization of our technologies and applications or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities;

collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon the development of an application, repeat or conduct new clinical trials, or require a new formulation of an application for clinical testing;

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our applications and technologies;

a collaborator with marketing and distribution rights to one or more applications may not commit sufficient resources to their marketing and distribution;

collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

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If we are unable to compete effectively with current or new entrants to these markets, we will be unable to generate sufficient revenue to maintain our business.

Our competitors include producers of CT and MRI systems that include multi-national corporations such as Royal Philips, Siemens AG and Fujifilm Corporation, many of whom also manufacture and sell ultrasound equipment.

In the NAFLD diagnosis market we will compete with makers of surgical biopsy tools, such as Cook Medical and Sterylab S.r.l.

In the thermal ablation market, we will compete with manufacturers of surgical temperature probes, such as Medtronic plc and St.

Jude Medical, Inc.

These competitors and other potential competitors have substantially greater financial, technical and other resources, such as larger R&D staff, more robust manufacturing capabilities and more experienced marketing and manufacturing organizations.

These competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective or less costly than TAEUS applications that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization and market penetration than us.

Additionally, technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against those of our competitors.

Changes in the healthcare industry could result in a reduction in the size of the market for our products or may require us to decrease the selling price for our products, either of which could have a negative impact on our financial performance.

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there has been a consolidation among healthcare facilities and purchasers of medical devices who prefer to limit the number of suppliers from whom they purchase medical products, and these entities may decide to stop purchasing our products or demand discounts on our prices;

there is economic pressure to contain healthcare costs in markets throughout the world;

there are proposed and existing laws and regulations in international and domestic markets regulating pricing and profitability of companies in the healthcare industry.

These trends could lead to pressure to reduce prices for our products and could cause a decrease in the demand for our products in any given market that could adversely affect our revenue and profitability, which could harm our business.

We intend to market our approved TAEUS applications globally, and are therefore subject to the risks of doing business outside of the United States.

Because we intend to market our approved TAEUS applications globally, our business is subject to risks associated with doing business globally.

We intend to market our approved TAEUS applications globally, and currently market our TAEUS liver probe in the EU, and are therefore subject to the risks of doing business outside of the United States.

Because we intend to market our approved TAEUS applications globally, and currently market our TAEUS liver probe in the EU, our business is subject to risks associated with doing business globally.

Accordingly, our business and financial results in the future could be adversely affected due to a variety of factors, including:

changes in a specific country’s or region’s political and cultural climate or economic condition;

local outbreaks of sickness or disease, including COVID-19;

local outbreaks of sickness or disease;

war or terrorist attack, including cyberterrorism;

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In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices.

These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commissions, certain customer incentive programs and other business arrangements generally.

Our sales team in the European Union marketing our TAEUS liver probe are subject to these laws, as well as regulations that restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commissions, certain customer incentive programs and other business arrangements generally.

It is not always possible to identify and deter misconduct by employees and other parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.

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Our business exposes us to the risk of malpractice, warranty or product liability claims inherent in the sale and support of medical device products, including those based on claims that the use or failure of one of our products resulted in a misdiagnosis or harm to a patient.

Such claims may cause financial loss, damage our reputation by raising questions about our products’ safety and efficacy, adversely affect regulatory approvals and interfere with our efforts to market our products.

Although to date we have not been involved in any medical malpractice or product liability litigation, we may incur significant liability if such litigation were to occur.

We may also face adverse publicity resulting from product field actions or regulatory proceedings brought against us.

Claims could also be asserted under state consumer protection acts.

If we cannot successfully defend ourselves against product liability or related claims, we may incur substantial liabilities or be required to limit distribution of our products.

If we cannot successfully defend ourselves against product liability or related claims, we may incur substantial liabilities or be required to limit the distribution of our products.

Even a successful defense would require significant financial and management resources.

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injury to our reputation and negative media attention;

initiation of investigations by regulators;

initiation of investigations by regulators and adverse impacts to our ability to obtain regulatory approvals;

costs to defend the related litigation;

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a decline in the price of our securities.

Although we currently maintain liability insurance in amounts we believe are commercially reasonable, any liability we incur may exceed our insurance coverage.

Although we currently maintain liability insurance in amounts that we believe are commercially reasonable, any liability we incur may exceed our insurance coverage.

Our insurance policies may also have various exclusions, and we may be subject to a claim for which we have no coverage.

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Much of our value arises out of our proprietary technology and intellectual property for the design, manufacture and use of medical imaging systems, including development of our TAEUS applications.

Much of our value arises from our proprietary technology and intellectual property for the design, manufacture and use of medical imaging systems, including development of our TAEUS applications.

We rely on patent, copyright, trade secret and trademark laws to protect our proprietary technology and limit the ability of others to compete with us using the same or similar technology.

Third parties may infringe or misappropriate our intellectual property, which could harm our business.

As of December 31, 2022, we maintained a patent portfolio consisting of thirty-three (33) patents issued in the United States and twenty-three (23) issued patents in foreign jurisdictions, five (5) patent applications pending in the United States and thirty-one (31) patent applications pending in foreign jurisdictions relating to our technology.

These patents and patent applications mostly cover certain innovations relating to fat imaging, fat quantitation, and temperature monitoring in the liver and other tissues.

Each of our utility patents generally has a term of 20 years from its respective priority (earliest filing) date.

Design patents have a term of 14 years from a respective filing date.

Among our issued utility patents in the United States, the first patent is set to expire in 2033 and the last patent is set to expire in 2041.

Additionally, any patents issued to us may be challenged by third parties as being invalid, or third parties may independently develop similar or competing technology that avoids our patents.

Should such challenges be successful, competitors might be able to market products and use manufacturing processes that are substantially similar to ours.

Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require costly efforts to protect our technology.

Our failure to secure, protect and enforce our intellectual property rights could substantially harm the value of our TAEUS platform, brand and business.

See the section of this Annual Report titled “Intellectual Property” under “Item 1.

Business” for further information on our Intellectual Property portfolio.

Expenses related to a patent portfolio include periodic maintenance fees, renewal fees, annuity fees, various other governmental fees on patents and/or applications due in several stages over the lifetime of patents and/or applications, as well as the cost associated with complying with numerous procedural provisions during the patent application process.

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We may not be able to stop a competitor from marketing and selling products that are the same or similar to our products or from using product names that are the same or similar to our product names, and our business may be harmed as a result.

Intellectual property rights may not provide adequate protection, which may permit third parties to compete against us more effectively.

In order to remain competitive, we must develop and maintain protection of the proprietary aspects of our technologies.

We rely on a combination of patents, copyrights, trademarks, trade secret laws and confidentiality and invention assignment agreements to protect our intellectual property rights.

Any patents issued to us may be challenged by third parties as being invalid, or third parties may independently develop similar or competing technology that avoids our patents.

Should such challenges be successful, competitors might be able to market products and use manufacturing processes that are substantially similar to ours.

To the extent our intellectual property protection is incomplete, we are exposed to a greater risk of direct competition.

In addition, competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts or design around our protected technology.

Our failure to secure, protect and enforce our intellectual property rights could substantially harm the value of our TAEUS platform, brand and business.

Risks Related to Government Regulation

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The changes to the regulatory system implemented by the MDR include stricter requirements for clinical evidence and pre-market assessment of safety and performance, refined classifications to indicate risk levels, requirements for third party testing by Notified Bodies, tightened and streamlined quality management system assessment procedures and additional requirements for the quality management system, additional requirements for traceability of products and transparency as well a refined responsibility of economic operators.

We are currently in a transitional period, where our existing certified products will be required to continue to comply with applicable medical device directives (including the Medical Devices Directive and the Active Implantable Medical Devices Directive) and with the Medical Device Regulation and to obtain CE mark certification in order to market medical devices.

We are currently in a transitional period, where our existing certified products will be required to continue to comply with applicable medical device directives (including the Medical Devices Directive and the Active Implantable Medical Devices Directive) and with the Medical Device Regulation to obtain CE mark certification in order to continue or commence marketing medical devices.

The CE mark is applied following approval from a Notified Body or declaration of conformity.

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We are also required to comply with the regulations of each other country where we commercialize products, such as the requirement that we obtain approval from the FDA and the China Food and Drug Administration before we can launch new products in the United States and China, respectively.

International sales of medical devices manufactured in the United States that are not approved by the FDA for use in the United States, or that are banned or deviate from lawful performance standards, are subject to FDA export requirements.

Exported devices are subject to the regulatory requirements of each country to which the device is exported.

Frequently, regulatory approval may first be obtained in a foreign country prior to application in the United States due to differing regulatory requirements;

however, other countries, such as China for example, require approval in the country of origin first.

Before a new medical device or a new intended use for an existing product can be marketed in the United States, a company must first submit and receive either 510(k) clearance or premarketing approval, or PMA, from the FDA, unless an exemption applies.

Our NAFLD TAEUS device will be reviewed under a “de novo” process for a risk-based classification determination whether the device is of low to moderate risk and that it can be appropriately regulated as a Class II device and thereby eligible for 510(k) clearance.

While the 510(k) pathway for product marketing typically requires only non-clinical testing proof of substantial equivalence to a lawfully marketed predicate device for a given indication, a de novo review is more likely to require clinical studies to support a reclassification to a lower risk class.

Our NAFLD TAEUS device is being reviewed under a “de novo” process for a risk-based classification determination whether the device is of low to moderate risk and that it can be appropriately regulated as a Class II device and thereby eligible for 510(k) clearance.

While the 510(k) pathway for product marketing typically requires only non-clinical testing proof of substantial equivalence to a lawfully marketed predicate device for a given indication, the FDA has requested clinical studies to support a reclassification to a lower risk class via the de novo process.

Even with the clinical data we expect to provide with the de novo submission for our NAFLD TAEUS device, the FDA may decide to reject the request to classify the device into Class II.

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We may not be able to obtain the necessary clearances or approvals or may be unduly delayed in doing so, which could harm our business.

Furthermore, even if we are granted regulatory clearances or approvals, they may include significant limitations on the indicated uses for the product, which may limit the market for the product.

Even if we obtain regulatory approval for our TAEUS device, our product will remain subject to regulatory oversight.

Even if we are granted regulatory clearances or approvals, they may include significant limitations on the indicated uses for the product, which may limit the market for the product.

Therefore, even if we believe we have successfully developed our TAEUS technology, we may not be permitted to market TAEUS applications in the United States if we do not obtain FDA regulatory clearance to market such applications.

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If any of these events were to occur, our business and financial condition would be harmed.

We have experienced and may in the future experience delays and other difficulties in enrolling a sufficient number of patients in our clinical trials which could delay or prevent the receipt of necessary regulatory approvals.

We may not be able to initiate or complete as planned any clinical trials if we are unable to identify and enroll a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other regulatory authorities.

We also may be unable to engage a sufficient number of clinical trial sites to conduct our trials.

We may face challenges in enrolling patients to participate in our clinical trials.

Patients suffering from diseases within target indications may enroll in competing clinical trials, which could negatively affect our ability to complete enrollment of our trials.

Additionally, enrollment may be delayed by unforeseen circumstances, as occurred with the COVID-19 pandemic.

Enrollment challenges in clinical trials often result in increased development costs for a product candidate, significant delays and potentially the abandonment of the clinical trial.

We may have other delays in completing our clinical trials and we may not complete them at all.

Since we lack significant experience in completing clinical trials and bringing a medical device through commercialization, we have hired outside consultants with such experience.

Clinical trials for our TAEUS device may be delayed or terminated as a result of many factors, including the following:

patients failing to complete clinical trials due to dissatisfaction with the procedure, side effects, or other reasons;

failure by regulators to authorize us to commence a clinical trial;

suspension or termination by regulators of clinical research for many reasons, including concerns about patient safety, the failure of study sites and/or investigators in our clinical research program to comply with GCP requirements, or our failure, or the failure of our contract manufacturers, to comply with current cGMP requirements;

delays or failure to obtain clinical supply for our products necessary to conduct clinical trials from contract manufacturers;

treatment candidates demonstrating a lack of efficacy during clinical trials;

inability to continue to fund clinical trials or to find a partner to fund the clinical trials.

Any delay or failure to complete clinical trials could have a material adverse effect on our cost to develop and commercialize, and our ability to generate revenue from, our TAEUS device.

Our TAEUS applications may require recertification or new regulatory clearances or premarket approvals and we may be required to recall or cease marketing our TAEUS applications until such recertification or clearances are obtained.

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● our ability to set a price that we believe is fair for our products;

our ability to generate revenues and achieve or maintain profitability;

● out ability to generate revenues and achieve or maintain profitability;

● the availability of capital.

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Any or all of these factors could adversely affect our cash position requiring us to raise additional capital which may be on unfavorable terms and result in substantial dilution.

Additionally, the risks surrounding our business, as well as the limited market for our common stock, have resulted, and will likely continue to result, in volatility in the price of our common stock and warrants.

Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future.

From January 1, 2022 through December 31, 2022, intra-day trading prices of shares of our common stock, on a Reverse Stock Split-adjusted basis (as discussed below in Item 7 under “Nasdaq Capital Market Listing and Reverse Stock Split”), on the Nasdaq Capital Market fluctuated from a low of $3.16 to a high of $15.80, and may continue to fluctuate significantly in the future.

From January 1, 2023 through December 31, 2023, intra-day trading prices of shares of our common stock on the Nasdaq Capital Market fluctuated from a low of $0.87 to a high of $5.39, and may continue to fluctuate significantly in the future.

The stock market in general and the market for healthcare companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.

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While we have no reason to believe our shares would be the target of a short squeeze, there can be no assurance that they will not be in the future, and you may lose a significant portion or all of your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value.

Our stock is subject to minimum requirements to remain listed on the Nasdaq Capital Market, including a minimum bid price requirement, and may be delisted if it does not maintain compliance with those requirements.

On January 5, 2022, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer met the minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).

The Company held a special meeting of the stockholders in November 2022 for the purpose of approving a reverse stock split.

Following stockholder approval, the Company filed a Certificate of Amendment to the Company’s Fourth Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to effect a 1-for-20 reverse stock split of the shares of the Company’s Common Stock, effective as of December 9, 2022 (the “Reverse Stock Split”).

As a result of the Reverse Stock Split, the Company regained compliance with the Nasdaq Minimum Bid Price Requirement.

If we fall below the Minimum Bid Price Requirement again, we cannot be certain that our stockholders will approve a reverse stock split or, if approved, how the market would respond to such a reverse stock split.

We may be subject to securities litigation, which is expensive and could divert management attention.

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The trading market for our securities is 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 securities and industry analysts.

If no or few analysts commence research coverage of us, or one or more of the analysts who cover us issues an adverse opinion about our company, the price of our securities would likely decline.

If one or more of these analysts ceases research coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our securities or trading volume to decline.

If any of the securities or industry analysts who cover us or may cover us in the future change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline.

If any securities or industry analyst who covers us or may cover us in the future were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our common stock to decline.

If we are unable to implement and maintain effective internal control over financial reporting, including by remediating current material weaknesses in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our securities may decrease and we may become subject to litigation or enforcement actions.

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We could also become subject to stockholder or other third-party litigation as well as investigations by the stock exchange on which our securities are listed, the Securities and Exchange Commission (the “SEC”) or other regulatory authorities, which could require additional financial and management resources and could result in fines, trading suspensions or other remedies.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Exchange Act.

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Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

We have not paid dividends in the past and have no immediate plans to pay dividends.

We have not paid dividends in the past and have no plans to pay dividends.

We plan to reinvest all of our earnings, to the extent we have earnings, in order to further develop our technology and potential products and to cover operating costs.

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General Risk Factors

Our business is affected by macroeconomic conditions.

Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, interest rates and foreign currency exchange rates and overall economic conditions and uncertainties, including those resulting from the current and future conditions in the global financial markets.

For instance, we experienced inflationary pressures in 2022 and expect such pressures to continue in 2023.

Cost inflation, including increases in raw material prices, labor rates, and transportation costs may impact our profitability.

Our ability to recover these cost increases through price increases is significantly limited by the process by which we are reimbursed for our products and services by government and private payers.

The volatility of the capital markets could also affect the value of our investments and our ability to liquidate our investments in order to fund our operations.

Increasing interest rates and reduced access to capital markets could also adversely affect the ability of our suppliers, distributors, licensors, collaborators, contract manufacturers and other commercial partners to remain effective business partners or to remain in business.

The loss of a critical business partner, or a failure to perform by a critical business partner, could have a disruptive effect on our business and could adversely affect our results of operations.

Unfavorable national or global economic conditions or political developments could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the national or global economy and financial markets.

For example, governmental statements, actions or policies, political unrest and global financial crises can cause extreme volatility and disruptions in the capital and credit markets.

A severe or prolonged economic downturn, political unrest or additional global financial crises, including those resulting from the COVID-19 pandemic and the ongoing Russia-Ukraine war, Israel-Hamas war and the conflict between China and Taiwan, could result in a variety of risks to our business, including weakened demand for our products, if approved, or our ability to raise additional capital when needed on acceptable terms, if at all.

A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption.

Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate, further political developments and financial market conditions could adversely impact our business.

Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.

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Any failure of a depository institution to return these deposits on demand, or if a depository institution is subject to other adverse conditions in the financial or credit markets, could impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance.

The ongoing military action by Russia in Ukraine could have negative impact on the global economy, which could materially adversely affect our business, operations, operating results and financial condition.

In February 2022, Russian forces launched significant military action against Ukraine, and sustained conflict and disruption in the region is possible.

The impact to Ukraine as well as actions taken by other countries, including new and stricter sanctions imposed by Canada, the United Kingdom, the European Union, the United States and other countries and companies and organizations against officials, individuals, regions, and industries in Russia and Ukraine, and actions taken by Russia in response to such sanctions, and each country’s potential response to such sanctions, tensions, and military actions could adversely affect the global economy and financial markets and thus could affect our business, operations, operating results and financial condition as well as the price of our common stock and our ability to raise additional capital when needed on acceptable terms.

The extent and duration of the military action, sanctions and resulting market disruptions, including supply chain disruptions, are impossible to predict, but could be substantial.

Any such disruptions caused by Russian military action or resulting sanctions may magnify the impact of other risks described in this Annual Report on Form 10-K.

Our business and operations are subject to risks related to climate change.

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Any such matters could have a material adverse impact on our future results of operations, financial position and cash flows.

Unresolved Staff Comments

Not applicable.

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