Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2021, the end of the period covered by this Annual Report on Form 10-K, and has concluded that, based on such evaluation, as of the end of the period covered by this annual report, our disclosure controls and procedures were not effective due to the material weakness described below. However, our management, including our principal executive officer and principal financial officer, has concluded that, notwithstanding the identified material weakness in our internal control over financial reporting, the financial statements in this annual report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
Material Weakness in Internal Controls Over Financial Reporting
We identified a material weakness in our internal control over financial reporting that exists as of December 31, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We determined that we had a material weakness because we did not design controls to address segregation of duties over the review and approval of account reconciliations and manual journal entries. There were no misstatements as a result of this material weakness; however, it could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.
Management’s Plan to Remediate the Material Weakness
With the oversight of senior management and our audit committee, we implemented remediation steps in 2021, including hiring additional accounting personnel and implementing improved accounting and financial reporting procedures and controls. While we believe these measures will remediate the material weakness identified and strengthen our internal control over financial reporting, the implemented and enhanced controls have not operated for a sufficient period of time to demonstrate that the material weakness is remediated. As such, our remediation initiatives were not completed within a sufficient timeframe to remediate the material weakness in internal control over financial reporting as of December 31, 2021. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2021, we implemented enhanced controls related to our journal entry and account reconciliation processes. There were no other changes in our internal control over financial reporting that occurred during the quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
This annual report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
156
Not applicable.
157
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with the Annual Meeting of Stockholders within 120 days after December 31, 2021, or the Proxy Statement, and is incorporated in this Annual Report on Form 10-K by reference.
We have adopted a code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer, controller, and persons performing similar functions. Our code of business conduct and ethics is available under the Corporate Governance section of our website at www.investors.neuropace.com under the section entitled Governance Documents. If we make any substantive amendments to our Code of Conduct or grant any of our directors or executive officers any waiver, including any implicit waiver, from a provision of our Code of Conduct, we will disclose the nature of the amendment or waiver on our website or in a Current Report on Form 8-K.
158
Item 11. Executive Compensation.
The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.
159
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following documents are filed as part of this Annual Report on Form 10-K:
(1) FINANCIAL STATEMENTS
Our financial statements are listed in the “Index to the Financial Statements” under Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
(2) FINANCIAL STATEMENT SCHEDULES
All schedules to the financial statements are omitted because they are not applicable, not material or the required information is shown in Par II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
(3) EXHIBITS
The documents listed in the Exhibit Index of this Annual Report on Form 10-K are incorporated by reference or are filed with this Annual Report on Form 10-K, in each case as indicated therein.
160
EXHIBIT INDEX
Incorporation by Reference
Exhibit
Number
Description of Exhibit
Form File Number Exhibit Filing Date Filed Herewith
3.1 Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect.
8-K 001-40377 3.1 April 26, 2021
3.2 Amended and Restated Bylaws of the Registrant, as currently in effect
S-1/A 333-254663 3.4 April 14, 2021
4.1 Form of common stock certificate of the Registrant.
S-1/A 333-254663 4.1 April 14, 2021
4.2
Description of securities
X
10.1
2020 Stock Plan.
S-1
333-254663
10.4
March 24, 2021
10.2
Forms of Option Agreement, Stock Option Grant Notice and Notice of Exercise under the 2020 Stock Plan.
S-1
333-254663 10.5
March 24, 2021
10.3
2021 Equity Incentive Plan.
S-1/A
333-254663
10.6
April 14, 2021
10.4
Forms of Option Agreement, Stock Option Grant Notice and Notice of Exercise under 2021 Equity Incentive Plan.
S-1/A
333-254663
10.7
April 14, 2021
10.5
2021 Employee Stock Purchase Plan.
S-1/A 333-254663 10.8
April 14, 2021
10.6
Form of Indemnification Agreement, by and between the Registrant and each of its directors and executive officers.
S-1/A 333-254663 10.9 April 14, 2021
10.7+
Amended and Restated Offer Letter, dated March 24, 2021, by and between the Company and Michael Favet.
S-1 333-254663 10.11
March 24, 2021
10.8+
Amended and Restated Offer Letter, dated March 24, 2021, by and between the Company and Rebecca Kuhn.
S-1 333-254663 10.12 March 24, 2021
10.9+
Amended and Restated Offer Letter, dated March 24, 2021, by and between the Company and Martha Morell, M.D.
S-1 333-254663 10.13 March 24, 2021
10.10+
Amended and Restated Offer Letter, dated March 24, 2021, by and between the Company and Irina Ridley.
S-1 333-254663 10.14 March 24, 2021
10.11
Term Loan Agreement, dated September 24, 2020, by among the Company, the Subsidiary Guarantors from time to time party thereto, the Lenders from time to time party thereto and CRG Servicing LLC.
S-1 333-254663 10.17
March 24, 2021
10.12
Amendment One to the Supply Agreement, dated December 21, 2020, by and between the Company and Micro Systems Engineering, Inc.
S-1 333-254663 10.19 March 24, 2021
161
10.13
Supply Agreement, dated January 1, 2021, by and between the Company and Greatbatch Ltd.
S-1/A 333-254663 10.19
April 14, 2021
10.14+
Non-Employee Director Compensation Policy
S-1/A 333-254663 10.20 April 14, 2021
10.15
Office Lease, dated August 24, 2011, by and between the Company and BXP Research Park LP (f/k/a BP MV Research Park LLC).
S-1/A 333-254663 10.21 April 14, 2021
10.16
First Amendment to Office Lease, dated May 24, 2018, by and between the Company and BXP Research Park LP (f/k/a BP MV Research Park LLC).
S-1/A 333-254663 10.22 April 14, 2021
10.17
Lease Modification Agreement, dated April 30, 2020, by and between the Company and BXP Research Park LP (f/k/a BP MV Research Park LLC).
S-1/A 333-254663 10.23 April 14, 2021
10.18+
Officer Severance Benefit Plan.
S-1/A 333-254663 10.24 April 14, 2021
10.19+
Employee Cash Incentive Plan.
S-1/A 333-254663 10.25 April 14, 2021
23.1
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.
X
24.1
Power of Attorney (included on signature page hereto).
X
31.1* Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2* Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
32.1* Certification of Principal Executive Officer and Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
101.SCH XBRL Taxonomy Extension Schema Document. X
101.INS
XBRL Instance Document.
X
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. X
101.DEF XBRL Taxonomy Extension Definition Linkbase Document. X
101.LAB XBRL Taxonomy Extension Label Linkbase Document. X
162
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. X
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101) X
_________________
+ Indicates management contract or compensatory plan.
* The certifications attached as Exhibit 32.1 and 32.2 accompany this Annual Report on Form 10-K pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any of the Registrant’s filings under the Securities Act of 1933, as amended, irrespective of any general incorporation language contained in any such filing.
Item 16. Form 10–K Summary.
None.
163
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Mountain View, State of California, on March 10, 2022.
NEUROPACE, INC.
By: /s/ Michael Favet
Michael Favet
President and Chief Executive Officer
By: /s/ Rebecca Kuhn
Rebecca Kuhn
Chief Financial Officer and Vice President, Finance and Administration (Principal Financial Officer and Principal Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael Favet and Rebecca Kuhn, jointly and severally, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
164
Signature
Title
Date
/s/ Michael Favet Director, President and Chief Executive Officer
(Principal Executive Officer)
March 10, 2022
Michael Favet
/s/ Rebecca Kuhn Chief Financial Officer and Vice President, Finance and Administration (Principal Financial Officer and Principal Accounting Officer)
March 10, 2022
Rebecca Kuhn
/s/ Frank Fischer Director March 10, 2022
Frank Fischer
/s/ Greg Garfield Director March 10, 2022
Greg Garfield
/s/ Joseph S. Lacob Director March 10, 2022
Joseph S. Lacob
/s/ Lisa Andrade Director March 10, 2022
Lisa Andrade
/s/ Rakhi Kumar Director March 10, 2022
Rakhi Kumar
/s/ Renee Ryan Director March 10, 2022
Renee Ryan
165